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Ashish Chugh , Investment Analyst and Author of Hidden Gems , picks Panoramic Universal and Asian Hotels as interesting companies to invest in. Speaking to CNBC-TV18, he said that Panoramic Universal is present in both hospitality and IT, while Asian Hotels is present only in hospitality. Panoramic is a good buy because it plans to expand heavily. Asian also plans heavy expansion by way of its demerger.

Excerpts from CNBC-TV18's exclusive interview with Ashish Chugh:

Q: What do you like the story of Panoramic Universal?

A: Panoramic Universal is a Mumbai-based company. This company is into two business segments; hospitality and IT; about 80% of the revenues are constituted by the hospitality business and the remaining 20% are constituted by the IT business.

This company owns nine hotels, out of which five hotels are located in the US, one in New Zealand and three hotels in India. This company owns hotels like Holiday Inn in Ohio and Quality in New York, US. They also have three hotels, which are located at Goa, Shirdi and Malvan in India.

This company did revenues of about Rs 133 crore in FY06-07. This company made an operating profit of about Rs 60 crore. Profit at net level was close to Rs 33 crore. They have got a small equity of about Rs 6.15 crore. This is a Rs 5 paid up stock trading at about Rs 110. So EPS last year was about Rs 25.

In the first half of the current financial year, we do not have the consolidated revenues of the company, but if one compares the standalone numbers of the company; the sales are up by about 30%, the PAT is slightly lower than first half of the last year. This was mainly on account of weakening of the dollar.

This company has got aggressive plans for building few more hotels in India. They have already acquired land at various places and they are in the process of constructing about five-six new properties at places like Pune, Chandigarh, Hyderabad, Kerela and Goa. They have either acquired land directly or they have acquired companies, which own land at these places.

Besides this, this company has already ventured into travel and tourism business. They have acquired a 51% stake in a travel agency and they have plans to build-up a travel portal similar to makemytrip.com and yatra.com. Incidentally, this company also holds about 4.5% in interconnected stock exchange as an investment.

So at the current price of about Rs 110, the PE ratio is less than 4.5 so this company trades at reasonable valuations

The caution in this company, the biggest risk could be the execution risk and second is, this company has got high debt on the balance sheet. They have close to Rs 125 crore of debt and third risk in the near-term is strengthening of rupee, since a lot of their revenues are dollar denominated.

So over the short-term, the strengthening of the rupee is not good for the company, but over a longer-term they would have less revenues coming from places like US, and more from India when they have more hotels in place. So this is merely a short-term risk, but these risks appeared to be priced in the stock market in the price of the company and market cap of about Rs 140 crore; this appears to be a value stock.      

Disclosure: I do not hold Panoramic Universal.

Q: In the same space, you like Asian Hotel, which is a better track stock. Why do you see value there?

A: Asian Hotel is a Delhi-based company. They currently have three hotels Hyatt Regency Delhi, Mumbai and Kolkata; all the three hotels are five star deluxe properties. They are all premium properties.

The revenues of the company last year were about Rs 413 crore, profit after tax was about Rs 91 crore, EPS was Rs 43 and this stock trades at a PE of 18. This PE of 18 may not appear cheap, but if one analyses the story going forward, then one has good growth coming in this company.

This company has been split-up into three companies. To give a background, Asian Hotel was primarily started by three promoter groups Saraf Group, Jatia Group and Gupta Group. Over a period of time, all the three promoter groups have acquired independent interest in the hotel and hospitality business. All of them have interest in various companies, which are involved in the hotel business.

Saraf Group owns a company called Unison Hotels, which owns the Grand Hotel, located at Vasant Kunj in Delhi. It's a five star premium property; it's a 400-room property; besides this property they also have interest in Yak & Yeti, which is a five star hotel located in Kathmandu. Besides that, Unison Hotels has plans to construct about eight hotels in the next four-five years. These are all going to be premium five star properties.

The second group, which is a Jatia Group, they have a company called Magus Estate, which is constructing a five star hotel, which will be branded as Four Seasons Hotel in Worli in Mumbai. This hotel is completed and it may start operations in April of 2008.

The third group, the Gupta Group, has an interest in Qutub Hotel in Delhi and besides that they are planning to build three more hotels under the Clarion brand name, which is a brand name of Choice Hospitality of US.

This three way split and one of these three hotels of the Asian Hotel Group will go to one promoter along with development rights and cash liquidity where the valuation of the hotel is less. So what will happen is that after the three ways split, each promoter will be in a better position to take a long-term strategic view about the future of their company. Once the split is complete, we may see all the promoters vigorously doing a growth strategy through mergers and acquisitions, which will eventually lead to enhancement of the shareholders valuation.

So the stock may not appear cheap by price to earning ratio of 18, but going by the valuation of the properties and the growth, which can come in the years to come. I think one can buy the stock at this price and sum of parts maybe much more than the whole if you look back one year from now.

Disclosure: My family & I would have positions in Asian Hotels.