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kumarrvq
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Quote kumarrvq Replybullet Topic: Sterling Holiday Resorts (India)
    Posted: 17/Jan/2008 at 10:52am

I have looked at this small cap company on 3 parameters i.e, Right business, Right promoters, Niche/Scale of business.

Business:-

  • Sterling Holiday Resorts (India) is available at Rs70 (Mcap = 200Cr).
  • They have 14 resorts across the country.
  • The Mountains ->» Kodaikanal» Lonavala» Manali» Munnar» Mussoorie» Ooty» Darjeeling» Yelagiri» Yercaud
    The Beaches-> » Goa» Mahabalipuram» Puri
    Pilgrimage Centers ->» Puri» Swamimalai

Management:-

  • 32 lakhs (12% of total equity share of 2.7Cr) warrants issued to promoters at a price of Rs 73.16/-

Scale:-

  • Time sharing resorts are new business in India, as of now only Country Club and Club Mahendra plays in this niche area. So scope of expension is much more since middle class consumption and life style is changing.

Trigger:-

  • Mahindra Holidays & Resorts India Ltd., (MHRIL) a part of the Infrastructure Sector of the Mahindra Group, the company’s flagship brand ‘Club Mahindra Holidays’, today has a fast growing customer base of over 60,000 members and 15 beautiful Resorts at some of the most exotic spots in India and abroad.
  • The pre-IPO placement deal values the leisure hospitality provider at around Rs 4,000 crore ($1 billion).
  • MHRIL has filed for its IPO, which will see a sale of 10 million equity shares of Rs 10 each at a premium. This would constitute about 13 per cent stake of the fully diluted post-issue paid-up capital of the company.
  • Country Club (India) Ltd another player in same business has Mcap of 821Cr. Sales 240Cr/Profit 60Cr FY08, PE=15.
  • Sterling Holiday Resorts (India), Mcap = 200Cr, Sales 30Cr/Profit 12Cr approx FY08.
  • Mahindra Holidays & Resorts India Ltd = Mcap:4000Cr; Country Club (India) Ltd = Mcap: 821Cr but Sterling Holiday Resorts (India) Mcap is just 200Cr.
  • There is valuation gap, so Country Club and Sterling Holidays will catchup the.

I am expecting Sterling Holidays currently at Rs70 to move up and reach min 200+ by the time IPO of Mahendra Holidays comes (it is expected to come in Jan-Feb'08). So we can look at this stock as multibagger in couple of months.

Note: This company doesn't have internal strength i.e, I don't know abt the management, they have not done well in past, neither they are a sector leader but there is valuation gap which I can see as potential upside. Personally, I do not hold any stake in this company!!!

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Harry
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basant
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Quote basant Replybullet Posted: 17/Jan/2008 at 11:56am
Interesting argument. Seems to make sense. Does any one have am idea of how big global companies have become. But this business should boom with growing income and demographic set up.
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smartcat
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Quote smartcat Replybullet Posted: 18/Jan/2008 at 12:01pm
There are global companies with market caps of $1 billion or so - all over the world. My only concern is competition from the unorganized sector. There is probably nothing that distinguishes a hotel/resort like this from a well run family run resort.
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deveshkayal
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Quote deveshkayal Replybullet Posted: 18/Jan/2008 at 12:18pm
On MCap/Sales basis, Sterling has higher valuation than Country Club. Also, i have never heard of Sterling Resorts but i can see aggressive advertising by Country Club.
"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett
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jack
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Quote jack Replybullet Posted: 20/Jan/2008 at 8:51pm
I was holding this shares during 90's period, it went up to Rs200, and it crashed like anything. Now attempting again to go up. Their accommodations are not par with Mahindra's, so it could not be compared with any yardstick with Mahindra's or Country club.
The most important thing is Management Issues. It seems to be very poor. They are struggling for so many years to bring back the business even though they are the first in time share concept in India.
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kumarrvq
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Quote kumarrvq Replybullet Posted: 20/Jan/2008 at 9:11pm
I too agree with you Jack, but I mentioned this company on only one parameter i.e valuation gap, Club Mahendra (Valuation = 4000Cr during IPO and looking at today's scenario it can be 6000-8000Cr while listing, in case if it get premium), so here is a company Sterling resort with similar number of resorts as Mahendra but available at Rs 200Cr only, doesn't it sounds different...
 
I mean Is Sterling resort should get 20 times less valuations than Club Mahendra!!!
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Harry
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Ajith
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Quote Ajith Replybullet Posted: 20/Jan/2008 at 9:56pm
 Sterling Teak-lot of investors(not share market) lost their money in Sterling teak trees  a few years ago,I think.Is this not the the same management?
Sterling has a resort in Ooty . Mahindra is  altogether a class apart.
But still Sterling may be a value buy-(in a bull market all sorts of shares move up)- if the question marks on the management can be refuted.



Edited by Ajith - 20/Jan/2008 at 10:11pm
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nitin_jagtap
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Quote nitin_jagtap Replybullet Posted: 20/Jan/2008 at 8:07am
Originally posted by kumarrvq

I too agree with you Jack, but I mentioned this company on only one parameter i.e valuation gap, Club Mahendra (Valuation = 4000Cr during IPO and looking at today's scenario it can be 6000-8000Cr while listing, in case if it get premium), so here is a company Sterling resort with similar number of resorts as Mahendra but available at Rs 200Cr only, doesn't it sounds different...
 
I mean Is Sterling resort should get 20 times less valuations than Club Mahendra!!!
 
Yes the valuation comparison makes a case to look at sterling however we should also remember the fact that market in terms of stock valuation would reflect the future earning potential and will not consider past performance or for that matter the valuation of peers, at this stage Mahindra has projected a bright future in terms of earnings growth and that could help them quote at a rich premium, sterling may have the same number of properties but without any future plan or for that matter any visibility in earnings would not really enthuse the market.
 
A case in example would be the rerating of essar oil one rel petro went thorugh the roof here we have a company which will start production only in dec 08 whereas essaroil has already got an existing set up and refinery.
 
The case for investment in sterling had some in BS a few months back when it was around 55 rs and the same logic using MM was used , but I suppose market in its wisdom couldnt really buy this srguement to give such a big rerating for sterling.
 
Now at the end of the day in such market conditions sterling may outperform in the but without any future visibility market would get it back to where it was is my guess unless some major corporate action like stake sale or additional properties or sale of existing properties take place.
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Nitin Jagtap
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