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Hotel Leela Venture’s (HLV) Q1FY12 EBIDTA came in at INR 206 mn versus
our INR 470 mn estimate. EBIDTA margin tumbled to 16.5% compared to
29.8% in Q1FY11 due to muted business at the recently opened Delhi
property. Loss of INR 265 mn was better than expected due to deferred
tax asset. Due to higher–than‐expected cost and no clarity on the
Chennai commercial space, we are revising down FY12E and FY13E
EBIDTA ~15% each. With total debt of ~INR 40 bn, we believe an asset
sale along with equity raising is imminent. We maintain ‘REDUCE’ with a
reduced target price of INR 20.
Flat ARRs, improving ORs; new properties dent margin
HVL’s sales of INR 1.25 bn (up 17.9% Y-o-Y) against our estimate of INR 1.38 bn were
largely driven by higher Ors, which improved 3-15% in Q1FY12. Among prime
properties, Bengaluru posted ORs of 65.1% (62.9% in Q1FY11) and Mumbai 74%
(68.3% in Q1FY11); the recently opened New Delhi property clocked 21.2% ORs. ARRs,
however, were flat across key properties. EBIDTA margin declined to 16.5% versus
29.8% in Q1FY11, primarily led by higher cost for the Delhi property. This, together
with high interest costs, led to loss of INR 265 mn during the quarter.
Cutting EBIDTA on high operating costs, Chennai space ambiguity
Due to high operating costs and no clarity on the sale/lease of Chennai commercial
space, we are cutting our EBIDTA estimates for FY12 and FY13 ~15% each. With its
debt trap, we believe HLV needs to mount fund raising efforts on a war footing. As per
media reports, Leela is looking to sell its Kovalam property (181 rooms) to an NRI.
Outlook and valuations: Money matters; maintain ‘REDUCE’
We believe fund raising exercise is the next point to watch as the joint development
agreement for Bengaluru land will have minimal impact. Sale of Chennai commercial
space along with equity raising is required to control the current D/E of 4.3x. We
continue to value the company on 17x FY12E EV/EBIDTA and cut our target price to
INR 20 (earlier INR 25) in line with cut in our EBIDTA estimates. We maintain ‘REDUCE’
recommendation on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hotel Leela Venture’s (HLV) Q1FY12 EBIDTA came in at INR 206 mn versus
our INR 470 mn estimate. EBIDTA margin tumbled to 16.5% compared to
29.8% in Q1FY11 due to muted business at the recently opened Delhi
property. Loss of INR 265 mn was better than expected due to deferred
tax asset. Due to higher–than‐expected cost and no clarity on the
Chennai commercial space, we are revising down FY12E and FY13E
EBIDTA ~15% each. With total debt of ~INR 40 bn, we believe an asset
sale along with equity raising is imminent. We maintain ‘REDUCE’ with a
reduced target price of INR 20.
Flat ARRs, improving ORs; new properties dent margin
HVL’s sales of INR 1.25 bn (up 17.9% Y-o-Y) against our estimate of INR 1.38 bn were
largely driven by higher Ors, which improved 3-15% in Q1FY12. Among prime
properties, Bengaluru posted ORs of 65.1% (62.9% in Q1FY11) and Mumbai 74%
(68.3% in Q1FY11); the recently opened New Delhi property clocked 21.2% ORs. ARRs,
however, were flat across key properties. EBIDTA margin declined to 16.5% versus
29.8% in Q1FY11, primarily led by higher cost for the Delhi property. This, together
with high interest costs, led to loss of INR 265 mn during the quarter.
Cutting EBIDTA on high operating costs, Chennai space ambiguity
Due to high operating costs and no clarity on the sale/lease of Chennai commercial
space, we are cutting our EBIDTA estimates for FY12 and FY13 ~15% each. With its
debt trap, we believe HLV needs to mount fund raising efforts on a war footing. As per
media reports, Leela is looking to sell its Kovalam property (181 rooms) to an NRI.
Outlook and valuations: Money matters; maintain ‘REDUCE’
We believe fund raising exercise is the next point to watch as the joint development
agreement for Bengaluru land will have minimal impact. Sale of Chennai commercial
space along with equity raising is required to control the current D/E of 4.3x. We
continue to value the company on 17x FY12E EV/EBIDTA and cut our target price to
INR 20 (earlier INR 25) in line with cut in our EBIDTA estimates. We maintain ‘REDUCE’
recommendation on the stock.
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