Buy Mahindra Holidays; target Rs 451: Ventura Securities
Ventura Securities is bullish on Mahindra Holidays & Resorts India (MHRIL) and has recommended buy rating on the stock with a target price of Rs 451 in its January 14, 2013 research report.
January 15, 2013 / 11:17 IST
Ventura Securities is bullish on Mahindra Holidays & Resorts India (MHRIL) and has recommended buy rating on the stock with a target price of Rs 451 in its January 14, 2013 research report.
"Owing to Mahindra Holidays & Resorts India Ltd (MHRIL)'s stable stream of cash flows and self funding nature of the business model, the company has been able to maintain its debt at negligible levels as compared to the hotel industry which has high gearing. MHRIL's strategy is to fund capex (building room inventory) and customer acquisition costs from membership fees (via both upfront and securitization of receivables). Also, majority of the resort and company level expenses are funded through Resort income and Annual subscription fees (ASF). With an estimated growth of membership base at a 13.4% CAGR, the fund flows, going forward, will ensure that the company maintains debt at negligible levels. Also, the annuity stream in form of ASF will become stronger. Further, we believe that the low gearing status is an added advantage especially during the period of hardships (viz slowdown in membership base, delay in payment of membership fees) as it will be in a good position to raise liquidity from external sources.We initiate coverage on MHRIL as a BUY with a Price Objective of Rs 451 representing a potential upside of ~37.0% over a period of 15 months. At the CMP of Rs 329, the stock is trading at 23.7x and 19.0x its estimated earnings for FY13 and FY14 respectively. MHRIL is the market leader in the VO industry and faces limited competition (other only organized player being Sterling Resorts). We believe that MHRIL should be able to witness robust uptick in member additions on the back of its revamped growth strategy. The VO industry which is the fastest growing component of the tourism segment in India provides enough room for MHRIL to gain its rightful share. While the stock has traded at an average PE of 29.0x its one year forward earnings, currently the company is being quoted at its lowest valuations. With the new management team in place coupled with key customer centric initiatives (“Member First” philosophy, inventory additions, value added services), we expect the company's valuations to re-align to its historical levels. We have valued the company at a PE of 26.0x, which is at a 10% discount to its historical average of 29.0x," says Ventura Securities research report.Shares held by Mutual Funds/UTI Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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