Byke hospitality - Truly asset light?

Stock Opportunities Untested - but worth a good look
82

I think there are 3 primary reasons

  1. A lot of people including me are not comfortable about their Room chartering business where they upfront buy rooms and then sell later. The skill is intangible and something which can be a little fishy and can lead to forged books.
  2. Threat from online players like OYO rooms, makemytrip ,ibibo etc.
  3. As some people mentioned in the posts above, the quality of their rooms is not exactly good. Similar things about quality was flagged in Vaibhav Global and we all know what happened further.

Disc. <1% of my portfolio

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83

Good Read on OYO for people invested in Byke.

"Is Oyo Rooms the startup equivalent of a Ponzi scheme?"
https://www.linkedin.com/pulse/oyo-rooms-startup-equivalent-ponzi-scheme-sumanth-raghavendra

Give importance to some of the finer points on the industry.

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84

http://www.bseindia.com/corporates/anndet_new.aspx?newsid=c180ac66-228f-44a3-afdd-620cfcb0bc09
Puri facility starting in April is one nugget to note, in addition to Thane
PS - Inspite of everything positive, I reduced a small portion, post Q4, as I needed some cash

85

@rajpanda Thanks for sharing that. That was a good read.

I have looked at the occupancy ratio:

Owned & Leased:

Room chartering:

See the difference? Are they too efficient to fill up 94% of their rc rooms while their own & leased business is filled with ~66%. Or something behind the back is happening?

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86

CONFERENCE CALL - from Capital Markets

Confident of improving both OPM and PAT margins by 100-150 basis points in FY 2017

The Byke Hospitality held conference call on 23rd May 2016 to discuss results for the period ended March 2016.
The call was addressed by Vikash Agarwal.

Highlights of the call:

  • For the quarter ended March 2016, sales grew 19% to Rs 68.01 crore. OPM jumped 180 bps to 23.8% which took OP up 29% to Rs 16.16 crore.

  • Hotel revenue grew 18.5% to Rs 37.91 crore and stood at around 56% of total income.

  • Chartering revenues grew 21%to Rs 30.10 crore and accounted around 44% of total sales.

  • After providing for depreciation (up 52% to Rs 4.61 crore), PBT grew 23% to Rs 11.22 crore. Taxation jumped 100% to Rs 3.86 crore as tax incidence grew from 21.1% to 34.4%. Thus finally net profit grew 2% to Rs 7.36 crore.

  • For FY 2016, sales grew 28% to Rs 231.52 crore. OPM jumped 220 bps to 22.7% which took OP up 41% to Rs 52.62 crore.

  • For the FY Hotel revenue grew 25% to Rs 114.29 crore (49% of sales) and Chartering revenues grew 31% to Rs 117.23 crore (51% of sales).

  • After providing for depreciation (up 14% to Rs 11.60 crore), PBT jumped 56% to Rs 39.66 crore. Taxation jumped 157% to Rs 13.73 crore as tax incidence grew from 21.0% to 34.6%. Thus finally net profit grew 29% to Rs 25.94 crore.

  • Room portfolio under owned and leased (O&L) segment totals 677 rooms.

  • During the quarter, in the room chartering business, the number of room nights sold increased from 1.02 lakh to 1.29 lakh y-o-y.

  • Thane Property (Byke Suraj Plaza) Commenced Operations in FY16.

  • The Byke Suraj Plaza is strategically located at high density area.

  • Property taken on long term lease of 15 years

  • It has 122 Rooms, 4 Banquet Halls, 3 Conference Rooms,1 Restaurant and 1 Bar Lounge

  • This property will target high density residential population of Thane, Navi Mumbai and nearby locations specifically for events including weddings, birthdays, and corporate events.

  • This property will contribute significantly to increase in all revenue streams (room rent, food & beverage/ other revenues).

  • The Byke Vijoya, Puri commenced operations in April, 2016. thisproperty will contribute in FY 2017.

  • Byke Vijoya has been taken on long term lease of 15 years. It has 54 Rooms, 4 Conference Rooms, 1 Multi-Cuisine Restaurant.

  • Puri is an upcoming location for destination weddings and other such events in East India.

  • This property will target leisure and religious tourists.

  • The company has identified 8 locations for the next phase of growth. these locations are Dalhousie, Chandigarh, Jodhpu, Udaipur, Lonavala, Mahabaleshwar, Darjeeling and Gangtok. This will further expand its pan India reach.

  • The company hopes to add an inventory of 450-500 rooms through these locations in the next two years.

  • The company will target tourist locations across India in line with current presence.

  • Its Chartering business is seeing continued expansion of network. This will expand reach to customers to get the booking across India.

  • Occupancy of its Lease Business in March 2016 quarter stood at 75.0% against 79.0% in March 2015 quarter.

  • ARR of its Lease Business in March 2016 quarter stood at Rs 4323 against Rs 4463 in March 2015 quarter.

  • Number of rooms of its Lease Business in March 2016 quarter stood at 623 against 519 in March 2015 quarter.

  • For FY 2016 ARR of its Lease Business stood at Rs 3909 against Rs 3783 in March 2015 quarter.

  • For FY 2016 occupancy of its Lease Business stood at 65.0% against 67.0% in March 2015 quarter.

  • Occupancy of its Chartering Business in March 2016 quarter stood at 94.0% against 95.0% in March 2015 quarter.

  • ARR of its Chartering Business in March 2016 quarter stood at Rs 2340 against Rs 2430 in in March 2015 quarter.

  • No. of room nights sold of its Chartering Business in March 2016 quarter stood at 1.28 against 1.02 in March 2015 quarter.

  • Occupancy of its Chartering Business in FY 2016 stood at 94.0% against 94.0% in FY 2015.

  • ARR of its Chartering Business in March 2016 quarter stood at Rs 2388 against Rs 2401 in FY 2015.

  • No. of room nights sold of its Chartering Business in March 2016 quarter stood at 4.90 against 3.73 in FY 2015.

  • The company had 10 hotel properties operational at tourist destinations in India as on Mar’16 of which 2 are on ownership and 7 are on long term lease. It has total 677 rooms

  • Thane and Puri properties will add 176 rooms.

  • It enjoys niche in vegetarian segment.

  • Its Room Chartering business is spread across 50 plus cities in India.

  • Chartering business has developed relationship with over 150 Hotels owners.

  • The company is well placed to capture Tourism Growth in India

  • The management feels that domestic middle class leisure tourism is set to grow at faster pace.

  • Leased Model offers the company to have low cost & faster rollout of hotel properties.

  • Its Charter model is highly scalable with geography & seasons diversification.

  • It has strong marketing / distribution network of agents

  • Its lease model business has expanded no. of rooms by a CAGR of 31% over FY11-16.

  • It will focus to grow the Lease portfolio aggressively by leasing distressed properties and turning around quickly. The company has successfully turned around many properties. Renovation of the property, one of the key success factors for turn around.

  • Lease business is expected to grow at 20%+ over the next few years.

  • Its Chartering Business through pan-India presence helps in gaining insight on tourist trends, which is the key for selection of hotel properties.

  • Lease model business is highly scalable ahs faster turnaround & consumes low capital cost.

  • Chartering Business has low capital employed and has flexibility to quickly expand depending on tourist trends.

  • Chartering Business is highly scalable and generates strong margins.

  • Net worth stands at Rs 121 crore.

  • Gross debt stands at Rs 11 crore.

  • Cash and bank balance stands at Rs 3 crore as on March 2016.

  • Hotel occupancy in India is 60%. This has crossed 60% pan India for the first time.

  • Tax incidence grew from 21% to 34% because till FY 2015 it had mat credit which was completely exhausted in FY 2015. Going forward it will be around 34%.

  • Shimla property will take time for commencement. It is taking longer due to pending government approval for some renovation.

  • Thane property has occupancy of 55% in March 2016 quarter.

  • The company is targeting operational 25 hotels by 2020 and 50 operational by 2025. By operational, it means that the company will have to sign all agreements by 2019 for 2020 target.

  • Going forward all the quarters will be even for the company as it is spreading itself across India. However, Q2 is generally lean quarter for the company and the industry.

  • The company is almost debt free. It has short term debt of Rs 6 crore and long term debt of Rs 2 crore. The company will become debt free by 2017. It does not need debt keeping in mind its expansion and cash generation.

  • Lonavala and Mahabaleshwar is top segment for wedding functions.

  • EBITDA is at 23% and the company sees improvement of 100 to 150 basis points for FY 2017. PAT margins will also likely improve by 100 to 150 basis points in FY 2017.

  • The company buys inventories in 3 months advance.

  • Depreciation was due to capex of previous year and change in depreciation policy which was adjusted in March 2016 quarter.

  • Shimla and 4 properties out of 8 will get commissioned in FY 2017.

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88

Hi , First thanks to @Administrator for this great website
and forums

I am learning a lot

Just a few queries –they have sold 110 K nights in Q22016 so
with assuming 90 days it makes max -1500 rooms they have approximately with
them

& from 1500 to 50000 , only with assuming 90% occupancy
rates and 2500 average room rent ,and say working for 200 days in an year that means
-2200+ revenue with 16% gross margin which means approx 300+ cr gross margin

and then if we deduct operational cost of managing 50000
rooms inventory -the communicating channels need to procure those room and sell
those room, cash handling from customer to self to cutting margin than giving
back to hotels -even if we deduct 20% from gross margin that means -approx 240cr
ebidta -10x from there 2400cr mcap so almost 4x from current mcap levl of 600cr

but than its a big then the jump from 1500 per qtr to
50000rooms chartering in next quarter thats a big jump in 3 years or say next
even 10 years

means -what make byke hospitality special for hotel owner so they leave money on table and
flock to byke hospitality

and why the other hotel inventory consolidator like
airbnb,makemy trip,yatra,cleartrip can not be able to do similar to byke
hospitality and if they had not done so far what is the challenges they are
facing in doing it so

I am still learning the trick of the trade and been considered as newbeee in evaluating busienss models

regards

89

Forbes Asia recently covered Byke in their June issue

Rattling off his plans in rapid Hindi and halting English, Patodia says he aims to add six properties this year and touch $75 million in revenues by 2020, creating a pan-India chain with 25 properties. By 2025 he wants 50 hotels.

Part of the appeal is vegetarianism. While such diets are possible across India, Byke’s “pure vegetarian” plank appeals to older, orthodox Indians by ensuring that utensils and cooking spaces aren’t in contact with animal-derived dishes. This attracts “pilgrims” traveling to religious and heritage destinations. It’s also a major lure for those from the Gujarati or Jain communities, who are vegetarian, as well as Patodia’s fellow Marwaris, a notable trading clan.

Disclaimer: No holding but in watchlist

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90

MOSL report on Byke Hospitality

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91

@Lynchfan @KS16 @mihir23192 @The_Confused_Consult Have you guys observed that even with no price movement, the daily shares traded are more than 1L for almost all the trading days and the delivery is always between 15-20%. This kind of activity makes me uncomfortable. I have never observed such a thing. Can somebody enlighten me that how can anybody gain from it?
Also if we look in SHP, there are a lot of trading companies(Modern Trading Businesses, Florence Agro Foods etc) which hold substantial chunk in the company, what can be the reason for this ?

The_Confused_Consultant- I constantly read your thread on VP and in your latest thread I found that you are already invested here. So I wanted to get your views. Thanks in advanced.

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@kanvgarg123 precisely my observation as well and hence I decided to move on from The Byke. My views may be biased and hence I will request others not to base their decision because of mine.
Thx

93

Thanks for highlighting, honestly I was not aware of. I am quite ignorant in market related data, still let me try your question.

First let go down number crunching to justify the low delivery quantity.

https://www.nseindia.com/products/content/equities/equities/eq_security.htm

This is last six fortnight data (attached file), between 30-33%, one fortnight it fell to 27% where as on higher side 38%. File attached.

The lower delivery obviously indicates higher speculation and lower genuine buyer interest. But mute question if price is not rising then who is gaining? Increased price movement with lower volume carry a higher percentage of speculative profit to price which can be sticky. The chance exist traders exit and price fall. Sharp price movement is always attached with speculative interest, but here I don’t see large price movement.

On other hand a bunch of investment companies (for themselves or for their client, what so ever reason) holding a chunk of shares. This can lead to accumulation by operator who wants to suck the shareholders from retail. If this is the case a mark up phase has to come where share price should go up before distribution begin.

Let me evaluate a bit more in detail and come back to you, this is an old purchase for me. Not spent time for some time on this.

Workbook4.xlsx (57.2 KB)

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94

I have been tracking this stock for quite sometime. Thought they keep on posting excellent results there has been no stock movement for 3 years now as you all know. I have decided to enter the stock only if crosses well above its lifetime high of 172 or may be even 200 levels.

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Thanks for summing my doubt up. I will be waiting for your response. I have some money to deploy and I want to add more shares of Byke in my Portfolio.

Thanks
Kanv

96

I spent few hours looking at this company and here are my general observation based on recent ARs and what I read in this thread so far (I’m not a numbers expert).

  • Management seem to have done well in the past 4-5 years in increasing the topline & bottom line (and are hopeful to increase going forward with projects of ~500 Cr revenue by 2020 or before).
  • Almost debt free
  • Management claims that there is enough market opportunity for multiple players to operate in this space. One of their advantage is to lease hotels in distress (thereby getting them for cheaper rentals). But here’s where the competition is getting heated up.

What goes against Byke,

  • Oyo is no more an aggregator and as you can seen from the recent fund raising, they are directly competing with Byke by leasing properties (this is to maintain consistent quality / experience which otherwise was not possible). OYO flagship is exactly the leasing business of Byke - https://yourstory.com/2016/08/oyo-rooms-funding-softbank/
  • While Byke is targeting 25 properties by 2020 and 50 by 2015, OYO flagship had 70 properties as of Aug 2016 mid and given the fund backing, they can target this space aggressively, thereby impacting the leasing costs for Byke.
  • Byke claims that they lease properties based on their experience in charting business (where they know which locations or properties are best among the available). But my view is OYO will have more advantage in choosing better ones given the amount of data they can collect and analyse via their app/website users. This is a huge advantage OYO kinds have compared to agent based feedback received by Byke.
  • Similar to OYO Flagship, there’s Treebo which leases out entire inventory. http://www.livemint.com/Companies/1CzuzNIDGeFmaEAw6CYIaK/Oyo-Rooms-starts-leasing-hotels.html (reference to Treebo in this article)

Given the above, I doubt if Byke can aggressively compete against the funded online players (especially with same business model). Disruption with Technology will catch up fast and companies like OYO or Treebo can scale way much faster than Byke. Another thing to watch for is how much money companies like OYO or others are losing (and when they’ll start making any profit). For now they might aggressively go for market share than worry much about profits.

Note: For folks who had listened to Byke’s conf call (last one I think), when someone probed on OYO business model & its impact, Byke management said they are not aware of OYO’s exact business model, but they felt they had enough market opportunity. My personal view is that Byke management will be (and need to be) aware of competitors business models and act accordingly. Saying “I donno” is not the right way to answer.

Counter views welcome.

Disclosure: No holdings.

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97

Dear Kanv
I tried to did something which obviously not an indication for investment decision making but to spot greediness of a speculator.

With my limited knowledge of speculation if I put my hats of speculator then:

  1. On a 2 year chart or even short term stock appears to be moving in range or at best consolidating. Basically there is no price or volume action for some time. I would look for at least some price and volume increase for a speculative profit.
  2. The history of delivery percentage has not seen much change during last few months. Basically there is no deviation to pattern.
  3. I checked some of these names (investment companies we discussed last time) in old shareholding pattern. Most of them are there for long time, names prop up after new management take over. Possible old promoter holding or relatives through investment companies.

However I don’t feel these can be stand alone factors for investment. Industry is saddled by disruption for some time, niche area like veg restaurant can be double edge sword. If you have specific questions for business model let’s evaluate. I may not take a fresh entry at this price unless we do some further analysis due to 1. the growth being factored now (no more available at balance sheet valuation) 2. the industry is prone to disruption (like aggregator turning to room chartering) 3. even blue ocean like MICE which may strangulates the current strategy and focus.

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I was holding Byke as I had mentioned here before. I recently sold at a small 5% profit. I sold because as folks mentioned here, Oyo has got into leasing properties (and not just an aggregator). When PE money comes into the equation, it vitiates the atmosphere because the game is no longer even. I don’t think Byke is that big to fight the onslaught and the moat doesn’t seem strong enough, if at all. And as always, I reserve the right to be proven wrong. :slight_smile:

99

The low delivery volumes has been a characteristic of this stock for last few years.

I am generally vary of such stocks where low delivery volumes continue for months. Its circular trading most of the
times to maintain price of profit/loss entries.

In this case the delivery data looks a bit scary

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100

All these companies are doing the same business as The Byke but there scale up is infinitely faster than Byke and they are more Tech savvy than them.

Disc. - Hold a tracking position and wanted to add more.

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101

There are many stocks that hadn’t moved for years on end.

For a speculative analyst, no trend means no scope for profit. Hence, he will advise to stay away from such stocks. Long-term investors will take a different view.

PE funds would demand their slice of pie after the period of investment is over. PE investment field is littered with plethora of start-up graves. It is too early to gauge the impact of PE and e-commerce in hotel business and I believe I can wait and observe for some more time. Hospitality is a people business fundamentally, and those who control their business closer to the end customer will have better impact.

Let us not see the business merely in terms of number of properties. If the efficiency of business is good, it will reflect in the numbers and the market must take note of it.

Today, The Byke’s traded volumes was at 0.89 lakh against the 2-week average of 0.52 lakh, and the delivery % was 63% (Source: BSE web site).

Disclosure: Invested and no transaction in the last 1 month

102

After loitering in the range of 150 - 170 for last 2 years or so there is a fresh breakout today and the stock is at all time high.