Marriott International, Inc.

Marriott Vacations Worldwide Corporation (NASDAQ: VAC) is a leading global vacation company that offers vacation ownership, exchange, rental and resort and property management, along with related businesses, products and services.

Key Updates:

• Ambiguous Macro scenario: During the last week, we have seen a major sell-off across the global capital markets due to the possible resurgence of the COVID 19 virus across the globe. The above might lead to the imposition of lockdown restrictions and travel bans, which is a key concern for the company as it would impact the company’s occupancy rate in the coming quarters.
• Lower margins: The company reported a lower profit margin than the industry median, which indicates weak operational efficiencies. Notably, EBITDA margin and operating margin were reported at 18.3% and 12.3%, respectively, in Q3FY21, as compared to the industry median of 19.7% and 13.9%, respectively. Net margin during the quarter was recorded at 1.0%, versus the industry median of 6.1%.
• Lower debt protection metrics: At the end of Q3FY21, the company reported net debt to EBITDA of 20.55x, which is significantly higher than the industry median of 9.68x. A higher ratio denotes a poor debt protection level.

Q3FY21 Financial Highlights:

• VAC announced its quarterly result, wherein the company posted its total revenues of USD 1,052 million, soared from USD 649 million in pcp. The increase was driven by higher income from all its business segments.
• The quarter was marked by an increase in inputs costs like the cost of vacation ownership products, management and exchange costs and higher marketing and sales costs. Total expenses were recorded at USD 896 million, increased from USD 673 million in pcp, due to a rise in input costs.
• The company turned profitable and posted a net income of USD 11 million, as compared to a net loss of USD 58 million in pcp.

Q3FY21 Income Statement Highlights (Source: Company Report)

Risks: The company’s operations might be hindered due to the imposition of lockdown and travel restrictions.

Stock Recommendation:

The stock of VAC corrected ~12% in the last week due to the rising concern of the resurgence of COVID 19 across specific countries. Moreover, further lockdown restrictions might lead to a decline in the occupancy rate. Moreover, the VAC stock closed at USD 146.99, which is below its 50-days and 100-days simple moving average, indicating a bearish trend. The stock is available at an EV to EBITDA of 9.8x on an NTM basis, as compared to the industry (Consumer Cyclicals) median of 7.3x. Considering the aforesaid facts, we recommend a ‘Watch’ stance on the stock of VAC at the last traded price of USD 150.35 on December 03, 2021.

One-Year Technical Price Chart (as on December 03, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.