As of march 31 the company had 43 billion in debt up

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As of March 31, the company had $4.3 billion in debt, up from $4.0 billion a year earlier. The debt/total capital ratio was 37%, compared to 49% for peers. HST had $323 million in cash and cash equivalents and $511 million available under its credit facility. EBIT covered interest expense by a factor of 8.5 in 1Q, above the peer average of 4.8. HST’s debt is rated BB+ by S&P and BBB by Fitch. Moody’s withdrew its rating in May 2017. Its most recent rating was Baa2. Host pays a quarterly dividend of $0.20 per share, or $0.80 annually, for a yield of about 3.6%. Over the past five years, the company has raised the dividend at a 14.9% compound annual rate. Our dividend estimates are $0.85 for both 2018 and 2019. In February 2017, the board authorized a $500 million repurchase program; however, the company has not repurchased any shares on this authorization. MANAGEMENT & RISKS James Risoleo has been CEO of Host Hotels since January 2017. He was previously the managing director of West Coast investments and joined the company in 1996. The chairman of Host Hotels is Richard E. Marriott.
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M ARKET U PDATE - 4 - The hotel industry is cyclical and is affected by the balance of supply and demand for hotel rooms. The overall health of the U.S. economy affects this demand, and a prolonged downturn could have a significant effect on hotel profitability. Marriott International hotels comprise over half of the company’s portfolio, so any problems with this brand could have a serious impact on overall results. Host Hotels also faces risks from volatile energy and insurance costs. HST has operations in Europe, which has faced relatively slow economic growth. HST’s Houston and New York properties have also been struggling. COMPANY DESCRIPTION Host Hotels & Resorts Inc., formerly Host Marriott Corp., is one of the largest hotel real estate investment trusts. Host owns 90 full-service luxury hotel properties with about 53,000 rooms. The company is also part of an international joint venture that owns ten hotels in Europe, and has hotel investments in the Asia/Pacific region and India. Host’s portfolio consists mostly of upscale properties. Its brands include Marriott, Ritz-Carlton, Hyatt, Fairmont, Sheraton, Hilton, Westin, W, St. Regis, The Luxury Collection, and Swissotel. HST shares are a component of the S&P 500. VALUATION We think that HST shares are fairly valued at recent prices near $22. The shares have traded between $17 and $22 over the last 52 weeks and are currently at the top of this range. The shares have weakened during periods when interest rate increases have appeared more likely, and have risen when prospects for rate hikes have diminished. As interest rates are likely to rise further over the next year, we expect the shares to weaken. Our valuation model incorporates peer and historical analysis. The shares are trading at a projected 2018 price/ AFFO multiple of 13.0, above both the five-year average of 12.2 and the peer median of 12.0. They are also trading at an EV/EBITDA multiple of 13.4, above the five-year average of 13.1 and the median of 13.2 for other lodging REITs.
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