See 50% upside in Mahindra Holidays, says Rajen Shah

See 50% upside in Mahindra Holidays and Resorts India in the next 18 months, says Rajen Shah, Angel Broking.

Shah told CNBC-TV18, "Mahindra Holidays and Resorts India is a quality company. It is 82 percent subsidiary of Mahindra and Mahindra and it is 10th largest vacation ownership company in the world with about 43-44 properties, 39 domestic and about 5 international properties; I think this month or last month they acquired a property in Bangkok and they are getting very aggressive in the overseas market actually, already acquired 5 properties."
He further added, “They have set up very ambitious target for 2017. They are aspiring to be among the top five vacation ownership companies in the world. If I am reading correctly that means that they should have nothing less than 65-70 properties by 2016-17 and a membership base of nothing less than 275,000. So that is a very ambitious target this company has set and if it is able to achieve these numbers, which I am sure it would, because the strategy they have lined up over the last nine months, which they have mentioned in the last annual report is aggressive member acquisition and huge addition of room inventory. "In the last 10 months they have added about 780 rooms to their inventory. If that is achieved this stock should be in a different zone altogether.
"One more small comparison I will make. In 2009 June, three and half years back they came out with an IPO at Rs 300 and today it is quoting at the same level of Rs 300. It did touch a level of Rs 500 in between and it has come down to that IPO price of Rs 300. If you see in June 2009 when it came out with an IPO it had 110,000 members, today it has got about 155,000 members, that is 40 percent more and if you see in June 2009 they had a room inventory of about 1,500, today they have about 2,200-2,300 that is again more than 40 percent, but the stock is at the same level. So I see a very low downside about 10 percent."
"The low it touched was about Rs 255-260. So I think the worst case scenario it could go to that level, but the upside could be as high as about 50 percent from the current levels in the next 18 months. We also need to keep in mind that it has got a land bank of almost 200 acres across about 10 different locations, the value of that is said to be about Rs 700-800 crore and the market cap is Rs 2,500 crore. So it actually looks a very interesting low risk-high reward kind of stock." Disclosure: We have positions in the above stock.