Very detailed and thorough post on Byke… Thanks!
I understand your dilemma in assigning price multiples to this company due to trading nature of their RC business. This business is actually intriguing, more so because of the performance it is posting year after year. Very impressive, i must say! 94% occupancy rate is just superb.
I am wondering why the Hotels (that are selling the rooms inventory to Byke) are selling to Byke rather than doing it themselves or to the agents directly? I mean everybody knows everybody here, and 95% occupancy do suggest there is very good demand for these rooms, so what is stopping the bypassing of Byke here? Must be something, as otherwise, numbers won’t be this consistent for this long.
I think this might be due to the payment guarantee and ‘peace of mind’, which Byke offers to Hotels, by getting there rooms 3-4 months in advance. Byke’s goodwill is the moat here giving them pricing power (in buying and selling of this room inventory). Byke’s able agent network is also a contributing factor towards this consistent success. On surface this might look like simple trading of rooms, but inherently the business is not that simple. I mean OYO is operating in similar RC business (primarily B2C) from last few years but is operating at huge losses. Many are questioning their model now. On the other hand, B2B RC business of Byke is firing on all cylinders. So on buying side, their goodwill and size is the key. On selling side, their agent network is the key. This trading business looks inherently simple from outside, but this isn’t actually the case.
Going forward they have plans to increase their leased hotel count along with chartering more and more rooms. So, i see a balanced approach going forward. But at 28 trailing p/e market will need 20-25% CAGR growth consistently. Any dip there would result in the stock taking a beating.