Wednesday, February 10, 2010

Wyndham Worldwide (WYN) Beats Estimates, Raises Dividend, Restarts Share Buyback Program

A solid report by portfolio holding Wyndham Worldwide (WYN) beating analysts estimates by 3 cents; as a bonus the quite small dividend was increased from 4 cents to 12 cents.  REVPAR (Revenue per Available Room) fell 11.9% - which for hotels is a key statistic.

Technically, the chart is ok but not great.  The stock is making lower highs but unlike most stocks sits above the 50 and 200 day moving averages.  That said, outside of buying a slew of beaten down Chinese and "weak dollar" stocks for a holding period of 48-72 hours before flipping out of all the exposure, this is what we are left with if the focus is relative strength.

As the stock pulled back to fill a "gap" from mid December last Friday, we rebought shares that had been sold in the $23 area, but if recent lows are broken we're going to be right back out. 

While not as cheap as when we first bought the stock, even at 13x earnings (something I would deem not too far from fair value) the stock is MUCH cheaper than its hotel peers.  What this says about the valuation of its peers, I'll let you decide but apparently the market is still believing the "American consumer is coming back any minute now" thesis, in pushing their valuations through the roof.


Full report here:
  • Wyndham Worldwide generated fourth quarter diluted earnings per share (EPS) of $0.40, compared with Company-issued guidance of $0.35 - $0.38. (analysts 37 cents)
  • Revenues for the fourth quarter of 2009 were $913 million, relatively flat compared with the prior-year period.
The company breaks itself up into 3 reporting units, the 3rd unit being one they are trying to get away from over time:
  1. Wyndham Hotel Group - Revenues were $149 million in the fourth quarter of 2009, a decline of 12% compared with the fourth quarter of 2008, primarily reflecting the global RevPAR decline. System-wide RevPAR declined 11.9% in the fourth quarter of 2009. In constant currency, fourth quarter 2009 system-wide RevPAR decreased 13.3%, reflecting declines of 13.8% and 15.4% in domestic and international RevPAR, respectively.
  2. Wyndham Exchange and Rentals - Revenues were $258 million in the fourth quarter of 2009, a 3% increase compared with the fourth quarter of 2008. In constant currency, revenues were relatively flat.
  3. Wyndham Vacation Ownership - Driven by the previously announced initiative to reduce capital deployed in this business, gross vacation ownership interest (VOI) sales declined 21%, from the prior-year period, to $343 million in the fourth quarter of 2009. The year-over-year change reflects a 36% increase in volume per guest which partially offset the planned reduction in tour flow of 41%.
Cash flow was a major issue for the company about 1.5 years ago so this metric has improved significantly.  Hence both an increased dividend and opportunity to restart a buyback program.
  • For the year ended December 31, 2009, the Company generated net cash from operating activities of approximately $690 million, compared with $109 million in 2008.

Dividend increase takes the yield up from 0.75% to 2.3%
  • The Company’s Board of Directors authorized an increase of the quarterly cash dividend to $0.12 from $0.04 per share, beginning with the dividend that is expected to be declared in the first quarter of 2010. With this increase, the dividend is equivalent to an annual rate of $0.48 per share.
Share buyback program - up to $157M left to go (note the company has a $3.8B market cap at this time, so if fully executed this would take out 4%+ of shares)
  • The Company plans to resume repurchase of its common stock under its existing $200 million stock repurchase program, which currently has $157 million remaining capacity.

Full year 2010 guidance
  • Revenues of $3.5 – $3.9 billion
  • Adjusted EBITDA of $775 – $800 million

General Info:
  • As of December 31, 2009, the Company’s hotel system consisted of approximately 7,110 properties and 597,700 rooms, of which 22% were international.
  • The development pipeline included approximately 950 hotels and 108,100 rooms, of which 51% were new construction and 43% were international.

[Oct 29, 2009: Wyndham Worldwide Beats, Raises Guidance]

[Sep 29, 2009: Wyndham Worldwide and Sector Upgraded by Goldman Sachs]
[Jul 29, 2009: Wyndham Worldwide Solid: RevPAR Far Above Industry]
[May 1, 2009: Bookkeeping - Creating New Position in Wyndham Worldwide]
[May 1, 2009: A Stroll Through the Hotel Space]

Long Wyndham Worldwide in fund; no personal position

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