Hotel Leela a good bet for long term.

>> Thursday, November 13, 2008

Scrip: - Hotel Leela.
BSE Code: - 500193
CMP: - 24
52 Weeks H/L - 76.85 - 21.05

Summary -
Hotel Leela has been listed on the stock exchanges of Indian i.e. BSE & NSE since 19th of July 1995.
It is in Hospitality industry from a long Time.
The company has four fully functional hotels all over India i.e. at Mumbai, Goa, Bangalore & Kerela.
It comes in a luxury Hotel segment. Its Bangalore property has been rated as one of the best business hotel.
It current market capital is 906 crores with a PE ratio of 6.5 per share of face value of Rs.2/-.
The company is planing to double the capacity by 2010 and tripple by 2012 i.e 12 hotels in all.
Logically if it starts eight new hotels their cost of building, licensing, etc would be approx 400 crores per hotel i.e. 300 x 8 = 2400 crores.
And at present the company's market capital is 906 crores which would add 2400 crores to it.
So assume the market cap is 3300 crores approx which surely tipple the stocks value by the same period.
Another key factor is the zooming land rates in few parts and in few parts they are stable.
Development in economy and development in tourism will add to scrips hidden value.
So keeping the long term factor in mind one can accumulate this scrip at any rate within Rs.28/-.
I would keep a price target of Rs.80/- approx by the end of 2010.

Developments -
1) The company is Expanding operation by developing projects in Delhi, Chennai, Pune, Hyderabad and Udaipur.
2) Entered into a Contract for management of The Leela Kempinski Gurgaon, Delhi (NCR) 319 room, and The Leela Residences Kempinski gurgaon 90 serviced residences.
3) Additional 29 more rooms are being added in Goa and also setting up an IT park and a Commercial Complex in Chennai.

The above projects are expected to be completed by FY09 and FY10. The company plans to double it's room count after the implementation of the above projects. The company has opened sales and marketing offices in London, Dubai and appointed GSA in Singapore.

After the complete expansion in place the company's revenue is set to grow @75% p.a. The stock can prove on to be a good multibagger play.

Fundamentals -

1) The average occupancy rate is around 80%.
2) Strong presence in 5-star deluxe category.
3) Aggressive capex to add exponentially to the revenues.

Risks -

1) A slowdown in economy can reduce the occupancy rate and also the ARR.
2) Bangalore accounting for 45% of its revenues, earnings remain vulnerable to decline in tariffs and occupancies.
3) With number of luxury service apartments increasing in last couple of years, corporate occupancy is set to decline.
4) Strong rupee appreciation can offset the margin's partially for dollar based room tariff's.

Key Positive -
A dividend paying stock.
Good long term perspective.
Lots of developments taking place.
Good management.

Chart Credits MyIRIS.Com

Happy Investing.