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Valuation Using Cash Flows

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Valuation Using Cash Flows. Intercontinental Hotel Group IHG. Julia Lassarat February 5, 2014. Overview. Industry and Firm Introduction Overview of IHG Forecasting Discounted Cash Flow Model 10% WACC 9.6% WACC. Industry Overview.

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Valuation Using Cash Flows

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  1. Valuation Using Cash Flows Intercontinental Hotel Group IHG Julia Lassarat February 5, 2014

  2. Overview • Industry and Firm Introduction • Overview of IHG Forecasting • Discounted Cash Flow Model • 10% WACC • 9.6% WACC

  3. Industry Overview • Resilient industry in the face of slowing economic pace • Revenue per available room (RevPAR) is standard performance metric • RevPAR was up 4.5% in 2012 in comparison to 5.9% in 2011 • Highly competitive market • The global hotel market is estimated to be 21.5 million rooms • 7.5 million of these are branded hotel rooms Source: IHG 2012 Annual Report

  4. SWOT Analysis Internal Factors External Factors Positive Factors Negative Factors

  5. Forecasting Using Sales Growth, EPM, and EATO • Forecast revenues via forecasts of sales growth rates • Forecast EPAT via forecasts of EPM • Forecast NEA via forecasts of EATO

  6. Parsimonious Assumptions • Sales Growth Rate: 5.50% • EPM: 28% • EATO: 1.67

  7. Calculating Free Cash Flow FCF= EPAT- NEA

  8. Discounted Cash Flow Model Enterprise Value on Yahoo Finance: $9.46 Billion

  9. Discounted Cash Flow Model Enterprise Value on Yahoo Finance: $9.46 Billion

  10. Questions?

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