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Investment Rationale
Company Background
C&K is one of the largest and widely recognized holiday
brands in India and has evolved over 250 years. The
company caters to overall travel needs of Indian and
international travelers. It has presence in 19 countries and
in India has 272 touch points covering 164 locations. In
India, the company caters to outbound, inbound, and
domestic travelers. In its international presence, C&K is
primarily an outbound tour operator. Its business can be
broadly categorized as leisure travel, corporate travel, forex
and visa processing. It provides end-to-end travel solutions
including land, air and cruise bookings, hotel bookings, in
transit arrangements and various other travel-related
services. C&K has subsidiaries in UK, Australia, New Zealand,
Japan, US, UAE, Germany, Hong Kong, Greece and
Singapore.
Investment Rationale
Well Diversified Business
International operations contributing almost 50% of total
income, the revenues are well spread across geographies.
Consistent innovation and the company’s inorganic growth
strategy have provided C&K with higher growth rates.
Highly recognized brand helps it drive better bargains from
business partners. Better bargain helps the company offer
cheaper products to customers in comparison to
competitors.
With seamless integration of acquisitions and starting of a
luxury train, along with the visa processing facility, we
believe the company is in a sweet spot to benefit from
growth in inbound, outbound and domestic travel. Charter
Airlines Business, corporate travel, forex, inbound travel,
MICE business are contributing significantly.
MICE business is growing very rapidly in India and C&K is
one of the favorite tour companies because of its Global
Presence. Global Presence is giving competitive edge and
synergetic advantage to company among its peers.
Strong Fundamentals
Y-O-Y Performance
Although debt as a percent of total capital decreased at Cox
& Kings Limited over the last fiscal year to 38.41%, it is still
in-line with the Hotels, Restaurants and Leisure industry's
norm. Additionally, there are enough liquid assets to satisfy
current obligations. Cash Collection is a strong suit as the
company is more effective than most in the industry
managed as the Inventory Processing Period is typical for
the industry, at 21.24 days.
Q-o-Q Performance
Compared to the same quarter last year, Cox & Kings
Limited has been able to grow revenues from 78.89crs to
108.3crs. Most impressively, the company has been able to
reduce the percentage of sales devoted to income tax
expense from 10.24% to 9.80%. This was a driver that led to
a bottom line growth from 19.28crs to 23.02crs.
Strong Distribution Network
It plans to add 150 franchisees in the next 12-18 months.
Franchise model will allow to increase its presence in more
cities without investing in the infrastructure and other
associated costs. Franchisees are expected to contribute 15-
18% of total revenues in next 2-3 yrs.
Focus on Inorganic Growth
C&K is scouting for global acquisitions to drive its growth
and strengthen its position as the leading tour operator in
the country. For this purpose, C&K has raised Rs. 12 bn
through IPO proceeds, GDR and internal accruals.
Industry Growth
Indians traveling abroad increased to 12.61 mns from 11.56
mns in 2009.We have already witnessed 18% growth in the
number of trips in 2010 from 550mns Indians to 650mns.
65% relates to leisure travel. Arrivals in India grew by 9.3%
from 2009 to 2010.
Industry Expects’ Indian Tour & Travel industry to grow at
an annual rate of 7.8% over the next 10 years. India has
been ranked 8th with $110.6 billion direct industry GDP in
2020. India will rank 3rd in terms of annual growth in Travel
& Tourism Demand between 2010 and 2019, averaging
8.2% per annum.
Valuation
Looking at the industry growth and the company’s
performance, at CMP Of Rs. 374 the scrip is trading at 18x
and 13x FY11E and FY12E with consolidated EPS of 21 and
28 respectively which is at a discount on global peers.. We
expect a fair band of 17x PE with a price target of Rs. 475.
Concerns
Slow down in global economy and unforeseen events.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Investment Rationale
- Well Diversification Business
- Strong Fundamentals
- Strong Distribution Network
- Focus on Inorganic Growth
- Industry Growth
Company Background
C&K is one of the largest and widely recognized holiday
brands in India and has evolved over 250 years. The
company caters to overall travel needs of Indian and
international travelers. It has presence in 19 countries and
in India has 272 touch points covering 164 locations. In
India, the company caters to outbound, inbound, and
domestic travelers. In its international presence, C&K is
primarily an outbound tour operator. Its business can be
broadly categorized as leisure travel, corporate travel, forex
and visa processing. It provides end-to-end travel solutions
including land, air and cruise bookings, hotel bookings, in
transit arrangements and various other travel-related
services. C&K has subsidiaries in UK, Australia, New Zealand,
Japan, US, UAE, Germany, Hong Kong, Greece and
Singapore.
Investment Rationale
Well Diversified Business
International operations contributing almost 50% of total
income, the revenues are well spread across geographies.
Consistent innovation and the company’s inorganic growth
strategy have provided C&K with higher growth rates.
Highly recognized brand helps it drive better bargains from
business partners. Better bargain helps the company offer
cheaper products to customers in comparison to
competitors.
With seamless integration of acquisitions and starting of a
luxury train, along with the visa processing facility, we
believe the company is in a sweet spot to benefit from
growth in inbound, outbound and domestic travel. Charter
Airlines Business, corporate travel, forex, inbound travel,
MICE business are contributing significantly.
MICE business is growing very rapidly in India and C&K is
one of the favorite tour companies because of its Global
Presence. Global Presence is giving competitive edge and
synergetic advantage to company among its peers.
Strong Fundamentals
Y-O-Y Performance
Although debt as a percent of total capital decreased at Cox
& Kings Limited over the last fiscal year to 38.41%, it is still
in-line with the Hotels, Restaurants and Leisure industry's
norm. Additionally, there are enough liquid assets to satisfy
current obligations. Cash Collection is a strong suit as the
company is more effective than most in the industry
managed as the Inventory Processing Period is typical for
the industry, at 21.24 days.
Q-o-Q Performance
Compared to the same quarter last year, Cox & Kings
Limited has been able to grow revenues from 78.89crs to
108.3crs. Most impressively, the company has been able to
reduce the percentage of sales devoted to income tax
expense from 10.24% to 9.80%. This was a driver that led to
a bottom line growth from 19.28crs to 23.02crs.
Strong Distribution Network
It plans to add 150 franchisees in the next 12-18 months.
Franchise model will allow to increase its presence in more
cities without investing in the infrastructure and other
associated costs. Franchisees are expected to contribute 15-
18% of total revenues in next 2-3 yrs.
Focus on Inorganic Growth
C&K is scouting for global acquisitions to drive its growth
and strengthen its position as the leading tour operator in
the country. For this purpose, C&K has raised Rs. 12 bn
through IPO proceeds, GDR and internal accruals.
Industry Growth
Indians traveling abroad increased to 12.61 mns from 11.56
mns in 2009.We have already witnessed 18% growth in the
number of trips in 2010 from 550mns Indians to 650mns.
65% relates to leisure travel. Arrivals in India grew by 9.3%
from 2009 to 2010.
Industry Expects’ Indian Tour & Travel industry to grow at
an annual rate of 7.8% over the next 10 years. India has
been ranked 8th with $110.6 billion direct industry GDP in
2020. India will rank 3rd in terms of annual growth in Travel
& Tourism Demand between 2010 and 2019, averaging
8.2% per annum.
Valuation
Looking at the industry growth and the company’s
performance, at CMP Of Rs. 374 the scrip is trading at 18x
and 13x FY11E and FY12E with consolidated EPS of 21 and
28 respectively which is at a discount on global peers.. We
expect a fair band of 17x PE with a price target of Rs. 475.
Concerns
Slow down in global economy and unforeseen events.
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