Collins Stewart Reiterates a 'Hold' on Sunstone Hotel Investors (SHO); Positive Channel Checks

October 19, 2009 10:57 AM EDT

Collins Stewart reiterates a 'Hold' on Sunstone Hotel Investors (NYSE: SHO), raises price target to $8.50.

Collins analyst says, "On Friday 10/16, Sunstone issued 23MM new shares at $7.20 - upsized from an initial 14MM share offering. We understand demand was so great that the firm could have issued much more. This new equity will be used to acquire deeply discounted hotels over the next couple of quarters...Sunstone hosted an upbeat conference call on Wednesday to update investors on 3Q09 and current trends. On the call, management highlighted increased activity at its Boston, New York and Washington DC hotels - consistent with our channel checks over the last several weeks...We believe that more share offerings and acquisitions are likely in the cards for 2010. However, we also believe that investors will now want to see some of this new capital deployed - and on what terms. Given SHO's aggressive positioning, we are upping our target multiple to 11x (from 10x), which accounts for 50% of our valuation methodology (RE valuation at $200k - unchanged - reflects the other 50%). At this time we are adjusting our earnings estimates to reflect updated operational trends, the impact of the share offering and potential acquisitions."

To see more analyst ratings on SHO Click Here.

Sunstone Hotel Investors, Inc. operates as a real estate investment trust.

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