Buy Mahindra Holidays; target of Rs 580: SKP Securities

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Buy Mahindra Holidays; target of Rs 580: SKP Securities

SKP Securities is bullish on Mahindra Holidays and Resorts India and has recommended buy rating on the stock with a target of Rs 580 in its October 22, 2010 research report.

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SKP Securities is bullish on Mahindra Holidays and Resorts India and has recommended buy rating on the stock with a target of Rs 580 in its October 22, 2010 research report.

"Mahindra Holidays & Resorts India (MHRIL) is a leading player in the leisure hospitality industry, provides family holidays primarily through vacation ownership memberships. Mahindra Holidays currently has a pan- India presence through its extensive network of 33 resorts and 1476 apartments. Currently company has 109,884 vacation ownership members as on March 31, 2010. Company follows a mixed use model by generating revenue from selling vacation ownership to members and also provides accessibility to non members for its unused apartments on a per night room tariff. This enables MHRIL to enhance its revenue through optimum occupancy and sales from restaurants and other services. Company also provide financing option to its members, and attract a interest a rate of 15-16% in a year."

"Members pay an upfront membership fee and are also required to pay an annual subscription fee each year thereafter. Club Mahindra has the highest brand equity among timeshare companies in India. With the escalating demand of VO products, MHRIL with its strong brand and pan India presence is well poised to take advantage of it. In terms of market share, MHRL has accounted for 72% of the total active members across the vacation ownership industry in India with Resort Condominiums International (RCI) up to end May 2009. Membership enrollment has increased at a CAGR of 31% over the last five years and reached to 113829 as on June 30 2010."

"Company has launched new services offerings such as, Zest - targeting young urban consumers, club mahindra fundays, club mahindra travel etc, which will help company to capture more potential members in near future. Increasing the membership base and the number of resorts would enable company to increase the total income from vacation ownership."

"Vacation Ownership Industry is at its nascent stage and MHRIL is favorably placed with 70% market share of total VO memberships in India. Innovative and distinctive product in its portfolio, constant growth in membership, high quality of services makes MHRIL a prominent player in VO industry. At the current market price of Rs 462, MHRIL is trading at PE of 26.4x and 22.1x of FY11E and FY12E earnings of Rs 17.5 and Rs 20.9 respectively. We expect revenues and PAT to post CAGR of 25% and 30%, respectively, over FY10-12 E. We recommend BUY rating on the stock with a target price of Rs 580 (25% upside) in 12 months," says SKP Securities research report.

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To read the full report click on the attachment