Royal Orchid Hotels - Available at good valuation!

(yourraj) #42

Basu ji could you please share that what is the source of data as i am doing some study on hotel industry and after that the same will publish in VP forum .I think it will add value to my analysis

(Abhishek Basumallick) #44

Not sure what data you are looking for. Industry data related to ARR or capacity utilization is not readily available. Individual companies talk about them in the concalls or quarterly presentations. You can also get some data from media reports and interviews.

(yourraj) #45

@basumallick Thanks for your reply ,The comparison made by you is excellent ,which is about Royal Orchid and Lemon treehouse comparision ( Highlighting Financial highlights and other qualitative data) .So does it means one has to dig deep in individual annual report and other online resources such as Horwath report or other .It will be great help if you please suggest some of the good resources.

(Abhishek Basumallick) #46

Details can be found in any of he sources I mentioned earlier.

(gauravksinha) #47

you can find reports by HVS online HCS 2017.pdf (1.0 MB)

(Mridul) #48

Few important updates on Royal Orchid Hotels as of mid May (BTVI)! Both occupancy and room tariffs are looking great. Things to improve further. Royal Orchid is being very aggressive as far as picking new properties is concerned.

Room rates
Scope of 20-25% improvement in order for investments to make sense for hoteliers. This may not happen this year but should happen going forward.

Most of our hotels are doing more than 80%. Usually April May is lean period but this year it has been very different. Industry has turned around completely.

New properties
Looking forward to add 6-7 new properties through management contract route.
Looking forward to add couple of other properties on lease model (so that topline also grows).

(Dhinakaran AK) #49

Very encouraging, good times ahead, I think. Let’s see.

(smehta) #50
				Royal Orchid Ltd
			Highlights of Q4FY18 and FY18 results 

Key Financials

  • Consolidated FY18
    o Revenue grew by 9 % compare to last year
    o EBITDA grew by 35 % compare to last year
    o PBT also increase due to reduction of cost of debt and it will come down further
    o PAT stands at 2.54 Cr from (-4.53 Cr) compare to last year
    o Debt stand at 95 Cr compare to last year
  • Standalone FY18
    o Revenue grew up by 12 % compare to last year
    o EBITDA grew up by 25 % compare to last year
    o PAT grew by 95 % to 10.9 Cr from 5.6 Cr compare to last year
    o Debt stands at 36 Cr compare to last year
  • Key Highlights
    o Occupancy had gone up by 8 % , ARR by 4 % compare to last year
    o Added 8 hotels last year on management contract basis
    o In FY19 company is going to add further 15 hotels which take total to 65 hotels
    o Turnaround in management contract hotels and they become profitable at royal orchid consolidated level
    o Debt is swopped to 10.1 % from 11.3 % last year
    o Going forward demand will grow faster then supply


  • Does the Jaipur Joint venture turnaround ?
    o In Jaipur company had still book loss of 180 lakh because of depreciation of 451 lakh . Now Jaipur hotel is able to meet bank loan requirement both on interest and principal level
  • What was the result for Bangalore central ?
    o It result into little loss of around 4 Cr because of depreciation
    o Company get management fees from both hotel in Jaipur get 170 Cr and in Bangalore it was 144 lakh . In Goa also good profit of 1.5 Cr
  • Kindly provide detail on new 15 hotels ?
    o They are signed and contract are done , It is combination of running hotel to refurbish them and some new hotel . It will add another 1000 rooms which make total 4200 rooms from current 3200 rooms
  • Give detail on subsidy which is doing loss ?
    o ICON and Central Bangalore because of depreciation . In FY19 company had done some renovation and added a new restaurant and change plant and machinery so this year it will be profitable
  • What was the company occupancy level in last year and in Q4 FY18 ?
    o 78 % for the last year and 81 % for Q4 FY18
  • Kindly provide revenue break up ?
    o Standalone
     Room Revenue – 63 %
     Food and Beverages - 31 %
     Others – 7 %
    o Consolidated
     Room Revenue – 60 %
     Food and Beverages - 31 %
     Others – 9 %
  • What update on land parcel ?
    o Discussion is at advance level but it got delayed due to CML plan of Mumbai . In June it might be republic and at same time the land will get sold
  • What is operational efficiency ?
    o Management cost was almost same in FY17 it was 9.5 cr and 9 Cr in FY18 but management fees increase from 10.82 Cr in FY17 to 13 Cr in FY18
  • How does company retain talent ?
    o Company have lot of retention and at the same time own college of Hotel management to train people across the country with online video conference system and have some high end online courses which run on regular basis in college for staff. At the same time company give very heavy bonus to general managers for achieving their targets . Company give more inventive compare to any other hotel
  • What kind of growth seen in destination wedding business ?
    o Jaipur and Goa are major one and promoting Bangalore and Hampi where company have 130 room hotel. Also going to look at Pushkar and Rathambore .
    o Company is promoting the hotel where company have a lounge and banquet hall and there are lot of hotels where it can happen . It contribute 40-50 % of total food and beverage business
  • How does company looking at ARR and contract business in FY19 ?
    o 10 % increase in ARR . Company is doing negotiation with every customer and getting 10 % rate hike in contract business .
  • Does company is getting any lease property ?
    o Yes company has started looking for it
  • What is the proportion of cost and management fees ?
    o If cost goes up 1-2 % then management fees will go up 10 %. Company main cost in management contract business is employee cost
  • What is the EBITDA for Jaipur hotel and ICON ?
    o 8.89 Cr in Jaipur hotel and 3.50 Cr in ICON
  • Give guidance on EBITDA growth ?
    o 25 % yoy . Occupancy will not grow much higher as it is already at 80 % and ARR will grew by 10-15 % . PAT will grew by 20 %
  • Provide financial of management contract subsidiary ?
    o PAT grew by 20 % from 10.80 Cr to 13 Cr
    o EBITDA grew by 20 % from 25.11 Cr to 39.73 Cr
    o EBITDA was 31 % in management contract
  • What is the viability of starting new project ?
    o Due to high land prices company is not doing any project
  • All new 15 hotels will only be management contract ?
    o Majority will be only 1 or 2 % will be on lease
  • One of the promotor Kishan Balajee running same kind of Pre-hospitality so will be there any kind of conflict of interest ?
    o No because he don’t have any share in parent company and he manage budgeted hotels and guest house where company is not present
  • What is the company debt reduction plan ?
    o In ICON current debt is 18 Cr and interest rate has come down to 12 % from 14 %
    o In Shiv sagar debt is 41 Cr and interest rate come down to 9.3 % from 13.3 %
    o In Jaipur debt is 20 Cr
    o Overall cost of debt has come down to 10.3 % from 11.4 %
    o It is manageable and comfortable
  • How company manage rates with corporates ?
    o It depend on demand and supply . If demand os rooms goes up then prices for corporates also goes up
  • Is there any impact of election in Karnataka ?
    o Yes there was a dry day for 5 days so there was little impact on food and beverages but no major impact on full quarter basis

(gkg) #51
  • YoY occupancy has gone up from 72% to 79%; ARR has gone up from 3900 to 4200 (owned hotels)

Can anyone please share what are the main reasons behind high occupancy rates for Royal Orchid comparing with industry average OR global brands…i mean what is the USP of Royal Orchid? Why a customer would prefer to Royal Orchid compared to Taj or Any global brand in any metro

(Rohit8546) #52

The tariff is on lesser side if u compare with same category hotels…and as indian we knw it very well price does matter

(Abhishek Basumallick) #53

Royal orchid is predominantly present in the mid-scale hotels (3-4 star). They do not directly compete with the luxury and super luxury hotel brands. Hence their occupancies are higher and ARRs are lower.

(Rits) #54

Abhishek Da, do you think that after recent corrections, this is offering some margin of safety…

(Abhishek Basumallick) #55

I am not sure how the market price will be but I personally see that the business is doing well. I am expecting good growth in the next 2-3 years in the hotel sector.

Disclosure: Invested.

(sandeep17) #56

I am not an expert on the Hotel Industry and I dont know the difference between “well” and “not well” for the hotel companies.

As per my limited knowledge though, the hotel industry ( not just India but globally ) is intrinsically designed ( just like industries like Airlines, Automobiles, etc ) to not make significant returns on capital. Reasons range from fixed high operational costs to very high capital investments. Thus, over a long period of time, the returns range from a worst case scenario of negative returns to a best case scenario of recovering the cost of capital.

Thus, the key to investing in the hotel industry is to identify outliers who have consistently managed to operate outside this range on the positive side. ( just like an Interglobe in aviation or a Maruti in Automobiles ).

I am not so sure if ROHL qualifies. Will dig more.

(Rohan) #57

I think this will help the company


Royal Orchid as mentioned is somewhere above Ginger Hotel and lower than Taj ( which are super luxurious hotels)
Royal Orchid target tier 2 and 3 cities like Shimoga where you don’t have any star hotels.
I happen to visit Shimoga frequently and found this hotel value for money.( as modestly priced INR 1500/- + taxes with corporate discounts)
Royal Orchid have extensive corporate tie-up as well with many organisation due to pan India presence.
Royal Orchid also has a membership plan started around four year back which I found also value for money and other chain like Holiday Inn and Citrus mirroring it.
You need to pay INR 7500/- for an annual membership you get two nights stay free and other two night at half the price along with many freebies like free buffet coupons for family, birthday celebration, free drinks etc…from the restaurant.
All this will enhance room occupancy and customer loyalty.
Disclosure : Not invested

(Kumar Saurabh) #59

Latest credit rating report. Overall looks good. Some interesting points are from risk and margin improvement perspective -

  1. High geographical concentration to Bangalore
  2. Higher concentration to online channels restricting margin improvement possibility

Expected steps:

  1. Geographical mix improvement
  2. Channel mix improvement

(rskothari) #60

No much progress in last one year. Still hopeful of reaching 75 hotels by 2020 as per Investor presentation for Q1.

Disclosure - Tracking position.

(Abhishek Basumallick) #61

(DunzoAD) #62