See 100% upside in Oriental Hotels over two-three years from now, says Rajen Shah, CIO of Angel Broking.
Shah told CNBC-TV18, "One would find Oriental Hotel is extremely cheap. You would rarely find the hospitality company trading at one time the revenue. If you see Indian Hotels, Rs 3,500 crore is the revenue and the marketcap is Rs 5,100 crore, so it is trading at about 1.5 times the sales. If you see East India Hotels, Rs 1,600 crore is the revenue and the marketcap is Rs 4,000 crore, so it is trading at 2.5 times the sales. Even if you see Hotel Leela Venture, Rs 600 crore is the income and about Rs 1,200 crore in the marketcap, so it is trading at two times the revenue."
He further added, "Oriental Hotels is trading a little above one time the revenue. So it is a very cheap stock. In the short-term ITC Grand Chola is going to impact its business of Taj Coromandel, which is a flagship property but we also need to keep in mind that this is going to be temporary nature. The prospects of the hotel industry are extremely bright over the next two-three years because today we are at about 5.5 percent growth and still we are back to 2007-2008 kind of occupancy and the average room rate. I think as soon as we move back to 7-7.5 percent kind of growth these stocks could be in action. So at Rs 21 there is hardly anything to lose."
"We need to keep in mind that over the last 15-18 months Oriental Hotels spend almost about Rs 150 crore on setting up a new property at Coimbatore and it has spend significant amount in renovating its Taj Coromandel property and expanding its property Fisherman's Cove at Chennai and besides this it also operates six other properties, all in south of the country."
"I think this stock has languished over the past 12 months, hardly appreciated and offer a very decent opportunity. The downside is very low and the upside could be as high as 100 percent in about two-three years from now." Disclosure: We hold Apar Industries in our PMS. No holding in Oriental Hotels.
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