Mahindra Holidays & Resorts - Closing in on The Finishing Line; Result Update Q3FY15 :: Edelweiss

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Mahindra Holidays & Resorts (MHRL) reported net revenue of INR2,065mn, up 6% versus our estimate, in Q3FY15 due to: (1) higher net member addition of 2,928 versus our 2,649 estimate despite high cancellations; and (2) in-line average realisation of INR0.36mn on sale of vacation ownership. The company’s pre-cancellation member addition (~4-5K) was, however, significantly higher-up 16% QoQ. Factoring in high member addition, improved resort level income, on-track room addition and rolling forward to FY17E.

Finishing line for consolidation in sight 

Higher pre-cancellation membership addition QoQ and on-track room addition (108 added in 9mFY15, 275-300 to be added in Q4FY15) are leading indicators of MHRL’s improving operation metrics. The company has been using higher member addition to write-off non-recoverable ‘receivables’ from its balance sheet. We expect with targeted marketing and upgraded customer profiles write off will end in next 2-3 quarters. Its resort level income also jumped 18% QoQ and 19% YoY in Q3 FY15.

Average realisation set to rise; land monetisation to yield results

MHRL’s average realisation has remained range bound from Q1FY13-Q3FY15-INR0.33mn–0.37mn per member) even as cost of room addition has jumped significantly over the past 2 years. High gross member addition renders demand clarity and hence we forecast 10% rise in average realisation for MHRL in FY16. It will also continue to monetise its land bank (e.g. Goa), which will propel its net income.

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https://www.edelweiss.in/research/Mahindra-Holidays-And-Resorts--Closing-in-on-The-Finishing-Line;-Result-Update-Q3FY15/28114.html