|
|
| India Infoline Research Team / 11:36 , Aug 19, 2011 |
|
|
|
CMP Rs37, Target Rs33, Downside 11.2%
-
In an effort to reduce leverage (FY11 net D/E at ~1.8x), Hotel Leela would sell, subject to approvals, its 183-room Kovalam property in Kerala for Rs5bn; Kovalam accounted for ~12% of FY11 revenues
-
As part of the deal, Hotel Leela would transfer the hotel to a SPV and receive shares in lieu of the transfer; subsequently, Travancore Enterprises, owned by Dr Ravi Pillai, would buy 100% of shares of the SPV from Leela for Rs5bn in cash; Hotel Leela would continue to manage the property through a management contract
-
In FY11, Kovalam reported ARRs of Rs8,155 (+13.6% yoy) and occupancies of 67% (down 300bps yoy) with total revenues at Rs624mn
-
Hotel Leela has expressed desire to reduce debt through development of land it owns in Bangalore, Pune and Hyderabad; as part of an ‘asset light strategy’ the Kovalam hive off would generate gross proceeds equivalent to ~13% of FY11 debt of Rs38bn
-
We assume net sale proceeds to be used to repay debt in the current fiscal (company has not indicated any time line for proposed transaction); factoring the proposed hive-off, we cut FY12/13 revenue estimate by 10%/8% and retain SELL with revised 9-mth TP of Rs33 (earlier Rs37) Financial summary
| y/e 31 March (Rs m) |
FY10 |
FY11 |
FY12E |
FY13E |
| Revenues |
4,492 |
5,258 |
5,728 |
7,494 |
| yoy growth (%) |
(1.1) |
17.1 |
8.9 |
30.8 |
| Operating profit |
1,286 |
1,580 |
1,850 |
2,503 |
| OPM (%) |
28.6 |
30.0 |
32.3 |
33.4 |
| Pre-exceptional PAT |
440 |
407 |
350 |
813 |
| yoy growth (%) |
(71.7) |
(7.6) |
(14.0) |
132.2 |
|
|
|
|
|
| EPS (Rs) |
1.1 |
1.0 |
0.9 |
2.1 |
| P/E (x) |
34.0 |
37.9 |
41.0 |
17.6 |
| P/BV (x) |
0.7 |
0.7 |
0.6 |
0.6 |
| EV/EBITDA (x) |
33.1 |
32.8 |
22.1 |
16.6 |
| Debt/Equity (x) |
1.4 |
1.8 |
1.1 |
1.1 |
| ROE (%) |
2.0 |
1.8 |
1.5 |
3.3 |
| ROCE (%) |
1.8 |
2.1 |
2.5 |
3.9 | Source: Company, India Infoline Research
|
|
|
|
|
|
|
|