This article was selected to be shared with PRO subscribers, who also got 7 days' exclusive access to Thomas Lott’s original Top Idea on Ryman Hospitality (NYSE:RHP). Thomas Lott is a former hedge fund portfolio manager that currently trades for his personal account. Find out more about PRO here.
Seeking Alpha: Can you briefly summarize your bullish thesis for readers who may not have seen it yet?
Thomas Lott: Sure. We view Ryman as a high-quality name to buy among travel industry stocks. Unlike most plain vanilla hotel REITs, Ryman owns luxury, high end, borderline irreplaceable resorts. They control almost 60% of the large US conference square footage outside of Vegas. The Opryland Hotel might be considered a trophy asset even. They also own the Grand Ole Opry, one of many interesting media assets at the company.
The stock has of course been decimated, down almost 60%. Bankruptcy concerns appear unfounded though, as Ryman has almost 2 years of liquidity even in a zero-revenue environment. Even today, the company has already booked over 40% of 2021 room nights. They can generate solid margins at 50%. With a vaccine perhaps only months away, the world has a good chance of normalizing by 2022.
Right now of course Ryman looks scary on 2020 operating metrics. Conference travel and corporate travel is pretty much nonexistent right now. But we think the virus will be played out by next year at some point, so that in 2022 they will see meaningful recovery. If Ryman can simply print what they did in EBITDA in 2018, around $400mm, still down from its peak at $480mm last year by the way, then there is a good shot that at 14x EBITDA, its normal valuation, Ryman can trade back to $77 per share. We included $210mm of cash burn in this analysis too, as 2020 is a cash burn year. That is more than
