|Written by GSCR Staff|
|Tuesday, 17 September 2013 23:34|
I trust that this risqué headline got your attention. This was a great SNL skit from the news segment with Jimmy Fallon and Paris Hilton from the early 2000’s. Check it out here: http://tiny.cc/zral3w.
Now, let’s get back to our regularly scheduled program. The Blackstone Group L.P. (NYSE – BX) announced last week it is taking Hilton public with an IPO of $12.5 billion after taking the firm private back in 2007. This seems to be great timing on both sides of the deal, i.e. private right before the massive downturn of 2008 and back on the public exchanges in time for the slowly improving economy of today. The upturn in the high-end hotel business and its brand name should make this a hot IPO when it comes out, possibly sometime in early 2014.
Hotel stocks have been on fire this year with the Dow Jones U.S. Hotels Index (^DJUSLG) up nearly 18%. It seems logical for us to play this momentum and get ahead of the curve on a bounce the sector should receive with this IPO.
Diamond Resorts International, Inc. (NYSE – DRII - $17.72) is a small cap in the space that appears to meet our September criteria – general momentum/accumulation and a good forward earnings story after just going public in late July.
The Company operates in the hospitality and vacation ownership industry in the United States, Hawaii, Canada, Mexico, the Caribbean, Central America, South America, Europe, Asia, Australia, and Africa and has nearly 100 managed resorts, over 200 affiliated properties, and 4 cruise itineraries.
The 5-day, 20-day, and 50-day DMA are all very bullish for the stock. Additionally, the stock has traded over the 100K mark over the past several sessions, a sign of positive accumulation. With the current estimates set for $0.62 per share for 2013 and $1.00 for 2014 the forward P/E is just over 17, under the industry average of 20 or so. Finally, the Company closed a senior secured revolving credit facility on September 11, 2013, with Credit Suisse AG as administrative agent. The credit facility has a maturity date of September 11, 2017 and provides for funds to be borrowed at an adjusted base rate or LIBOR rate, with up to a maximum of $25,000,000 outstanding at any time. This should be a crucial component for expansion and growth.
Look for a price target of $20+ by the end of the year as the P/E multiple expands.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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