Moneycontrol
Last Updated : Jan 05, 2018 11:48 AM IST | Source: CNBC-TV18

Buy Sinclairs Hotels: SP Tulsian

In an interview to CNBC-TV18's Latha Venkatesh, Sonia Shenoy, and Anuj Singhal, SP Tulsian of sptulsian.com shared his readings and outlook on the market, and specific stocks and sectors.

CNBC TV18 @moneycontrolcom

In an interview to CNBC-TV18's Latha Venkatesh, Sonia Shenoy, and Anuj Singhal, SP Tulsian of sptulsian.com shared his readings and outlook on the market, and specific stocks and sectors.

Below is the verbatim transcript of the interview.

Sonia: Sinclair Hotels is the idea that you are going to talk about today, just tell us the story there?

A: That is right, in fact this is a hotel company and you rarely come across where all the properties which they are operating on, they are also owning it because sometimes it is very difficult to take a call on the hotel stock that how many properties they are under conducting basis and how much is properties they are owning it. However, if you take a call on this company, they have seven properties and all are at the prominent hill stations. If I just quickly give the names, they are at Darjeeling, Dooars, Kalimpong, Siliguri, Ooty, Burdwan, and Port Blair. These are the seven hotels and all the seven properties are owned by the company. In fact if you see the collective room capacity, it is about 400 rooms. Of all these properties, you can say that they are all nicely furnished, recently company has furnished them and giving them a very good business.

Coming on the financials of the company, if I just take a first half call, income was at Rs 25 crore against first half of the same period at Rs 23 crore. It is very essential to compare it on a year-on-year (YoY) basis because of the seasonality element. So, topline was practically constant or you can say it was up by about 8 percent. However, PAT has almost doubled to Rs 7.8 crore from Rs 3.87 crore partly because of the write back of deferred tax but partly because of the operating performance also which resulted into an EPS of Rs 14 for first half of FY18 against Rs 7 of first half of FY17. In FY17, EPS was at Rs 16. So, as I said, there has been some reversal of deferred tax credit in the first half.

Even if you exclude that, I think that company should be able to post an EPS of closer to about Rs 21-22 for whole of FY22 against FY17 EPS of Rs 16 which was at Rs 12 for FY16; that means that Rs 12, Rs 16, and Rs 21. This is the trajectory which we will be seeing on the EPS front going forward. Company paid a dividend of 40 percent for FY17, so, that means the financials are very much in place.

Quickly on the equity, equity is very small at Rs 5.57 crore with face value of Rs 10 and net worth of about Rs 90 crore and book value is Rs 160. If you see the cash and cash equivalent, they have about Rs 40 crore and the best part is that, apart from the seven properties, company is also holding – if you analyse the balance sheet and from the inside circle, they are owning property in Kolkata also which they wish to monetise. The property valuations are given anywhere between Rs 30-40 crore. If you take that call, then probably that adds the value further. So taking all this into consideration, promoter stake of about 57 percent, who have been seen raising it every year by 5 percent, by the creeping acquisition route which they have already done in FY18, so no more increase is possible in next three months, but let us expect that they will do it in FY19.

So taking all this into consideration, market cap of just Rs 280 crore, EV of Rs 240 crore, while the net present value of all these properties on a conservative basis is seen anywhere between Rs 400-450 crore. So taking all this into consideration, share now ruling at Rs 463, can move to a level of about Rs 555 in next six months or so.
First Published on Jan 5, 2018 10:37 am
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