Wednesday 5 September 2007

Hiddeb Gems - Hotel Leela Venture

S.P.Tulsian, Investment Advisor

Hotel Leela Venture : Reco Price Rs. 43.50 CMP: Rs.44.00 (Gain 1.15%)

For FY 07, the topline of the company was Rs 411.83 crores, EBITDA was at Rs 212.84 crores, PBT of Rs 189.51 crores and PAT of Rs 126.24 crores. EPS was at Rs 2.31 and at Rs 3.41 after considering exceptional gain.

Hotel Leela venture presently have hotels in Mumbai, Bangalore, Goa and Kovalam Beach and is setting up hotels at Gurgaon, Udaipur, Chennai, Hyderabad and Pune, which would be operational between 2007 and 2010.

For FY 07, the topline of the company was Rs 411.83 crores, EBITDA was at Rs 212.84 crores, PBT of Rs 189.51 crores and PAT of Rs 126.24 crores. This PAT is after booking an exceptional gain of Rs 40.58 crores, without which, PAT would have been Rs 85.66 crores. EPS was at Rs 2.31 and at Rs 3.41 after considering exceptional gain.

For June 07 quarter, the total income of the company, was at Rs 103.47 crores, with EBITDA of Rs 52.29 crores, PBT of Rs 35.92 crores, and PAT of Rs 30.16 crores, resulting in an EPS of 81 paise, on face-value of Rs 2 per share.

The company has acquired, a 3 acre plot in South Delhi for Rs 611 crores in March 07, and since then, market is apprehensive on future working, expecting company to go in huge debt, thus adversely affecting its financial working. However, the company is confident, in view of Commonwealth Game in 2010, and is setting up 7 Star Deluxe hotel.

The massive expansions at Gurgaon, Udaipur, Chennai, Hyderabad and Pune is also not well received by the market. However, management maintains that all are growing cities and this would give Pan India presence to the company, as also giving good growth from FY 08 onwards in phases, till FY 11.

The booming season for hotel industry is from October to March every year. The company has also started charging room rent in rupee based tariff which would improve its margin in peak season.

For FY 08, the company shall be able to post a topline of Rs 475 crores and PAT of Rs 125 crores, resulting in an EPS of Rs 3.40 per share.

On forward earning of FY 08, the share is ruling at a PE multiple of close to 13, which is very low, for any leading hotel chain. Due to lack of interest in hotel stocks and more especially for company, the share is now ruling at Rs 43 levels, which makes it a risk free buy for an expected return of 50% in the next 6 to 12 months.

Disclaimer: The writer may be deemed to be concerned or interested in the recommendation as he and his clients are invested in this scrip.