EIH Assoc Hotels a good investment

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EIH Assoc Hotels a good investment

Investment Analyst, Ashish Chugh is of the view that EIH Associated Hotels is a good investment. After restructuring the inventory has gone up from 225 to 850 rooms. The premium property of this company, which is the Oberoi Raj Vilas Jaipur has been consistently ranked as one of the worlds best Hotels.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See previous views by Ashish Chugh See what other Experts & Brokerages are saying about EIH Assoc Hotel See messages about EIH Assoc Hotel EIH Assoc Hotel BSE | NSE 01/06/12 Are Mutual Funds betting on EIH Assoc Hotel?

Investment Analyst, Ashish Chugh is of the view that EIH Associated Hotels is a good investment.

Chugh told CNBC-TV18, "EIH Associated Hotels is a part of Oberoi Group. It went under restructuring and the entire group went under a reorganizing about 2.5 years back. Earlier they owned only 2 properties and after the reorganization they now own 8 hotel properties and these are Oberoi Raj Vilas located at Jaipur, Cecil in Shimla and they have 6 hotels under the Trident Hilton brand of which three are located in Northern India in Udaypur, Agra, Jaipur and three are in the South at Chennai, Bhubaneshwar and Cochin."

He further added, "After restructuring the inventory has gone up from 225 to 850 rooms. The premium property of this company, which is the Oberoi Raj Vilas Jaipur has been consistently ranked as one of the worlds best Hotels and a leading travel magazine have ranked it as world's 11th best Hotel. The Tariff of this hotel starts from Rs 25,000 to Rs 1.5 lakh per day.

"After the restructuring there has been a see change in the financials of the company. The company, which was making very little operating profit and a very high net profit till 2004 is, has seen its operating profit jump significantly. In 2005-06 and 2006-07 the operating profit was Rs 35 cr and Rs 52 cr respectively and the profit at net level was about Rs 9 cr and Rs 13.5 cr for the same period. So after a gap of 7 years the company has again come back into the list of dividend paying companies."

"For the first nine months of the current financial years the revenues are up by 13% to Rs 117 cr and PAT is up by about 50% to about Rs 8.36 cr. At the current price of about Rs 140-145 this company has market cap of about Rs 270 cr. Given the good parentage, which is the EIH Oberoi Group and the fact that this company has 8 hotel properties, some of them are real premium properties, the market cap of Rs 270 cr and even if you include the debt in the balance sheet the enterprise value comes to about Rs 400 cr. This looks significantly lower than the intrinsic value of their properties. At the current price of Rs 140-150 levels this stock could be a good investment for the next 2-3 years."

Disclosure: Analyst and his family would have investments in the above stock.