Orient-Express is trading at nearly $12 per share with a total market cap of more than $1.2 billion. The market values Orient-Express quite expensively at 19.3 times EV/EBITDA. If EBITDA rose to $140 million, its EV/EBITDA dropped to around 12.4. Its bigger peers are Marriott International Inc (NYSE:MAR) and InterContinental Hotels Group PLC (ADR) (NYSE:IHG). Orient-Express does not look expensive if Scott could successfully implement his plan.
Is it better than its larger peers?
Marriott International Inc (NYSE:MAR) recently reported impressive first-quarter earnings results. Its revenue witnessed a 23% year-over-year growth to $3.14 billion. Net income came in at $136 million, 31% higher than the net income of $104 million in the first quarter last year. However, EPS had a much higher growth of 43% to $0.43 per share. The higher growth in EPS was due to a significant reduction in the number of diluted shares, from 344.6 million shares to only 320 million shares.
In the past ten years, Marriott has consistently increased its dividend payment, from $0.14 per share in 2003 to $0.49 per share in 2012. Marriott recently raised its quarterly dividend by 30% to $0.17 per share. Thus, the annual dividend payment would be $0.68 per share. Marriott International is trading at $43.60 per share with a total market cap of $13.40 billion. The market values Marriott International at 14.5 times EV/EBITDA. The dividend yield is 1.20%.
InterContinental Hotels Group PLC (ADR) (NYSE:IHG) is currently operating around seven brands, including Crowne Plaza Hotels & Resorts, InterContinental Hotels & Resorts, and Holiday Inn, with management and ownership of more than 4,400 establishments in more than 100 countries globally. In the first quarter of 2013, InterContinental witnessed RevPAR growth of 3.1%, mostly driven by the increase in its average daily rate. RevPAR growth was seen in most of the regions, including the Americas (4.1%), Asia, Middle East & Africa (5.5%), and Greater China (1.8%), while the RevPAR in Europe dropped 2.2%.
At the beginning of May, the company had finished the divestment of InterContinental London Park Lane for around $469 million, of which $95 million was used for U.K. pension liabilities. What worries me is its over-leveraged balance sheet. At the end of 2012, it had only $308 million in equity, $195 million in cash, and as much as $1.24 billion in long-term debt. At $30 per share, InterContinental is worth nearly $8 billion on the market. The market values the company at around 13.2 times EV/EBITDA.
My Foolish take
Income investors might like InterContinental the most with its highest dividend yield of 2.90%. Orient-Express seems to be a sweet opportunistic play on the company’s promising turnaround under the new leadership of John Scott. However, with double-digit EV multiple in general, the valuations of all three hotel operators seem to be quite rich already. I would prefer another dip in the share price in order to establish a long position.
The article A Turnaround Play That You Should Take a Look At originally appeared on Fool.com and is written by Anh HOANG.
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