Ross Investment Competition

Ticker: ABC
Team #

Name 1
Name 2
Name 3
Name 4
2014 Competition
Dec 4 & 5, 2014
Ann Arbor, MI

Ross Investment Competition

Wyndham Worldwide Corporation
NYSE:WYN Market Cap: $10.14B Dividend Yield: 1.8%

Recommendation BUY

Current Price:
Target Price 1yr:
Upside:

$82.30
$82.30
20%

Ross Investment Competition

Outline
i.

Company Description

ii.

Stock Performance

iii.

Investment Thesis
a.
b.
c.

iv.

Assumptions

v.

Valuation

vi.

Recommendation

vii. Appendix

Ross Investment Competition

Wyndham Worldwide Corporation
Leading provider of hospitality products and services

A.

Hotel Group Division

Lodging Franchising

B.

Vacation Ownership Division

Timeshare

C.

Vacation Exchange and Rental Division

WYM R.Condominium International (RCI) Global Vacation Network

90% of their properties located in the US and Europe

Ross Investment Competition

Investment Thesis

Ross Investment Competition

Stock Performance
Wyndham (WYN)
Industry:
52 wk Range:
Volume:
Short Interest:

Consumer Discretionary
$66.32 - $82.94
$1.7mm
XXXX%

Ross Investment Competition

Appendix
NYSE:WYN

A. INDUSTRY
Industry trends
Inorganic growth Mkt Consolidation

B. STOCK PERFORMANCE
Stock performance Relative to Peers

C. PEER GROUP ANALYSIS

Multiples Analysis Group A (2)
Multiples Analysis Group B (2)

D. VALUATION
DCF Valuation
Financials Summary (2)
Income Statement
Balance Sheet (2)
Cash Flow Statement (2)

Company Profile
Wyndham Worldwide Corp. offers individual consumers and business
customers a broad array of hospitality services and products across
various accommodation alternatives through its portfolio of brands. It
operates through three business segments: Lodging, Vacation Exchange
& Rentals, and Vacation Ownership. The Lodging segment franchises
hotels in the upscale, upper midscale, midscale, economy and extended
stay segments and provides hotel management services for full-service
and select limited-service hotels. The Vacation Exchange & Rental
segment provides vacation exchange services and products to owners of
intervals of vacation ownership interests and markets vacation rental
properties primarily on behalf of independent owners. The Vacation
Ownership segment develops, markets and sells vacation ownership
interests to individual consumers, provides consumer financing with the
sale of vacation ownership interests and provides property management
services at resorts. The company was founded on July 31, 2006 and is
headquartered in Parsippany, NJ.

Ross Investment Competition

Industry Trends

Ross Investment Competition

Inorganic Growth
WYN and Industry Trends

Interest to grow inorganically in the lodging business.

Bid to buy IHG to grow lodging (1) and vacation rentals (3) didnt go through.

Ross Investment Competition

Stock Performance
Relative to Peers

Ross Investment Competition

Multiples Analysis
Hotel Group Set A Operational Data

Peer Hotel Set

Gross
Margin %

EBITDA
Margin %

N.Incom e
Margin %

Revenues, EBITDA, N. Incom e,

1 Yr
1 Yr
1 Yr
Grow th % Grow th % Grow th %

T.Debt/
Capital %

T.Debt/
EBITDA

Mkt Cap

M arket Capi tali zati on Latest

Hilton Worldw ide Holdings Inc. (NYSE:HLT)

Starw ood Hotels & Resorts Worldw ide Inc. (NYSE:HOT)
Marriott International, Inc. (NasdaqGS:MAR)
Hyatt Hotels Corporation (NYSE:H)
Choice Hotels International Inc. (NYSE:CHH)
Marriott Vacations Worldw ide Corp. (NYSE:VAC)
Accor S.A. (ENXTPA:AC)
Extended Stay America, Inc. (NYSE:STAY)
Intercontinental Hotels Group plc (LSE:IHG)
La Quinta Holdings Inc. (NYSE:LQ)

40.4%
46.8%
69.4%
36.3%
56.7%
46.5%
16.0%
53.1%
58.1%
54.9%

28.4%
33.1%
46.8%
24.1%
29.6%
16.3%
16.1%
43.0%
37.4%
35.9%

8.08%
15.99%
26.34%
7.15%
16.36%
6.39%
2.77%
7.25%
14.40%
(35.58%)

7.05%
(7.37%)
2.76%
8.08%
0.82%
(0.66%)
(1.49%)
7.62%
(0.95%)
10.24%

1.33%
(7.54%)
9.30%
16.76%
3.84%
0.00%
0.34%
5.00%
(3.44%)
7.54%

20.22%
(18.80%)
7.77%
1.57%
4.91%
36.51%
39.14%
(55.45%)
-

71.75%
53.14%
209.25%
23.32%
201.87%
33.84%
41.84%
67.66%
107.08%
70.74%

6.4x
2.2x
2.8x
2.2x
3.6x
2.6x
3.0x
5.7x
1.9x
5.7x

25,748
13,854
21,830
8,856
3,114
2,385
10,575
3,818
9,780
2,808

Wyndham Worldw ide Corporation (NYSE:WYN)

High
Low
Mean
Median

52.7%
69.4%
16.0%
47.8%
50.0%

23.1%
46.8%
16.1%
31.1%
31.4%

10.2%
26.34%
(35.58%)
6.92%
7.67%

6.9%
10.24%
(7.37%)
2.61%
1.79%

7.7%
16.76%
(7.54%)
3.31%
2.59%

25.4%
39.14%
(55.45%)
4.48%
6.34%

77.5%
209.25%
23.32%
88.05%
69.20%

4.0x
6.4x
1.9x
3.6x
2.9x

10,145

Ross Investment Competition

Multiples Analysis
Hotel Group Set A - Ratios
Peer Hotel Set

EV/REV

TEV/EBITDA

P/E

Hilton Worldw ide Holdings Inc. (NYSE:HLT)

Starw ood Hotels & Resorts Worldw ide Inc. (NYSE:HOT)
Marriott International, Inc. (NasdaqGS:MAR)
Hyatt Hotels Corporation (NYSE:H)
Choice Hotels International Inc. (NYSE:CHH)
Accor S.A. (ENXTPA:AC)
Extended Stay America, Inc. (NYSE:STAY)
Intercontinental Hotels Group plc (LSE:IHG)
La Quinta Holdings Inc. (NYSE:LQ)

5.6x
4.8x
9.4x
3.7x
4.9x
1.6x
6.0x
6.2x
4.9x

19.4x
14.1x
20.0x
15.0x
16.7x
10.2x
14.1x
16.6x
13.6x

46.9x
28.0x
32.8x
47.3x
26.9x
54.8x
43.1x
40.4x
NM

Wyndham Worldw ide Corporation (NYSE:WYN)

High
Low
Mean
Median

2.8x
9.4x
1.6x
5.2x
4.9x

12.1x
20.0x
10.2x
15.5x
15.0x

19.8x
54.8x
26.9x
40.0x
41.8x

Ross Investment Competition

DCF Valuation
Windham Worldwide Corporation Model

Ross Investment Competition

DCF Valuation
Windham Worldwide Corporation Price Sensitivity

Ross Investment Competition

Financial Summary
Income Statement
12 m onths
Dec-31-2010A
USD
Total Revenue
Growth Over Prior Year
COGS
COGS / Rev
Gross Profit
Margin %
SG&A
SG&A / Rev
EBITDA
Margin %
Growth %
Earnings from Cont. Ops.
Margin %
Net Incom e
Margin %
Growth %
Diluted EPS Excl. Extra Item s
Growth Over Prior Year

3,851.0
2.7%
1,876.0
48.7%
1,975.0
51.3%
1,071.0
27.81%
904.0
23.5%
379.0
9.8%
379.0
9.8%
2.05
27.3%

12 m onths
12 m onths
12 m onths 12 m onths
12 m onths
12 m onths
CAGR
Dec-31-2011A Dec-31-2012A Dec-31-2013A Dec-31-2014E Dec-31-2015E Dec-31-2016E 2010-2013
USD
USD
USD
USD
USD
USD
4,254.0
10.5%
2,025.0
47.6%
2,229.0
52.4%
1,221.0
28.70%
1,008.0
23.7%
11.5%
417.0
9.8%
417.0
9.8%
10.0%
2.51
22.4%

4,534.0
6.6%
2,093.0
46.2%
2,441.0
53.8%
1,388.0
30.61%
1,053.0
23.2%
4.5%
399.0
8.8%
400.0
8.8%
(4.1%)
2.75
9.6%

5,009.0
10.5%
2,392.0
47.8%
2,617.0
52.2%
1,471.0
29.37%
1,146.0
22.9%
8.8%
433.0
8.6%
432.0
8.6%
8.0%
3.21
16.7%

5,260.36
5.02%

5,506.63
4.68%

5,768.32
4.75%

1,236.53
23.51%
2.0%
-

1,317.31
23.92%
6.5%
-

1,397.01
24.22%
6.1%
-

4.47
16.59%

4.88
9.35%

5.47
12.12%

All forw ard period figures are consensus mean estimates provided by the brokers and may not be on a comparable basis as financials.
Source: Capital IQ

9%

8%

4%

Ross Investment Competition

Financial Summary
Balance Sheet and Cash Flow

Ross Investment Competition

Income Statement
Full Report
12 m onths
Dec-31-2009
USD
Revenue
Other Revenue
Total Revenue
Cost Of Goods Sold
Gross Profit
Selling General & Admin Exp.
Depreciation & Amort.
Other Operating Exp., Total
Operating Incom e
Interest Expense
Interest and Invest. Income
Net Interest Exp.
Income/(Loss) from Affiliates
Other Non-Operating Inc. (Exp.)
EBT Excl. Unusual Item s
Restructuring Charges
Merger & Related Restruct. Charges
Gain (Loss) On Sale Of Invest.
Gain (Loss) On Sale Of Assets
Asset Writedow n
Insurance Settlements
Other Unusual Items
EBT Incl. Unusual Item s
Income Tax Expense
Earnings from Cont. Ops.
Minority Int. in Earnings
Net Incom e
Source: Capital IQ

3,541.0
209.0
3,750.0
1,823.0
1,927.0
1,093.0
178.0
1,271.0
656.0
(114.0)
7.0
(107.0)
1.0
550.0
(47.0)
5.0
(15.0)
493.0
200.0
293.0
293.0

12 m onths
12 m onths
Dec-31-2010 Dec-31-2011
USD
USD
3,664.0
187.0
3,851.0
1,876.0
1,975.0
1,071.0
173.0
1,244.0
731.0
(137.0)
5.0
(132.0)
1.0
600.0
(9.0)
6.0
(4.0)
(30.0)
563.0
184.0
379.0
379.0

4,099.0
155.0
4,254.0
2,025.0
2,229.0
1,221.0
178.0
1,399.0
830.0
(140.0)
24.0
(116.0)
3.0
717.0
(6.0)
4.0
4.0
(57.0)
(12.0)
650.0
233.0
417.0
417.0

12 m onths
Dec-31-2012
USD
4,332.0
202.0
4,534.0
2,093.0
2,441.0
1,388.0
185.0
1,573.0
868.0
(132.0)
8.0
(124.0)
2.0
746.0
(7.0)
(1.0)
(6.0)
4.0
(108.0)
628.0
229.0
399.0
1.0
400.0

LTM
12 m onths 12 m onths
Dec-31-2013 Sep-30-2014
USD
USD
4,733.0
276.0
5,009.0
2,392.0
2,617.0
1,471.0
216.0
1,687.0
930.0
(131.0)
9.0
(122.0)
3.0
3.0
814.0
(10.0)
(2.0)
(8.0)
(111.0)
683.0
250.0
433.0
(1.0)
432.0

4,951.0
294.0
5,245.0
2,482.0
2,763.0
1,551.0
231.0
1,782.0
981.0
(118.0)
9.0
(109.0)
3.0
2.0
877.0
(10.0)
(2.0)
(8.0)
(8.0)
0
849.0
314.0
535.0
(1.0)
534.0

Ross Investment Competition

Balance Sheet
Total Assets

ASSETS
Cash And Equivalents
Total Cash & ST Investm ents
Accounts Receivable
Other Receivables
Total Receivables
Inventory
Prepaid Exp.
Deferred Tax Assets, Curr.
Restricted Cash
Other Current Assets
Total Current Assets
Gross Property, Plant & Equipment
Accumulated Depreciation
Net Property, Plant & Equipm ent
Long-term Investments
Goodw ill
Other Intangibles
Accounts Receivable Long-Term
Other Long-Term Assets
Total Assets

Dec-31-2009
USD

Dec-31-2010
USD

Dec-31-2011
USD

Dec-31-2012
USD

Dec-31-2013
USD

155.0
155.0
693.0
57.0
750.0
354.0
116.0
189.0
88.0
88.0
1,740.0
1,686.0
(733.0)
953.0
10.0
1,386.0
1,051.0
2,792.0
1,420.0
9,352.0

156.0
156.0
720.0
51.0
771.0
348.0
104.0
179.0
119.0
75.0
1,752.0
1,878.0
(837.0)
1,041.0
13.0
1,481.0
1,171.0
2,687.0
1,271.0
9,416.0

142.0
142.0
706.0
69.0
775.0
351.0
121.0
153.0
124.0
64.0
1,730.0
2,039.0
(922.0)
1,117.0
10.0
1,479.0
1,131.0
2,551.0
1,005.0
9,023.0

195.0
195.0
760.0
63.0
823.0
379.0
122.0
157.0
121.0
69.0
1,866.0
2,324.0
(1,032.0)
1,292.0
8.0
1,566.0
1,189.0
2,571.0
971.0
9,463.0

194.0
194.0
810.0
123.0
933.0
346.0
153.0
108.0
121.0
85.0
1,940.0
2,691.0
(1,136.0)
1,555.0
7.0
1,590.0
1,152.0
2,448.0
1,049.0
9,741.0

Sep-30-2014
CAGR
USD 2010-2013

252.0
252.0
751.0
1.0
752.0
306.0
143.0
97.0
127.0
165.0
1,842.0
1,522.0
1,571.0
1,124.0
2,411.0
1,087.0
9,557.0

8%

7%

3%

14%
2%

1%

Ross Investment Competition

Balance Sheet
Total Liabilities + Equity
Dec-31-2009
USD

Dec-31-2010
USD

Dec-31-2011
USD

Dec-31-2012
USD

Dec-31-2013
USD

Sep-30-2014
CAGR
USD 2010-2013

LIABILITIES
Accounts Payable
Accrued Exp.
Curr. Port. of LT Debt
Curr. Income Taxes Payable
Unearned Revenue, Current
Other Current Liabilities
Total Current Liabilities
Long-Term Debt
Unearned Revenue, Non-Current
Pension & Other Post-Retire. Benefits
Def. Tax Liability, Non-Curr.
Other Non-Current Liabilities
Total Liabilities

260.0
489.0
384.0
63.0
417.0
272.0
1,885.0
3,183.0
267.0
10.0
1,137.0
182.0
6,664.0

274.0
507.0
234.0
74.0
401.0
85.0
1,575.0
3,537.0
206.0
11.0
1,021.0
149.0
6,499.0

278.0
503.0
242.0
93.0
402.0
45.0
1,563.0
3,783.0
182.0
13.0
1,065.0
185.0
6,791.0

307.0
530.0
544.0
103.0
383.0
64.0
1,931.0
4,021.0
207.0
18.0
1,141.0
214.0
7,532.0

360.0
534.0
233.0
120.0
451.0
92.0
1,790.0
4,621.0
192.0
15.0
1,173.0
325.0
8,116.0

310.0
736.0
241.0
460.0
64.0
1,811.0
4,623.0
201.0
1,185.0
326.0
8,146.0

Common Stock
Additional Paid In Capital
Retained Earnings
Treasury Stock
Comprehensive Inc. and Other
Total Com m on Equity
Minority Interest
Total Equity
Total Liabilities And Equity

2.0
3,733.0
(315.0)
(870.0)
138.0
2,688.0
2,688.0
9,352.0

2.0
3,892.0
(25.0)
(1,107.0)
155.0
2,917.0
2,917.0
9,416.0

2.0
3,818.0
293.0
(2,009.0)
128.0
2,232.0
2,232.0
9,023.0

2.0
3,820.0
558.0
(2,601.0)
151.0
1,930.0
1.0
1,931.0
9,463.0

2.0
3,858.0
832.0
(3,191.0)
122.0
1,623.0
2.0
1,625.0
9,741.0

2.0
3,875.0
1,146.0
(3,672.0)
57.0
1,408.0
3.0
1,411.0
9,557.0

0%

4%
9%

8%

-18%

1%

Ross Investment Competition

Cash Flow Statement
Cash Flow from Operations
LTM
12 m onths 12 m onths 12 m onths 12 m onths 12 m onths 12 m onths
Dec-31-2009 Dec-31-2010 Dec-31-2011 Dec-31-2012 Dec-31-2013 Sep-30-2014
CAGR
USD
USD
USD
USD
USD
USD 2010-2013
Net Incom e
Depreciation & Amort.
Amort. of Goodw ill and Intangibles
Depreciation & Am ort., Total
(Gain) Loss On Sale Of Invest.
Asset Writedow n & Restructuring Costs
Provision for Credit Losses
Stock-Based Compensation
Tax Benefit from Stock Options
Other Operating Activities
Change in Acc. Receivable
Change In Inventories
Change in Acc. Payable
Change in Unearned Rev.
Change in Other Net Operating Assets
Cash from Ops.

293.0
150.0
28.0
178.0
6.0
24.0
449.0
37.0
165.0
(107.0)
(9.0)
(54.0)
(315.0)
22.0
689.0

379.0
145.0
28.0
173.0
4.0
340.0
39.0
(14.0)
153.0
(188.0)
54.0
(52.0)
(82.0)
(171.0)
635.0

417.0
146.0
32.0
178.0
13.0
44.0
339.0
42.0
(18.0)
100.0
(187.0)
79.0
41.0
(20.0)
(25.0)
1,003.0

400.0
154.0
31.0
185.0
8.0
409.0
41.0
(33.0)
207.0
(322.0)
95.0
18.0
(7.0)
3.0
1,004.0

432.0
180.0
36.0
216.0
8.0
349.0
53.0
(15.0)
197.0
(318.0)
32.0
46.0
39.0
(31.0)
1,008.0

534.0
195.0
36.0
231.0
8.0
8.0
274.0
58.0
(36.0)
65.0
(268.0)
57.0
88.0
15.0
15.0
1,049.0

4%

8%
n.a.
26%
1%
11%
2%
9%
19%
n.a.
n.a.
n.a.
n.a.
17%

Ross Investment Competition

Cash Flow Statement
CF from Investing and Financing
LTM
12 m onths 12 m onths 12 m onths 12 m onths 12 m onths 12 m onths
Dec-31-2009 Dec-31-2010 Dec-31-2011 Dec-31-2012 Dec-31-2013 Sep-30-2014
CAGR
USD
USD
USD
USD
USD
USD 2010-2013
Capital Expenditure
Sale of Property, Plant, and Equipment
Cash Acquisitions
Invest. in Marketable & Equity Securt.
Other Investing Activities
Cash from Investing
Short Term Debt Issued
Long-Term Debt Issued
Total Debt Issued
Short Term Debt Repaid
Long-Term Debt Repaid
Total Debt Repaid
Issuance of Common Stock
Repurchase of Common Stock
Common Dividends Paid
Total Dividends Paid
Special Dividend Paid
Other Financing Activities
Cash from Financing
Foreign Exchange Rate Adj.
Net Change in Cash

(135.0)
5.0
(13.0)
34.0
(109.0)
2,688.0
2,688.0
(3,162.0)
(3,162.0)
(29.0)
(29.0)
(58.0)
(561.0)
19.0

(177.0)
20.0
(236.0)
(25.0)
(418.0)
3,716.0
3,716.0
(3,641.0)
(3,641.0)
40.0
(235.0)
(86.0)
(86.0)
(13.0)
(219.0)
3.0
1.0

(244.0)
31.0
(27.0)
(12.0)
(4.0)
(256.0)
4,066.0
4,066.0
(3,841.0)
(3,841.0)
11.0
(893.0)
(99.0)
(99.0)
3.0
(753.0)
(8.0)
(14.0)

(222.0)
1.0
(263.0)
(42.0)
7.0
(519.0)
273.0
4,655.0
4,928.0
(4,598.0)
(4,598.0)
13.0
(631.0)
(134.0)
(134.0)
(9.0)
(431.0)
(1.0)
53.0

(303.0)
6.0
(129.0)
(3.0)
28.0
(401.0)
3,078.0
3,078.0
(63.0)
(2,832.0)
(2,895.0)
(593.0)
(156.0)
(156.0)
(39.0)
(605.0)
(3.0)
(1.0)

(260.0)
5.0
(19.0)
(10.0)
15.0
(269.0)
2,162.0
(2,046.0)
(597.0)
(173.0)
(173.0)
(135.0)
(789.0)
(8.0)
(17.0)

20%
-33%
-18%
n.a.
-204%
-1%
n.a.
n.a.
-6%
n.a.
n.a.
-7%
n.a.
36%
22%
22%
n.a.
n.a.
40%
n.a.
n.a.

Ross Investment Competition

Wyndham Quarterly Analysis