Hilton IPO Is Not A Sleeper - Buy This Blue Chip IPO

| About: Hilton Worldwide (HLT)

Hilton Worldwide Holdings (NYSE:HLT), the iconic Blackstone (NYSE:BX) -controlled hospitality firm, plans to raise $2.2 billion in its upcoming IPO-a sum that would make it the second largest IPO of 2013 behind Plains GP (NYSE:PAGP).

The McLean, Virginia-based firm will offer 112.8 million shares (including 43% insider shares) at an expected price range of $18-$21 per share. If the IPO can find the midpoint of that range at $19.50 per share, HLT will command a market value of $19.2 billion.

HLT filed on September 12, 2013 with a huge number of underwriters.
Lead Underwriters: BofA Merrill Lynch, Deutsche Bank Securities, Goldman Sachs, and Morgan Stanley. Underwriters: Barclays Capital, Blackstone Advisory Partners LP, Castle Oak Securities LP, Citigroup Global Markets, Credit Agricole Securities, Credit Suisse Securities LLC, Drexel Hamilton LLC, HSBC Securities, JP Morgan Securities LLC, Macquarie Capital, Nomura Securities International, Raymond James, RBC Capital Markets, RBS Securities, Robert W. Baird , Samuel A. Ramirez & Company, Telsey Advisory Group, UBS Investment Bank, and Wells Fargo Securities.

Hilton Worldwide is a massive hospitality firm that encompasses numerous popular brands including its flagship Hilton Hotels & Resorts brand, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, DoubleTree, Embassy Suites Hotels, Hilton Garden Inn, Hampton Inn, Homewood Suites, Home2 Suites, and Hilton Grand Vacations. In total, Hilton's 4080 hotels, resorts and timeshare properties offer a staggering 671,926 rooms.

Hilton was taken private by The Blackstone Group in 2007, and has since grown impressively with a 36% increase in open rooms, a 25% increase in EBIDTA for its management and franchise segment, and a massive increase in extra-American presence.

Hilton divides its business into a trio of segments. Its management and franchise segment manages third party-owned properties and licenses its brands to franchisees; this segment accounts for 3,833 hotels. Its ownership segment consists of 156 hotels that the firm owns or leases, including Hilton's best-known properties like The Waldorf Astoria New York and the London Hilton on Park Lane. Finally, the firm's timeshare segment includes 41 properties for a total 6,404 units.

HLT offers the following figures in its S-1 balance sheet for the nine months ending September 30, 2013:

Revenue: $7,092,000,000
Net Income: $398,000,000
Total Assets: $26,729,000,000
Total Liabilities: $24,176,000,000
Stockholders' Equity: $2,679,000,000

HLT must compete with numerous other hospitality firms. Its luxury brands compete with hotels such as Ritz Carlton, Four Seasons, Peninsula, St. Regis, Mandarin Oriental, JW Marriott (NYSE:MAR), and Fairmont. HLT's upscale-segment brands compete with Courtyard by Marriott, Hyatt (NYSE:H), Holiday Inn (NYSE:IHG), Aloft, and Sheraton. The firm's timeshares compete with Wyndham Vacations Resorts, Starwood Vacation Ownership (HOT), and others.

Blackstone installed President and CEO Christopher J. Nassetta at Hilton Worldwide in December 2007. Previously, he served as President and CEO of Host Hotels and Resorts; he had also been an Executive Vice President and COO with Host. He is a member and former Chairman of The Real Estate Roundtable and an Executive Committee member of the World Travel & Tourism Council. Mr. Nassetta holds a degree in Finance from the McIntire School of Commerce at the University of Virginia.

We're very optimistic on the Hilton IPO and rate it a buy in the $18 to $21 projected price range.

The firm's face lift under Blackstone-the private equity giant has invested in excess of $6 billion into the hotel firm-has been an unqualified success, with a potent new leadership team and consistent growth. Hilton's profitability has skyrocketed under Blackstone, with net income attributable to Hilton stockholders increasing by 68% on average from calendar 2010 through calendar 2012. The nine months ending September 30, 2013 saw net income attributable to Hilton stockholders increased 34% over the nine months ended September 30, 2012. These figures combined with the firm's continued expansion in terms of rooms and properties and its unparalleled name recognition spell success for the HLT IPO.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in HLT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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