Royal Orchid may close 06 with Rs 80 cr topline: Analysts

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Royal Orchid may close 06 with Rs 80 cr topline: Analysts

Royal Orchid Hotels listed on the BSE today at Rs 252 versus an issue price of Rs 165. CNBC-TV18's research analyst, Rahul Arora calculates and comes to the conclusion that it is not such a bad listing.

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Royal Orchid Hotels listed on the BSE today at Rs 252 versus an issue price of Rs 165. CNBC-TV18's research analyst, Rahul Arora calculates and comes to the conclusion that it is not such a bad listing.

According to Arora, valuation-wise, the company had a significant premium of over about 50% of Rs 252 versus the issue price of Rs 165. The issue itself has not done too badly, with the QIB portion subscribed about 43 times, he informs. Giving more details on the subscription, he says, the institutional investor subscribed about 51 times and the retail portion of about 28 times. The entire amount that the company was looking to raise through the issue, which it has, is a little over Rs 112 crore, he informs. So, from the subscription numbers it does not look too bad.

Giving numbers, he says that the promoters held about 91% in the company, which has come down to 67.8% post the issue. Also, there is a 25% dilution there.

In terms of projections, Arora spoke to the management and as per his understanding, these are just indicative numbers. They could look to close 06 at a topline of about Rs 80 crore and bottomline of about Rs 23 crore, which will give them an EPS target of about Rs 8.50, he calculates. In 07, when most of the expansion planned by them, for which they have raised the money, kicks in, they will close 07 at about Rs 120 crore with a bottomline of about Rs 35 crore which would give them an EPS of about Rs 13 over there, Bhatnagar calculates again. 

So, if one looks in terms of valuation, on a PE basis for 06,  the company is trading at about 27.8 times and  in 07, it will trade at about 18.2 times.

Arora spoke to a lot of analysts on the street to estimate the average PE for the industry and they expected it to be in the region of about 22-25. So, according to Arora, that is not too bad, given that most of the other competitors, whether it be Jaypee Hotels , Advani Hotels or Taj GVK hotels and the likes, trade very significantly at over 25-30.

The company has raised this money because they have a plan to set-up four new hotels in Hyderabad, Jaipur , Pune and Bangalore. The total room size of all these four hotels would be about 310 rooms, with Pune getting the bulk of it at about 120 rooms, informs Arora. They expect all these numbers to actually start making sense for them from FY07, in terms of contributing to the topline and the bottomline.

The room rates have been going up and Arora expects them to go up about another 10-15% in Q4, so that should help the company as well. The occupancy on an average for the company, including its flagship hotels is between 80 and 85 and they hope to maintain it going forward. So, that does not spell too badly for the company as well, he says. So, in terms of financial projections, the issue subscription on the whole was not bad. So, Arora believes a 50% premium was just about right, given that it is trading at a significant discount to some of its peers right now.