17 May 2018 Americas/United States Equity Research Travel & Leisure Hilton Grand Vacations Inc. (HGV) Rating OUTPERFORM Price (15-May-18, US$) 38.87 INITIATION Target price (US$) 48.00 52-week price range (US$) 47.30 - 34.05 Market cap(US$ m) 3,763 Plenty of Time Left on This Vacation Enterprise value (US$ m) 4,234 Target price is for 12 months. ■ Outperform Rating: We are initiating coverage of Hilton Grand Vacations Research Analysts (HGV) with an Outperform rating and a $48 target price, implying 23% upside Cameron McKnight potential. HGV is a top-tier timeshare company, with a very concentrated model. 212 325 6608
[email protected] ■ Buying into Timeshare: We are positive on the improved industry structure, Ben Combes, CFA return profile, and strong growth prospects. We expect more consolidation 212 538 2383 and limited supply growth. We expect sales to benefit from strong consumer
[email protected] confidence and the continued shift of consumer spend to travel and leisure. ■ The Debate: We point to strong growth prospects, lower volatility through the cycle, leading returns and cash conversion, long-term investment in new owners, recent underperformance, and an undemanding valuation. Bears argue HGV already has the best margins and efficiency ratios, additional investment will weigh on cash flow, the company is well liked, and it has already taken significant market share. ■ Growth Drivers: We expect a 19% EBITDA CAGR in 2017-19, versus 13% for the group. HGV is harvesting one of the industry’s largest inventory books and new owner bases – a significant source of future sales.