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Holidaybreak acquisition-one-off PAT impact to reverse in FY13
Cox & Kings (C&K) acquired UK-based Holidaybreak (HBR), an
education and activity travel group with market leading positions in UK
and other major European markets in late Q2 FY12. Acquisition was
made for an EV of US$730mn in a business that generated ~US$100mn
EBIDTA in FY11 (Oct-Sep). HBR business has a strong seasonality with
bulk of profits accruing in H2 (Apr-Sep). For instance, H1 FY11 saw
headline pre-tax loss of US$28mn whereas FY11 posted headline PBT of
US$53mn. Since C&K would consolidate the loss making Oct-Mar
period, we expect FY12 PAT to be adversely impacted but situation
would reverse with full year consolidation in FY13.
Holidaybreak: resilient model with leadership position
Holidaybreak offers educational and activity-based tours with FY11
group revenues of US$711mn and EBIDTA of ~14%. It has 4 segments-
Education, Hotel breaks, Adventure and Camping with the first two
accounting for over ~54% of revenues and 57% of EBIDTA in FY11.
Within the education segment, PGL is the leader in outdoor residential
trips for students with centres spread across Europe, largely on
ownership basis. Acquisition would fortify C&K’s revenue mix with the
addition of a sturdier education business to the high growth leisure
travel business.
India outbound growth to remain robust
Of the nearly 20% of the 13.6mn outbound travelers from India who
bought a travel package in 2011, C&K accounts for ~50% share; it
expects India outbound to grow at a robust 30% yoy. Over the FY09-12
period, C&K India revenues have probably witnessed a ~26% cagr and
we build in a healthy ~22% compounded growth over FY11-14.
Margins to improve, valuation appears attractive: BUY
Q3 FY12 EBIDTA was impacted by HBR merger which has a seasonally
lean period in Oct-Mar while higher interest expense took its toll on PAT.
However, the impact would reverse from FY13 upon full year
consolidation. C&K would drive synergies on both revenue (C&K
outbound generates European hotel bookings worth US$51mn to whom
Hotel break bookings can be marketed) and cost fronts through group
buying. Expect consolidated margin, return ratios to improve as HBR is
fully integrated; valuations at 8.4x EV/E appears attractive.
Recommend BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Holidaybreak acquisition-one-off PAT impact to reverse in FY13
Cox & Kings (C&K) acquired UK-based Holidaybreak (HBR), an
education and activity travel group with market leading positions in UK
and other major European markets in late Q2 FY12. Acquisition was
made for an EV of US$730mn in a business that generated ~US$100mn
EBIDTA in FY11 (Oct-Sep). HBR business has a strong seasonality with
bulk of profits accruing in H2 (Apr-Sep). For instance, H1 FY11 saw
headline pre-tax loss of US$28mn whereas FY11 posted headline PBT of
US$53mn. Since C&K would consolidate the loss making Oct-Mar
period, we expect FY12 PAT to be adversely impacted but situation
would reverse with full year consolidation in FY13.
Holidaybreak: resilient model with leadership position
Holidaybreak offers educational and activity-based tours with FY11
group revenues of US$711mn and EBIDTA of ~14%. It has 4 segments-
Education, Hotel breaks, Adventure and Camping with the first two
accounting for over ~54% of revenues and 57% of EBIDTA in FY11.
Within the education segment, PGL is the leader in outdoor residential
trips for students with centres spread across Europe, largely on
ownership basis. Acquisition would fortify C&K’s revenue mix with the
addition of a sturdier education business to the high growth leisure
travel business.
India outbound growth to remain robust
Of the nearly 20% of the 13.6mn outbound travelers from India who
bought a travel package in 2011, C&K accounts for ~50% share; it
expects India outbound to grow at a robust 30% yoy. Over the FY09-12
period, C&K India revenues have probably witnessed a ~26% cagr and
we build in a healthy ~22% compounded growth over FY11-14.
Margins to improve, valuation appears attractive: BUY
Q3 FY12 EBIDTA was impacted by HBR merger which has a seasonally
lean period in Oct-Mar while higher interest expense took its toll on PAT.
However, the impact would reverse from FY13 upon full year
consolidation. C&K would drive synergies on both revenue (C&K
outbound generates European hotel bookings worth US$51mn to whom
Hotel break bookings can be marketed) and cost fronts through group
buying. Expect consolidated margin, return ratios to improve as HBR is
fully integrated; valuations at 8.4x EV/E appears attractive.
Recommend BUY.
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