Management view on cash generation & deployment in books: 1000-1200 CR is required for CAPEX next 3-4 years. Co plans to share some portion with shareholders, currently there are some technical difficulties due to MCA rules and working on it. Vision is to use cash generated in future for further debt free growth acceleration & drive profitability/ member / inventory addition
3-4 major valuation drivers (Asked by RARE Enterprise); (i)Work on brand building & in resort customer engagement as that is directly proportional to resort income & helps in customer acquisitions (ii) work on members engagement (iii) inventory additions (iv) member addition
PBT was lower due increased dep / fin cost on new CAPEX
Q3 is seasonally best for industry
Q2 had some one-off items & if we normalize there is a 10% increase sequentially in profits
Due to accounting treatment prescribed numbers look better for company when occupancies are lower
Resort income that is income from F&B and activities to provide growth in future
There is a focus on cost management in all resorts to improve efficiency & maintain same customer experience
Deferred revenue has increased by 40% YOY
Cash in books is 1108CR compared to 1048 in September 21
80% Occupancy in this quarter & 16% increase in room nights on YOY basis
Jan 2022 have clocked in 66% occupancy
Digital sales are 58% of total now
HCR acquisition & thoughts:
• This quarter operations were impacted due to omicron wave.
• This is one of the best available company in time share / vacation industry which co managed to acquire & Finland as a location has a lot of strategic value as it is world’s happiest country
• As on date have 60K members there & performance should come in
• Acquisition right before pandemic has delayed benefits
• New team has been formed & they are working on new strategy to be rolled out, performance should come in
That should be primarily on account of debt in their foreign subsidiary, Holiday Club Resorts (HCR), Finland. You will notice if you flip to standalone numbers, long term debt on MHRIL (standalone) is zero.
I was further doing study & came to this video in my notifications (I am subscribed to the channel).
Though it’s a 42 min long video. If possible, watch the whole video, or you can start from 29:13.
Interesting analysis especially about Club Mahindra starts from 35:10.
Hi Folks, I tried valuing Club Mahindra from the point of view of lifetime value of rooms. This is WIP & model is hyper sensitive to bunch of inputs. I would be refining them over time. In the meanwhile, happy to know any thoughts/suggestions on how the valuation can be approached primarily from a quantitative perspective. https://docs.google.com/document/d/18XvW_0kx9d8IeklQAZHAi_n6XX8bxvl7HSY56QPFLW8/edit
Great analysis, thanks for sharing. I have following thoughts.
Since the model is for 25 years, do you think some buffer can be incorporated for capital misallocations (such as the foreign subsidiary that is more or less burning cash)?
Another probably naive question is about the interest income MHRIL is generating through prepaid membership fees. Do you think over time as membership grows, interest income can be significant and hence baked in the model?
Do you think comparing MHRIL with foregin companies with similar model will help in relative valuation? There are a few businesses in the US based on similar time share business model.
Definitely fair concern & can incorporate- Especially considering the fact that company cannot give large dividends at this point of time
So the way I have accounted for interest income is in the AUR itself- For e.g. for 3.5 lakhs if a installment is being offered @ 15%, NPV of that would finally come back to the same AUR number
I don’t think we can compare MHRIL with foreign companies because the business model is completely different- they sell fixed time, fixed place model- so in essence 52 owners for a single property whereas CM is notionally the same but in actuality the model is very different due to the resort choices. Add to that the aspects like Resort income, captive audience & family based value proposition and we get a different company with stronger competitive position and better value proposition in my opinion.
If we do some operational comparion with Taj and take out some of the key model impact and compare the over all valution & potentail gap in market cap.
i am a member of CM also invested in it share.
Mgmt used the term AUR (Avg unit realisation) in their concall…
So I want to know what is this exactly ?
They have quoted this to be 4.5 lakhs for Q3FY23
Is this the revenue earned by the 1 room in 1 qtr ?
@Harsh04 - AUR is not revenue earned by the room in 1 qtr. It is simply the total value of sales done in the period/# of new members added in the period. So for e.g if 100 new members are added and they have signed for 50 Red Studio membership @ 5 lakhs & 50 Blue Studio memberships @ 3 lakhs…AUR would be (505 lakhs+503 lakhs)/100 …The practical implication of this is it gives us how much of value a new member pays upfront as that is the amount used to fund the building of rooms and other services over the life time of the member in addition to ASF.
Only caveat in AUR is the management number also includes upgrades so it is usually overstated. But the sales upgrades numbers & con-calls can help us zero in on non-upgrade AUR.
