J.P Morgan Initiates Coverage On FelCor Lodging Trust

J.P Morgan is initiating coverage of FelCor Lodging Trust Inc. FCH with a Neutral rating and an $8 year-end 2011 price target. While J.P Morgan likes the lodging upcycle and believe the current cycle can be sustained for at least a few years, given years of very low supply growth, and believe FCH's recent balance sheet initiatives make the stock a better value now than in the past, JPM believes the current valuation largely reflects its upper-upscale segment driven growth prospects, its asset quality, and the potential balance sheet and mix benefits associated with its divestiture strategy. FCH has been successful in selling assets since 2005, having divested 45 assets coming into the peak of the market for $720 million, for an average of 12x TTM EBITDA. FCH continues to reposition its portfolio by selling an additional 30 to 40 properties, and its experience in selliing assets should bode well as the company repositions its portfolio. J.P Morgan's year-end 2011 price target of $8 is based on a net asset value approach, whereby it values its owned hotel assets at $122k per key and subtract year-end 2012 adjusted net debt and preferred equity value. FCH us trading lower at $7.32