Search
    • May 16, 2020
    • 2 min read

Bill Ackman bought Hilton (HLT). I think Park Hotels & Resorts (PK) is better.

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:

  1. 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.

  2. 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.

  3. 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.

  4. 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.

50 views0 comments