TajGVK an outperformer, tgt Rs 225: Spark Capital

Spark Capital has maintained outperformer rating on Taj GVK Hotels and Resorts with target price of Rs 225 in its May 06, 2008 report. "We forecast sales and EPS CAGR of 25% and 24% over FY08-FY10E. The stock  currently  trades at 10.5x FY09E EPS and 8.4x FY10E EPS, which  is attractive  in  the  context  of  our  forecasted  growth.  Coupled  with  a  clean  balance  sheet  and  industry-leading  return metrics  (low leverage of 0.4x, RoE greater than 30%, dividend yield of  2%), we think Taj GVK is a quality branded play in the hospitality segment going at  commodity-like valuations. We  initiate coverage with an outperformer  rating and a  P/E-based  target  price  of Rs 225,  an  upside  of  55%  from  current  levels. At  our  target, the stock would trade 13x FY10E EPS, a 15% discount to current multiples  commanded  by  players  such  as  Indian  Hotels, EIH  and  Hotel  Leela. Our  target  price is validated by our DCF valuation, which yields an objective of Rs. 236.   Key  risks  to  our  recommendation  would  be  an  aggressive  build-out  by  other  players  in Hyderabad,  slower-than-expected  roll-out of Taj GVK’s new properties  and a softening of demand trends in Taj GVK’s key markets of operation" according to Spark Capital report.  

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