Savera Industries Ltd.:For decent gains
Face Value: Rs.10
CMP: Rs.66.95
Target: Rs.100
BSE Group: B
BSE Code: 512634
52-Week high/Low: Rs.147/58
Market Cap: Rs.36 cr.
Background:
Savera Industries Ltd. (SIL) own ‘The Savera’, a leading classified 4-star hotel strategically located in Chennai with easy access to all parts of the city with a grand tradition of hospitality and service. The location inter connects the main arterial roads in the city and the new highways leading to places like Mahabalipuram and Kanchipuram. Besides the Chennai hotel, the company also owns a pub in Bangalore and a restaurant cum pub in Hyderabad. SIL had tapped the capital market in January 1995 to expand its room capacity and to add other facilities.
Promoters:
SIL was promoted by A. Ravikumar Reddy.
Chennai Hotel:
The 260 rooms of Savera are a fine example of elegance and function. Centrally air-conditioned, they have mini-bars, television sets with satellite transmission and direct dial telephones to make one’s stay memorable and comfortable. 71 out of the 260 well appointed rooms overlook the pool - a unique feature at the Savera.
Highlights:
Owns the popular 4-star Hotel Savera in Chennai
To launch a hotel in Hyderabad & Madurai soon
Has acquired two hotel plots in Coimbatore
Ventured into floriculture
Value buying surfaces on improved working
The hotel provides various services and facilities, including business centre, secretarial services, private office space and boardrooms, access to email, Internet, cellular phones, laptops, conferences, banquet facilities; health club; restaurants; and car rental services to business travellers.
Madurai Hotel:
Recognising the potential in two tier cities in Tamil Nadu, SIL acquired an existing hotel in Madurai and two properties in Coimbatore to develop as hotel properties. The project at Madurai, the temple city of South India, took off with the launch of speciality restaurant with a permit room in FY07 and the upgradation of the rooms is in progress.
Speciality Restaurants:
The company has successfully launched two speciality restaurants in Hyderabad, one at Kukatpally and another at Banjara Hills, which are well patronised. SIL has also taken on lease a property at Toli Chowk, near the IT Corridor of Hyderabad, to develop as a hotel with 40 rooms and a restaurant. It would be ready for operation by April 2008.
Floriculture Business:
As a part of its diversification, the company has acquired a floriculture business, with effect from 21st July 2006 by acquiring 85% of the equity of Elkhill Agrotech (P) Ltd. in Ooty. After the farm preparatory works, commercial operations commenced from May 2007.
Financial Performance: (Rs. in cr.)
Operations:
During FY07, SIL’s net profit advanced by 19% to Rs.4.3 cr. on 28% higher revenue of Rs.38.4 cr. During Q3FY08, net profit has surged by 24% to Rs.1.4 cr. on 7% increased revenue of Rs.11.3 cr. For the first three quarters of FY08, although revenue moved up by 29% to Rs.34.6 cr., net profit shot up by 87% to Rs.5.1 cr.
Financials:
SIL has a tiny equity of just Rs.6 cr. and with reserves of Rs.15.6 cr., the book value of the share works out to Rs.36. The value of its gross block in FY07 was Rs.78 cr. compared to Rs.55 cr. in FY06, which reflects its big expansion plans.
Land worth Rs.14 cr. was acquired by the company in the early Nineties. During FY06, it bought land worth Rs.15 cr. taking the total land value to Rs.29 cr. Given the boom in the real estate prices, the current value of its land is several times the purchase price.
Equity Holding:
The promoters hold 55.5% in its equity capital, PCBs hold 13.5% leaving 31% with the investing public.
Prospects:
While 2005-06 brought about buoyancy with further consolidation in 2006-07 in the Travel & Tourism industry, significant growth trends are witnessed globally. The industry grew by 8.2% in South Asia, 6.9% in Sub-Saharan Africa, 6.6% in North East Asia and by 6.3% in South East Asia.
The trade volume in tourism equals or exceeds that of food products, automobiles or even oil exports, making it one of the largest contributors to international trade. South Asia, with India as the single largest destination, is projected to receive 10 million visitors by 2010 and 19 million by 2020.
The World Travel and Tourism Council (WTTC) Report released in 2007 acknowledges India as a major tourist destination on account of its cultural endowments, presence of several world heritage sites, price competitiveness, low taxes & airport charges and its welcoming attitude to foreign travellers. The Travel & Tourism Competitiveness Index (TTCI) ranks India around the middle among the 124 countries considered.
Sustained Growth:
A recent study conducted by CRISIL has forecast a surge in hotel room rates well beyond the current highs. The report also predicts good times for the hospitality industry over the next five years with the highest in Bangalore, Hyderabad, Pune and Chennai.
Outlook:
SIL is committed to enhancing the guest’s experience by improving its product and service levels to the best in its class and continues to seek growth opportunities. It may also consider a tie-up with a global chain to further its business prospects.
The business outlook for the year ahead is positive. The general economic conditions remain bullish with the GDP growth forecast around 8-8.5%. There is a sharp rise in investments in the economy. This sharp increase in the rate of Gross Domestic Capital Formation (GDCF) reinforces the outlook for continued growth and business optimism. The Hospitality industry expects these positive developments to continue to attract tourists globally.
The outlook of the hospitality industry is buoyant and is expected to grow stronger. Major global and domestic hotel players are developing properties in South India, in view of the growth in business travelers and tourists. SIL is also in the race to claim its share of the growth pie.
For FY08, SIL may record an income of Rs.48 cr. in FY08 with a net profit of Rs.7.8 cr. resulting in an EPS of Rs.13. During FY09, income is likely to surge to Rs.60 cr. with net profit increasing to Rs.10 cr. and the EPS would go up to Rs.16.7.
At the current market price of Rs.61, the SIL share is trading at a P/E of 4.7 on FY08 EPS and 3.7 times it’s FY09 EPS against the industry average P/E of 14 for the hotel industry. In view of its expansion initiatives, its improving performance and the bright prospects of the hotel industry, the stock is recommended with a price target of Rs.100 in the medium-term.
Face Value: Rs.10
CMP: Rs.66.95
Target: Rs.100
BSE Group: B
BSE Code: 512634
52-Week high/Low: Rs.147/58
Market Cap: Rs.36 cr.
Background:
Savera Industries Ltd. (SIL) own ‘The Savera’, a leading classified 4-star hotel strategically located in Chennai with easy access to all parts of the city with a grand tradition of hospitality and service. The location inter connects the main arterial roads in the city and the new highways leading to places like Mahabalipuram and Kanchipuram. Besides the Chennai hotel, the company also owns a pub in Bangalore and a restaurant cum pub in Hyderabad. SIL had tapped the capital market in January 1995 to expand its room capacity and to add other facilities.
Promoters:
SIL was promoted by A. Ravikumar Reddy.
Chennai Hotel:
The 260 rooms of Savera are a fine example of elegance and function. Centrally air-conditioned, they have mini-bars, television sets with satellite transmission and direct dial telephones to make one’s stay memorable and comfortable. 71 out of the 260 well appointed rooms overlook the pool - a unique feature at the Savera.
Highlights:
Owns the popular 4-star Hotel Savera in Chennai
To launch a hotel in Hyderabad & Madurai soon
Has acquired two hotel plots in Coimbatore
Ventured into floriculture
Value buying surfaces on improved working
The hotel provides various services and facilities, including business centre, secretarial services, private office space and boardrooms, access to email, Internet, cellular phones, laptops, conferences, banquet facilities; health club; restaurants; and car rental services to business travellers.
Madurai Hotel:
Recognising the potential in two tier cities in Tamil Nadu, SIL acquired an existing hotel in Madurai and two properties in Coimbatore to develop as hotel properties. The project at Madurai, the temple city of South India, took off with the launch of speciality restaurant with a permit room in FY07 and the upgradation of the rooms is in progress.
Speciality Restaurants:
The company has successfully launched two speciality restaurants in Hyderabad, one at Kukatpally and another at Banjara Hills, which are well patronised. SIL has also taken on lease a property at Toli Chowk, near the IT Corridor of Hyderabad, to develop as a hotel with 40 rooms and a restaurant. It would be ready for operation by April 2008.
Floriculture Business:
As a part of its diversification, the company has acquired a floriculture business, with effect from 21st July 2006 by acquiring 85% of the equity of Elkhill Agrotech (P) Ltd. in Ooty. After the farm preparatory works, commercial operations commenced from May 2007.
Financial Performance: (Rs. in cr.)
Operations:
During FY07, SIL’s net profit advanced by 19% to Rs.4.3 cr. on 28% higher revenue of Rs.38.4 cr. During Q3FY08, net profit has surged by 24% to Rs.1.4 cr. on 7% increased revenue of Rs.11.3 cr. For the first three quarters of FY08, although revenue moved up by 29% to Rs.34.6 cr., net profit shot up by 87% to Rs.5.1 cr.
Financials:
SIL has a tiny equity of just Rs.6 cr. and with reserves of Rs.15.6 cr., the book value of the share works out to Rs.36. The value of its gross block in FY07 was Rs.78 cr. compared to Rs.55 cr. in FY06, which reflects its big expansion plans.
Land worth Rs.14 cr. was acquired by the company in the early Nineties. During FY06, it bought land worth Rs.15 cr. taking the total land value to Rs.29 cr. Given the boom in the real estate prices, the current value of its land is several times the purchase price.
Equity Holding:
The promoters hold 55.5% in its equity capital, PCBs hold 13.5% leaving 31% with the investing public.
Prospects:
While 2005-06 brought about buoyancy with further consolidation in 2006-07 in the Travel & Tourism industry, significant growth trends are witnessed globally. The industry grew by 8.2% in South Asia, 6.9% in Sub-Saharan Africa, 6.6% in North East Asia and by 6.3% in South East Asia.
The trade volume in tourism equals or exceeds that of food products, automobiles or even oil exports, making it one of the largest contributors to international trade. South Asia, with India as the single largest destination, is projected to receive 10 million visitors by 2010 and 19 million by 2020.
The World Travel and Tourism Council (WTTC) Report released in 2007 acknowledges India as a major tourist destination on account of its cultural endowments, presence of several world heritage sites, price competitiveness, low taxes & airport charges and its welcoming attitude to foreign travellers. The Travel & Tourism Competitiveness Index (TTCI) ranks India around the middle among the 124 countries considered.
Sustained Growth:
A recent study conducted by CRISIL has forecast a surge in hotel room rates well beyond the current highs. The report also predicts good times for the hospitality industry over the next five years with the highest in Bangalore, Hyderabad, Pune and Chennai.
Outlook:
SIL is committed to enhancing the guest’s experience by improving its product and service levels to the best in its class and continues to seek growth opportunities. It may also consider a tie-up with a global chain to further its business prospects.
The business outlook for the year ahead is positive. The general economic conditions remain bullish with the GDP growth forecast around 8-8.5%. There is a sharp rise in investments in the economy. This sharp increase in the rate of Gross Domestic Capital Formation (GDCF) reinforces the outlook for continued growth and business optimism. The Hospitality industry expects these positive developments to continue to attract tourists globally.
The outlook of the hospitality industry is buoyant and is expected to grow stronger. Major global and domestic hotel players are developing properties in South India, in view of the growth in business travelers and tourists. SIL is also in the race to claim its share of the growth pie.
For FY08, SIL may record an income of Rs.48 cr. in FY08 with a net profit of Rs.7.8 cr. resulting in an EPS of Rs.13. During FY09, income is likely to surge to Rs.60 cr. with net profit increasing to Rs.10 cr. and the EPS would go up to Rs.16.7.
At the current market price of Rs.61, the SIL share is trading at a P/E of 4.7 on FY08 EPS and 3.7 times it’s FY09 EPS against the industry average P/E of 14 for the hotel industry. In view of its expansion initiatives, its improving performance and the bright prospects of the hotel industry, the stock is recommended with a price target of Rs.100 in the medium-term.
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