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Posted: 16/Nov/2006 at 8:00pm
Viceroy’s 305 Room five star hotels situated in the banks Hyderabad famous HussainSagarLake. The property is managed on contract basis by world’s largest hotel chain Marriot International. Viceroy is on big expansion Path; its new hotels in Chennai (550Room), Bangalore (250Room), and Hyderabad (160) will be ready for occupancy in next 26-30 Months.
Viceroy’s new capacities will be ready for occupancy in Q3 FY08-09 onwards and will add around 960 new rooms by March 09.company already raised a over 120Cr as equity capital and proposes to raise over 500Cr Rs as Debt . Once they complete all their new projects. Viceroy will end up with 1250Rooms by March 09.
Viceroy Board approved merger of its group companies with itself, which are operating in restaurant biz with 10 outlets in Hyderabad’s prime locations and a 55Room budget hotel. Combined Turnover of the restaurant chain stands at 40Cr in FY06. Post merger Viceroy’s Equity capital will go to 43Cr.
Viceroy has made a franchisee agreement with Singapore based Bakery chain Bread and Talk (considered as largest Bakery chain in Asia-Pacific with 220 outlets) to open bakery chain in India. Company already opened an outlet in Mumbai and plans to open 40 outlets in 3 years. Average cost of setting an outlet is 75-80 Lacs Rupees. Company expects a turnover of 20Lacs/Month from each outlet.
With over 1250 room size Viceroy Can able to post strong numbers in FY 09-10. I think with kind of expansion plans the company has laid and growth in this sector one could look at investing in this company with longer term horizon.
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Posted: 16/Nov/2006 at 10:19pm
Thank you for that clear analysis. Viceroy is a dark horse at Rs 102 and should be accumulated by long term investors.ALong with Indian Hotels this remains the best combination to play the sector.
I have a small theory for calculatinmg the enterprise value for Hotel stocks.Assuming that a hotel room is rented out at Rs 8000 per day and is occupied for a period of 275 days the total annual revenue from tha room should be Rs 7500 x 275 = Rs 20,62,500.
Now at a RoE of 18% if a company wants to earn Rs 20,62,500 it should need to put in Rs 1.14 crores. I take it at a discount of 10% so broadly a room should have a replacement value of Rs 1 crore.
Presently Viceroy trades at a market cap of Rs 233 crores. In Fy 09-10 this should be a 1250 room hotel chain and could trade at amarket cap of Rs 1250 crores. This should create a 5 bagger in 4 years with considerable ease.
In the above calculation errors would cancel out each other.
1) The Average room rent could be higher/lower then Rs 7500
2) The occupancy rate should be more/less then 300 days
3) The required RoE could be less then 18%. If that is the case the replacement rate for the rooms go up even more.
4) Wwe have already discounted the final figure for contingencies.
Looking at PE/EPS willl create confusion as this hotel is yet to throw back cash. ALso I assume that the company would be debt free since hotels have a HUGE cash flow.
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
Joined: 29/Oct/2006
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Posted: 16/Nov/2006 at 10:39pm
Viceroy’s current average room rate stands at Rs10400 ($240) and having an occupancy rate of 100%. For the FY06 they had debt of 120 cr on their books. And according to my calculations they shld be comfortably doing 17 cr for FY07 and 23 cr for FY08. But the real push in financials will come after FY08 where all the expansion plans which the company has initiated will start kicking to the bottomline.
Rest I think Mr.Basant will be able to guide us better.
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Posted: 16/Nov/2006 at 11:00pm
You have really provided us good coverage on this stock. I think that for the time being we need not worry on Debt, EPS and PE for Viceroy if rooms are rolled out things will fall into place. Also their association with Marriot would help.
I have discounted occupancy levels and room rent to provide a balanced sense of approach.
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
I have been convinced on the Viceroy story for sometime but like you am waiting for an off season discount. Like the stock market, hotel rates are also at all time highs. Several 5 star hotels in Bombay are now charging USD 350 per night on a base category room and USD 550 per night for a premium category room (Not a suite). Plus it is very difficult to get a base category room these days as they are booked well in advance. Got to know about the above rates yesterday and these rates are much higher than the rates prevailing a month ago when rates were increased initially. Given this it seems to be a great time to get into hotel stocks so maybe I might take an initial exposure in Viceroy today and add more when corrections happen.
Basantjees post has further added to my conviction on Viceroy.
Cheers
Edited by Equity Buff - 16/Nov/2006 at 10:12am
"Time is on your side when you own shares of superior companies". Peter Lynch.
Joined: 01/Jan/2006
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Posted: 16/Nov/2006 at 10:41am
Take one room now and then you could transfer yourself into a larger room in case there is an off season discount. SUppose the discount comes next year then you would have a problem. I normally take half of my position the moment a stock looks interesting and then I keep adding on declines or on better results at same price.
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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Like the stock market, hotel rates are also at all time highs. Several 5 star hotels in Bombay are now charging USD 350 per night on a base category room and USD 550 per night for a premium category room (Not a suite). Plus it is very difficult to get a base category room these days as they are booked well in advance. Got to know about the above rates yesterday and these rates are much higher than the rates prevailing a month ago when rates were increased initially. Given this it seems to be a great time to get into hotel stocks so maybe I might take an initial exposure in Viceroy today and add more when corrections happen.
