Latest Developments:
In 3Q24, Park Hotels & Resorts (PK) generated $649 million in revenue, missing expectations by $167 million and reflecting a YoY decline of 4.4%. The company's largest exposure in Hawaii is facing ongoing challenges, with Japanese visitor numbers still 50% below pre-pandemic levels. PK has pulled its FY2024 guidance due to uncertainty around labor union negotiations, further complicating the outlook. Despite a history of share repurchases and dividends, the company’s strategy of asset disposals and a looming debt burden raises concerns for future shareholder returns.

Investment Case:
Park Hotels & Resorts is in a difficult position, with its growth constrained by ongoing asset sales and a focus on repaying significant debt obligations. The weakening yen and low visitor numbers in Hawaii, a key market, are major headwinds. Although the company’s share price may seem attractive due to its large discount to net asset value, its operational challenges and reliance on asset sales for liquidity suggest that growth is unlikely. Investors should be cautious, as future returns could be limited.

Company's Valuation:
The company is currently overvalued by approximately 70%, with an implied share price of $8.22 based on a DCF model. While the stock is trading at a significant discount to book value, the actual market value of PK’s assets may not support this. Given the ongoing challenges, the current valuation lacks a sufficient margin of safety.

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