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Open offer: Opportunity to book profit…
Clearwater Capital has finally announced an open offer for acquiring a
26% stake (post FCCB conversion) after converting its entire FCCB worth
US$18 million into equity shares. Kamat Hotels had raised this FCCB in
FY07 to fund its expansion plans (mainly for Mumbai Orchid expansion).
The conversion price for this FCCB, which was set at | 225 per share, was
again re-set to | 135 during June 2010. We believe this open offer gives
investors an opportunity to book profit at the offer price, given its fair
valuations in a neutral environment for the sector.
Promoter to continue to have controlling stake in company
Post FCCB conversion, the promoter holding will come down by 13.9% in
the company. However, they will continue to have a controlling stake in
the company. Hence, the risk of a change in owner does not exist for this
company.
FCCB conversion to have positive impact on EPS
We expect interest cost saving of | 2.5 crore (i.e. 8% YoY saving) on debt
reduction of | 55 crore. This, in turn, would increase overall FY13
profitability by 48% while outstanding shares would increase by 27% to
1.90 crore post FCCB conversion. Taking this into account, we have
increased our FY13E EPS guidance by 20%.
Acceptance ratio to remain 100%, opportunity to book profit in full
The combined holding of the promoter and Clearwater Capital post
conversion stands at over 82%. This gives other investors an opportunity
to get full acceptance ratio in the open offer for a 26% stake. Considering
this, we recommend that our investors tender their shares in full, given
the neutral environment for hotel players in Mumbai.
Valuations
We believe the company’s main operating region Mumbai is yet to
witness transition from an occupancy led cycle to the recovery in room
rates. At the offer price of | 135, the stock is trading at 18.8x and 14.3x its
FY12E and FY13E revised EV/EBITDA, respectively. We believe it is fairly
valued at the open offer price. Hence, we recommend that investors
tender their shares in full.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Open offer: Opportunity to book profit…
Clearwater Capital has finally announced an open offer for acquiring a
26% stake (post FCCB conversion) after converting its entire FCCB worth
US$18 million into equity shares. Kamat Hotels had raised this FCCB in
FY07 to fund its expansion plans (mainly for Mumbai Orchid expansion).
The conversion price for this FCCB, which was set at | 225 per share, was
again re-set to | 135 during June 2010. We believe this open offer gives
investors an opportunity to book profit at the offer price, given its fair
valuations in a neutral environment for the sector.
Promoter to continue to have controlling stake in company
Post FCCB conversion, the promoter holding will come down by 13.9% in
the company. However, they will continue to have a controlling stake in
the company. Hence, the risk of a change in owner does not exist for this
company.
FCCB conversion to have positive impact on EPS
We expect interest cost saving of | 2.5 crore (i.e. 8% YoY saving) on debt
reduction of | 55 crore. This, in turn, would increase overall FY13
profitability by 48% while outstanding shares would increase by 27% to
1.90 crore post FCCB conversion. Taking this into account, we have
increased our FY13E EPS guidance by 20%.
Acceptance ratio to remain 100%, opportunity to book profit in full
The combined holding of the promoter and Clearwater Capital post
conversion stands at over 82%. This gives other investors an opportunity
to get full acceptance ratio in the open offer for a 26% stake. Considering
this, we recommend that our investors tender their shares in full, given
the neutral environment for hotel players in Mumbai.
Valuations
We believe the company’s main operating region Mumbai is yet to
witness transition from an occupancy led cycle to the recovery in room
rates. At the offer price of | 135, the stock is trading at 18.8x and 14.3x its
FY12E and FY13E revised EV/EBITDA, respectively. We believe it is fairly
valued at the open offer price. Hence, we recommend that investors
tender their shares in full.
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