Angel Broking neutral on Hotel Leela Venture

“For 4QFY2011, Hotel Leela Ventures (HLVL) reported top-line growth of 18.2% yoy to Rs172cr (Rs146cr), which was below our estimates. As a result of lower-than expected top line, OPM also came in below our estimates at 25.4%, although it improved by 175bp yoy from 23.6% in 4QFY2010. PAT increased by 29.7% yoy to Rs11cr (Rs9cr). The company made a change in its revenue-recognition policy during the quarter, which was adjusted for both FY2011 and FY2010 in the respective fourth quarters. The company delayed the opening of the Chennai property to November 2011. The stock is currently trading at 19.4x its FY2013E EPS.”

“During 4QFY2011, occupancy rate (OR) for the hotel came in at decent 75.8%, against 70.8% in 4QFY2010. ARR for the quarter came in at Rs11,946 (Rs10,748), up 11.1% yoy. The ramp-up at the New Delhi hotel has been slightly lower than our expectations, while the Chennai hotel’s completion has been delayed to November 2011.”

“The hotel industry continues to witness steady recovery, with an improvement in Foreign Tourist Arrivals (FTA) and the overall economy. HLVL is well placed for growth in the industry, with the number of owned rooms expected to rise to 1,798 by the end of FY2013, compared to 1,457 currently. However, the company is faced with challenges due to high debt and delays in the opening of Chennai hotel. At the CMP, the stock is trading at 19.4x its FY2013E EPS and an EV/Room of Rs2.9cr, which factors in most of the positives. Hence, we remain Neutral on the stock,” says Angel Broking research report.

Institutional holding more than 40% in Indian cos

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