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Visit http://indiaer.blogspot.com/ for complete details �� ��
Investment Rationale
~ Top properties and Location Preferences
~ Expansion plans
~ Improving Financial Performance
~ Improving Industry outlook
Company Description
TAJGVK Hotels & Resorts Limited (TAJGVK) is a joint venture,
formed through a Strategic Alliance, between the Indian Hotels
Company Limited (IHCL) and the Hyderabad based GVK Group in
the year 1999/00. GVK Group is a Hyderabad based multi product
and multi-location business conglomerate with several integrated
companies in India and abroad. IHCL is a TATA enterprise with a
chain of hotels owning the Taj Group of Hotels and manages and
operates various hotels across the country and abroad. The
Company owns & operates three five star hotels in Hyderabad and
one five star hotel each in the cities of Chennai and Chandigarh. With
5 world class properties it has a room base of over 900 rooms.
Valuations
The industry and the company’s performance is improving gradually.
On a short term basis with festive season and the Debutant Formula
race event will improve the performance of the companies in this
industry for next couple of quarters as well. Currently the stock is
trading below its median PE of last 5 years. At CMP the stock trades
at 11.51x for FY12E and 9.80x for FY13E earnings. We see price
target of Rs.115 for a longer term perspective.
• Top properties and Location Preferences
Until the downturn, Hyderabad saw significant levels of economic
development in the form of a new international airport, extensive
improvements in road infrastructure, and announcements of new
industrial parks and SEZs proposed for development across the city,
especially in Gachibowli, HITEC City, and Shamshabad.
Taj Krishna, the flagship 5-star deluxe property of TAJGVK, with a
260 room inventory, is a magnificent structure in Banjara Hills.
Taj Banjara nestled away from the busy traffic of Banjara Hills, with
its own private approach and overlooking the lake, has 122 rooms.
Taj Deccan, with 151 rooms and set in a six acres lush green
landscaping - Taj Deccan.
The city of Chandigarh has always been a hub for film shootings
with its scenic landscapes and plush gardens. Cricket has also been
a mainstay with the Mohali cricket stadium forming a permanent
venue in any cricket series that is played in the country.
The Mohali cricket ground witnessed a historic event in 2010-11 in
the form of the Indo-Pak ICC Cricket World Cup semi-final which
provided lot of visibility as well as business to the Company's
property at Chandigarh.
Chandigarh's first ever branded property, the Taj Chandigarh was
successfully launched a little over 5 years ago with a room inventory
of 149 rooms.
Similar to most major cities, Chennai also witnessed significant rate
corrections in 2010-11. However, the city-wide occupancy increased
over the last year, owing to improved performance in the second half
of 2010- 11. Although the hotels witnessed a decline in demand from
the IT/ITeS industry concentrated on the OMR, the fast-developing
industrial regions of Sriperumbudur, Ambattur, and Egmore helped in
sustaining occupancies. The delay in hotel openings of large hotel
projects also helped in maintaining stable occupancy levels.
Taj Club House (Chennai) with 220 rooms, is one more proof of
TAJGVK's dedication to being recognized as a global synonym for
the warmest greeting in the hospitality industry.
The Company with its prime properties in key metros is well
positioned to benefit from the growing demand and restricted
supply going forward.
• Expansion plans
The civil works and interiors for the new five star hotel project site at
Begumpet, Hyderabad is in advanced stages. As per asset light
strategy of the Company, the owner of land has put up the structure
and the company is doing the interiors. The project would consist of
around 181 rooms with cost of interiors estimated at around ` 100
crores, and is expected to be operational this year.
They also plan to open at least five properties under its Vivanta by
Taj brand this fiscal. The 327-room Yesvantpur property, spread over
3.5 acres, has come up at an investment of Rs 230 crore, excluding
land.
The Company is proposing the construction of a 12000 sq ft spa and
an additional Car parking facility along-with enhanced landscaping
and connecting bridges at the existing premises of Taj Krishna, at
an estimated cost of ` 20 Crores. The excavation works have been
completed and the construction work on the car-parking facility has
commenced.
The Company is also planning to enter the value for money segment
through the 'Ginger' brand in Andhra Pradesh. The excavation
works on the first Ginger hotel on a site located near the
Shamshabad International Airport have been completed. The hotel is
expected to be completed over the next two years.
They have five more properties coming up in Hyderabad, Bekal
(North Kerala), Coorg (Karnataka), Coimbatore, and Gurgaon this
year and another in Dwarka by 2012-end. They are trying to go to
unique locations such as Srinagar, Bekal and Coorg for resorts.
After expansions
The room inventory will be enhanced to 1080 rooms on opening of
Vivanta by Taj – Begumpet in 2011. With Taj Krishna, the flagship 5-
star deluxe luxury property and two premium 5-star business
properties, Taj Deccan and Taj Banjara, TAJGVK is the market
leader in Hyderabad. Taj Chandigarh, its 5-star deluxe property
commands the market in Chandigarh. Taj Club House, its recently
launched trendy hotel with its contemporary rooms and food &
beverage outlets has captured significant market share in Chennai.
The Company will be expanding its footprints by launching ‘Vivanta
by Taj – Begumpet’ at Hyderabad and also a unique locations such
as Srinagar, Bekal and Coorg for resorts. The company is already
looking at other cities such as Amritsar, Nagpur and Guwahati and
are looking at another 10 hotels in the next three years.
• Improving Financial Performance
The company has been maintaining ~68% occupancy for last 3 years
and in the latest quarter the occupancy rate has been at ~66%. With
improving industry outlook this is expected to improve gradually. The
company has maintained 38% operating level margins and ~17%
PAT level margins. Also with expansions on track the margins are set
to improve going forward. The debt to equity ratio for the company is
low at 0.43 for FY11. The company maintains ROE of 14% in FY11.
It has good track record of generating good ROE’s with consistent
dividend player.
• Improving industry Outlook
The Indian tourism industry has been direct beneficiary of growing
Indian economy. The tourism demand is expected to reach US$
266.1bn by 2019. Hotel room rates are expected to rise in the
second-half of 2011-12 as the peak season sets in. The ‘Grand Prix
Formula-1’ car race which just got concluded and the festive
season in India will drive demand for hotel rooms during the
December 2011 and March 2012 quarters. This will also help
hotel companies to witness a rise in occupancy levels during
this period.
The ‘Incredible India’ campaign launched by the tourism ministry is
also expected to attract more foreign visitors to the country. Tourist
arrivals are expected to grow by four per cent in 2012-13 over an
estimated 6.3 per cent growth in 2011-12.
While higher tourists arrivals will bring more foreign earnings, a
weakening rupee is expected to further boost India’s earnings from
tourist arrivals.
Concern
Domestic and global fluctuations in eco-political issues.
Competition from global and domestic brands as well.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Investment Rationale
~ Top properties and Location Preferences
~ Expansion plans
~ Improving Financial Performance
~ Improving Industry outlook
Company Description
TAJGVK Hotels & Resorts Limited (TAJGVK) is a joint venture,
formed through a Strategic Alliance, between the Indian Hotels
Company Limited (IHCL) and the Hyderabad based GVK Group in
the year 1999/00. GVK Group is a Hyderabad based multi product
and multi-location business conglomerate with several integrated
companies in India and abroad. IHCL is a TATA enterprise with a
chain of hotels owning the Taj Group of Hotels and manages and
operates various hotels across the country and abroad. The
Company owns & operates three five star hotels in Hyderabad and
one five star hotel each in the cities of Chennai and Chandigarh. With
5 world class properties it has a room base of over 900 rooms.
Valuations
The industry and the company’s performance is improving gradually.
On a short term basis with festive season and the Debutant Formula
race event will improve the performance of the companies in this
industry for next couple of quarters as well. Currently the stock is
trading below its median PE of last 5 years. At CMP the stock trades
at 11.51x for FY12E and 9.80x for FY13E earnings. We see price
target of Rs.115 for a longer term perspective.
• Top properties and Location Preferences
Until the downturn, Hyderabad saw significant levels of economic
development in the form of a new international airport, extensive
improvements in road infrastructure, and announcements of new
industrial parks and SEZs proposed for development across the city,
especially in Gachibowli, HITEC City, and Shamshabad.
Taj Krishna, the flagship 5-star deluxe property of TAJGVK, with a
260 room inventory, is a magnificent structure in Banjara Hills.
Taj Banjara nestled away from the busy traffic of Banjara Hills, with
its own private approach and overlooking the lake, has 122 rooms.
Taj Deccan, with 151 rooms and set in a six acres lush green
landscaping - Taj Deccan.
The city of Chandigarh has always been a hub for film shootings
with its scenic landscapes and plush gardens. Cricket has also been
a mainstay with the Mohali cricket stadium forming a permanent
venue in any cricket series that is played in the country.
The Mohali cricket ground witnessed a historic event in 2010-11 in
the form of the Indo-Pak ICC Cricket World Cup semi-final which
provided lot of visibility as well as business to the Company's
property at Chandigarh.
Chandigarh's first ever branded property, the Taj Chandigarh was
successfully launched a little over 5 years ago with a room inventory
of 149 rooms.
Similar to most major cities, Chennai also witnessed significant rate
corrections in 2010-11. However, the city-wide occupancy increased
over the last year, owing to improved performance in the second half
of 2010- 11. Although the hotels witnessed a decline in demand from
the IT/ITeS industry concentrated on the OMR, the fast-developing
industrial regions of Sriperumbudur, Ambattur, and Egmore helped in
sustaining occupancies. The delay in hotel openings of large hotel
projects also helped in maintaining stable occupancy levels.
Taj Club House (Chennai) with 220 rooms, is one more proof of
TAJGVK's dedication to being recognized as a global synonym for
the warmest greeting in the hospitality industry.
The Company with its prime properties in key metros is well
positioned to benefit from the growing demand and restricted
supply going forward.
• Expansion plans
The civil works and interiors for the new five star hotel project site at
Begumpet, Hyderabad is in advanced stages. As per asset light
strategy of the Company, the owner of land has put up the structure
and the company is doing the interiors. The project would consist of
around 181 rooms with cost of interiors estimated at around ` 100
crores, and is expected to be operational this year.
They also plan to open at least five properties under its Vivanta by
Taj brand this fiscal. The 327-room Yesvantpur property, spread over
3.5 acres, has come up at an investment of Rs 230 crore, excluding
land.
The Company is proposing the construction of a 12000 sq ft spa and
an additional Car parking facility along-with enhanced landscaping
and connecting bridges at the existing premises of Taj Krishna, at
an estimated cost of ` 20 Crores. The excavation works have been
completed and the construction work on the car-parking facility has
commenced.
The Company is also planning to enter the value for money segment
through the 'Ginger' brand in Andhra Pradesh. The excavation
works on the first Ginger hotel on a site located near the
Shamshabad International Airport have been completed. The hotel is
expected to be completed over the next two years.
They have five more properties coming up in Hyderabad, Bekal
(North Kerala), Coorg (Karnataka), Coimbatore, and Gurgaon this
year and another in Dwarka by 2012-end. They are trying to go to
unique locations such as Srinagar, Bekal and Coorg for resorts.
After expansions
The room inventory will be enhanced to 1080 rooms on opening of
Vivanta by Taj – Begumpet in 2011. With Taj Krishna, the flagship 5-
star deluxe luxury property and two premium 5-star business
properties, Taj Deccan and Taj Banjara, TAJGVK is the market
leader in Hyderabad. Taj Chandigarh, its 5-star deluxe property
commands the market in Chandigarh. Taj Club House, its recently
launched trendy hotel with its contemporary rooms and food &
beverage outlets has captured significant market share in Chennai.
The Company will be expanding its footprints by launching ‘Vivanta
by Taj – Begumpet’ at Hyderabad and also a unique locations such
as Srinagar, Bekal and Coorg for resorts. The company is already
looking at other cities such as Amritsar, Nagpur and Guwahati and
are looking at another 10 hotels in the next three years.
• Improving Financial Performance
The company has been maintaining ~68% occupancy for last 3 years
and in the latest quarter the occupancy rate has been at ~66%. With
improving industry outlook this is expected to improve gradually. The
company has maintained 38% operating level margins and ~17%
PAT level margins. Also with expansions on track the margins are set
to improve going forward. The debt to equity ratio for the company is
low at 0.43 for FY11. The company maintains ROE of 14% in FY11.
It has good track record of generating good ROE’s with consistent
dividend player.
• Improving industry Outlook
The Indian tourism industry has been direct beneficiary of growing
Indian economy. The tourism demand is expected to reach US$
266.1bn by 2019. Hotel room rates are expected to rise in the
second-half of 2011-12 as the peak season sets in. The ‘Grand Prix
Formula-1’ car race which just got concluded and the festive
season in India will drive demand for hotel rooms during the
December 2011 and March 2012 quarters. This will also help
hotel companies to witness a rise in occupancy levels during
this period.
The ‘Incredible India’ campaign launched by the tourism ministry is
also expected to attract more foreign visitors to the country. Tourist
arrivals are expected to grow by four per cent in 2012-13 over an
estimated 6.3 per cent growth in 2011-12.
While higher tourists arrivals will bring more foreign earnings, a
weakening rupee is expected to further boost India’s earnings from
tourist arrivals.
Concern
Domestic and global fluctuations in eco-political issues.
Competition from global and domestic brands as well.
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