Park Hotels & Resorts' Acquisition Of Chesapeake Is Beneficial

5/28/19

By Ploutos Investing, SA

Summary

  • Park Hotels & Resorts operates high-quality resorts and upper upscale hotels in the United States.
  • The REIT’s acquisition of Chesapeake should improve the quality of its existing portfolio.
  • PK offers an attractive dividend with a dividend yield of 6.2%.

Investment Thesis

Park Hotels & Resorts (PK) delivered a solid Q1 2019 with strong comparable revenue per available room growth and EBITDA margin expansion. The company also announced to acquire Chesapeake Lodging Trust (CHSP). The acquisition should result in annual run rate synergies of $34 million and increase PK’s RevPAR and average daily rates. The acquisition should allow further geographic diversification. PK is currently trading at an attractive valuation and offers a 6.2%-yielding dividend. However, we are already in the late stage of the current economic cycle. Conservative investors may want to wait till the beginning of the next cycle to invest.

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