UPDATE (5/15/2020): Two months ago, we posted this write-up on our site and on Reddit, explaining why Bill Ackman should have purchased PK instead of HLT. Today Ackman reported a new 678,000 share position in PK. Looks like he read our post! Take a look at our post for yourself below! Bloomberg: Activist Ackman Reports Stakes in Blackstone, Park Hotels
Hi everyone, we just to share our diligence on Hilton (HLT) and Park Hotels & Resorts Inc (PK).
PK is a real estate investment trust (REIT) that holds the real estate property that HLT uses. PK was spun out to make HLT an asset-light company. According to HLT's 2019 annual report, it only owned $380M in property.
We believe PK is a significantly better buy than HLT for the following reasons:
PK is currently valued at $1.8B while its real estate value minus all liabilities equal $5B. There is a significant discrepancy between PK's market value and the intrinsic value of the real estate it holds. On the other hand, HLT is valued at $17B. However, HLT holds $10B in goodwill and brand value on its balance sheet. PK is a better buy because it holds more real value than HLT.
PK is currently 77% down from its 52-week high compared to HLT which is 45% down from its 52-week high. PK is a better buy because it has significantly higher upside than HLT.
PK historically pays $0.43 - $1.00 per share in dividends compared to HLT which historically pays $0.07 - $0.15 per share. HLT has suspended dividend payments while PK has not definitively suspended dividend payments yet.
PK currently has $4.8B in liabilities while HLT has $15.5B in liabilities. PK is well able to cover its liabilities with $11B in assets while HLT cannot cover its liabilities with $15B in assets.
In summary, both PK and HLT have >$1B in cash on hand or option to withdraw from their revolving credit facility and will likely be able to survive the COVID-19 crisis. However, PK is a much better investment than HLT for those interested in playing the upside in the hospitality industry. We are very bullish on PK and will continue investing in the REIT.