Samhi Hotels - Turnaround with Tailwinds

Samhi hold strong brand portfolio, just was looking for some new entries few days back and this struck, did a little analysis before sleeping and could not sleep after :joy::joy::joy:.

I like current price point, seeing strong business moat, competent management, growing appetite of Indian travellers and strong economic outlook. Risk reward ratio are very favourable. This is a kind if Mohnish Pabrai stock.

Already entered with 9% if my Portfolio. Three years down the line, this might become talk of the town. Fingers crossed.

Finding bets in current market is tough task.

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Two More risks I observed .

  1. Sudden Switching the rating agencies
  2. I watched the 2013 Interview of Ashish Jakhanwala when there were only 3200 keys ,he gives the guidance of adding 1000-1200 key every years and it’s 2024 they only managed to add 1600 in 11 years.
    Just presenting my research, 100% of my holding is in this single stock, no recos

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The hotels took a bad cycle during that phase due to over capacity and also due to whole Real Estate sector suffering. On top of that they had alot of leverage so execution was tough. The real question here to answer is given the FCF generation and potential to delever in the next few years is Samhi cheaper than the peer group? do they deserve a better multiple?

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Hi dpk,
I am invested in Samhi for a horizon of two to three years but the discussion was going for fy25 year end valuation scenario and i joined in and i kept the same exit multiple.

Yeah Current multiple can be considered for fy25 end valuation. I don’t foresee any major change for the multiples to change -negatively.

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Last lot bought at 171 today, fully loaded up with 20% allocation, as Warren bufffet said, stock will find its own value and this investment is a no brainer for me. Heads i win and tail i dont loose much. Fingers crossed.

They own all real state, only value of real state will go up by at least 50% in 3-4 years seeing the markets land is situated.

Not writing any number based calculations as it doesn’t work in current market conditions where penny stocks trade at P/S of 10 and PE 100,:joy::joy::joy:

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Around 2.87cr shares that is worth of 516cr are available to sell and around 620cr are locked. Do you think any sharp appreciation in the share price will only come once the selling pressure is over?

I am referring to the Samhi’s DRHP, on August 10, 2023 3.7cr shares were allotted to ACIC Mauritius as part of the acquisition deal. The shares were allotted at the price of 238.15 INR and the IPO price itself was 126 INR.

How come the allotted price was way higher than the IPO price? Does it mean the CMP is way below the fair market value as discovered on August 10, 2023 and the IPO price was way too low?

Could you or someone help me to decipher this, am i missing something? Thanks!

Refer: DRHP
Page 12:

PS: Note: ACIC holds 17% equity in SAMHI.

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Two small observations:-

  1. Most of the big investors have more or less pruned their positions be it small or insignificant.

  2. Refer screenshot: The total number of Investors have increased drastically.

Views invited

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Great set of results from Samhi during lackluster quarter, Revenue 257 cr, EBIDTA 92 cr, Operating margin 37.5% . Profit of 4 cr from loss of 89 cr.

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Samhi Hotels Q1FY25 Concall Summary.

Financial Performance

Revenue: SAMHI Hotels reported an asset income of INR 251 crores, marking a 31% year-on-year growth. This growth was driven by strong same-store growth and the addition of the ACIC portfolio.

Profitability: The asset EBITDA was INR 95 crores, showing a 32% increase year-on-year. The consolidated EBITDA stood at INR 89 crores, an 88% growth compared to the previous year. The reported PAT (Profit After Tax) was INR 4 crores.

Margins: The asset EBITDA margin was 37.7%, slightly diluted by the ACIC portfolio, which had a margin of 35%. The consolidated margin reached 34.6%.

Operational Metrics

RevPAR (Revenue Per Available Room): The same-store assets experienced a 13% year-on-year RevPAR growth, indicating robust demand in core markets such as Bangalore, Hyderabad, Delhi NCR, and Pune.

Occupancy: The company did not provide specific occupancy rates, but the focus on RevPAR growth suggests a strong occupancy performance.

Strategic Initiatives

New Locations and Expansion: SAMHI Hotels is actively expanding its inventory with plans to open 165 new rooms in Kolkata and Bangalore between September and November 2024. Additional projects include adding 22 apartments in Hyatt Regency Pune and 54 rooms at Sheraton Hyderabad.

Renovation and Rebranding: The company is renovating and rebranding several properties, including converting the Caspia Pro in Greater Noida to a Holiday Inn Express, and two ACIC portfolio assets in Pune and Jaipur to Marriott brands. These initiatives aim to enhance the average rate profile and EBITDA potential of these assets.

Future Outlook and Guidance

Growth Prospects: The management expressed confidence in both near-term and long-term growth, driven by macroeconomic factors such as the expansion of commercial office space and the aviation market in India. The company aims for a 10% to 15% inventory CAGR over the coming years.

Earnings Guidance: SAMHI Hotels expects significant EBITDA growth from renovation and rebranding activities, with a potential 25% increase in EBITDA based on FY24 numbers. The management anticipates high single-digit to low double-digit RevPAR growth in the upcoming quarters.

Management Tone
The management’s tone during the conference call was optimistic and confident. They highlighted strong market demand, strategic expansion plans, and operational efficiencies as key drivers for future growth. The focus on renovation and rebranding, along with disciplined capital allocation, underscores their commitment to enhancing shareholder value and maintaining a strong financial position

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India’s business travel spending is estimated to fully recover its pre-covid by 2025 & exceed pre-covid levels by 20% in 2027 with ~70% respondent saying they would travel at least 2-3 times for business.

In the Hotel Industry 75% of room addition is coming up in Tier II & III cities, means only 25% room addition in Tier I metro cities.
As per IHCL, out of 2900 branded keys added in Q1 only ~20% were added in Top 8 cities (i.e. Delhi, Mumbai, Bangalore, Kolkata, Hyderabad, Pune, Chennai, Ahmedabad). Also, while Demand is projected to grow at around 9% in top 8 cities, supply is lagging at 0.6% net addition in Q1.

Src: Thomas Cook PPT, Aug 2024 & IHCL PPT July 2024

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Hi…

Thanks for the Concall summary. That was helpful

Did they give any guidance on debt reduction roadmap or at what levels are they comfortable with their DEBT/EBITDA or Debt / Equity levels etc

Thanks

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Debt/EBITDA - 3.5 levels is the target for FY25 per the Q4FY24 concall.

I think it is a bit ambitious. Considering 400Cr EBITDA in FY25, they need to get ~1850Cr down to ~1400Cr. That is a lot to pre-pay, especially when all their debt is long term.

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Q1 FY25-

Q3 and Q4 are best qrtr.

Revenue and EBITDA starts flowing from FY26,but from FY27 it will flow strongly.
And by the end of the current fiscal year, we are fairly confident to generate incremental INR225 crores to INR250 crores of froe cash.
But we believe we are very well set to deliver high single digit to early double digit in terms of total revenue growth.

We believe that this incremental EBITDA growth will start coming in FY’26, but very small portion. FY’27 onwards, you start seeing this EBITDA growth coming into our P&L.

So you can clearly see the big cities are showing RevPAR growth, which are pretty robustthan tier 2 and tier3.

The combination of all the above, which is same-store growth, renovation, rebranding opportunities within our existing portfolio, inventory addition in our core markets within our cxisting portfolio, and then last but not the least, addition of new inventory, continue to drive a sustainable compounding of revenues in EBITDA and create a significant value for our stakeholders.

80% revenue from - Banglore, Hyderabad, Pune and Delhi NCR

Capex this year- 138cr including all renovation ,room addition etc.

And if I deep dive into your performance, you have a better performance than peers but a lot of it is driven by occupancy rather than ARR.

ICRA has updated our credit rating to A- stable, which is a testament to the steps we have taken to improve our capital structure and P&L.It will reduced interest cost to 9.7% and will further reduce to 9.5%

Obviously, part of this will be used towards contiuous deleveraging , or it will reflect in our net debt because of the cash we hold , either two ways, right?

We actually use a word called capital cfficient, which is delivered through our variable longterm leases, where we actually don’t end up paying for land and building, and we only pay for fitting out the building and very quickly start adding that EBITDA to our overall portfolio.

We’ve not been doing so far, but there r a lot of comments that we get. We will start allocating capital towards growth, which will bring near-term EBITDA. So, investors have a very clear visibility of how we foresce the balance shect growing in future.

With ACIC portfolio conversion to managed hotel under Marriott, coupled with the integration benefits with our existing Marriott portfolio, we should sce material margin improvement over the coming quarters.
In the last reported quarter, our same-store assets, which excludes the recently acquired ACIC portfolio and the Caspia Pro in Greater Noida, which is under renovation, delivered a 13% RevPAR growth in Q1 FY25, driven by robust demand as demonstrated in the office space net absorption and aviation growth in our core markets.

We arc currently renovating our 137-room Caspia Pro in Greater Noida and rebranding it to Holiday Inn Express, which is scheduled to open in October this year. Greater Noida tends to be a very strong market in H2, and this hotel will be open to benefit for that period.

We’ve also signed the agreement with Marriott to renovate and rebrand the two ACIC portfolio assets in Pune and in Jaipur, totalling 330 rooms.

Additional renovation plans to upgrade rooms and facilitics in Hyatt Regency Pune, Sheraton, Hyderabad, Fairfield by Marriott Hyderabad, and Four Points Vizag will further drive incremental revenue growth from these hotels.

We have sct a target of delivering about 10% to 15% inventory cater over the years. As of now, we are scheduled to open 163 new rooms in Calcutta and Bangalore between September and November of this year under the Holiday Inn Express brand.

We are also very happy to inform you that we have identified the opportunity to add 54 rooms at Sheraton Hyderabad by converting some underutilized F&B and third-party leased office spaces. As you know, Hyderabad is a very strong performing market, and being able to add 54 rooms is highly accretive.
Seeing strong performance of the hotel in Sriperumbudur, which is Fairfield by Marriott, we are starting to plan the addition of 80 rooms there, and we expect that the total incremental revenue from the additions that I have just spoken about will be in the zip code of about 70 crores.

In addition to these internal growth opportunities, we also have a very highly visible and actionable pipeline of both acquisition turnarounds and long-term variable leases. These have the potential to add at least 25% EBITDA on FY "24 pro forma basis.

So we think these three — Greater Noida will be a complete new addition, even though if’s a rebranding. And Punc and Jajpur have a significant EBITDA upside between those two assets.

So, Caspia, Delli, current, we alrcady have a contract signed with Marriott for a Fairficld by Marriott, We have not yet started the work on this asset. This is one of the assets that we would consider, you know, to be part of our asset recycling strategy. And that’s why we’ve held it for renovation. Vizag, is an asset where there is no rebranding. Ifs just improvement in the guest rooms. We have completed the planning cxcreise. I think by the end of the year, we’ll have the markers completed. And then we’ll start the work on that hotel.

The total repayments due over the next 12 months is about INR50-0dd crores, - INRS0 crores, INRSS crores. So as far as repayments are concerned we have a very strong profile of repayments over the course of the next 10 to 12 years. Only the ‘maturity due is in Jan 2027 which gives us adequate time to refinance that.

Not major supply is coming in Hyderabad, Pune, and Gurgoan, where we are expanding.

Navi Mumbai- So as of today we expect about 1,300 rooms as the stated supply in that market. Existing supply is 1,300. We think if everything gets added by end of FY28-29 we expect this to go to about 3,000 rooms so that’s doubling almost doubling of supply, butif you look at it from an absolute perspective 3,000 rooms catering to New Mumbai airport and whatever is happening in New Mumbai that’s just about Aerocity.

we are guiding towards 10% to 15% inventory CAGR over the years.

We believe that cities sometimes tend to be more important than segments . Ifyou look at the RevPAR growth by cities we’ve scen Bangalore grow almost at about 17% year-on-year. No surprises. Largest office market in terms of net absorption.

The sccond highest growth rate was both in Hyderabad and Pune in the zip code of about 16% cach, again driven by the growth of the office markets. NCR was at about 10%. And if you look at ow portfolio spread, Jinesh, right, almost 70% of our revenues come from Bangalore, Hyderabad, Pune. And if add NCR, about 80%. So when you have, you know, your presence in markets which continue to have good growth in terms of office space, the weighted impact reflects in the overall portfolio, right?

Two, we will also clarify that we don’t operate in leisure markets, right? And therefore, we tend to probably over the years deliver more stable growth rates, because leisure markets are the markets which tend to have higher fluctuations between seasonalities . Business hotels also have scasonality, but not to the extent that you will see in leisure markes.

The integration of ACIC portfolio is going exactly as planned.

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try to give my two cent on samhi hotel try to look RevPar,occupancy ratio, ARR is incresesing or not, samhi hotel available 4500 mkt cap around with keys 4800( 0.9x) valaution on keys, peer chalets hotel available at 6x valuation with 3052 keys at 17000 mkt cap, majority hotel in TIER 1city so little barrier to entry, hotel in bussiness segment,Q1is not good for hotel sector but samhi hotel very good results to peer, preESOP is over , interest cost is also reducing, majority capex is over,try to look EBITDA MARGIN you get better picture, next three quarters would be good, marging expansion & debt reduction story can play out , disc not sebi registerd in last 7 days taken the postion , due your due diligence.

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Found this on X very useful…Complete overview of the business :pray:

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Really well written. Covers everything. mentions the edge that samhi had this Q1FY25

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Do anyone knows has the breakup of the hotel properties are on lease vs owned by Samhi ? I tried referring to the latest annual report but couldn’t get details.

Understand that the hotel properties are mostly on long term leases as per the disclosure in AR.

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I found this one to be more comprehensive with good data points

Hidden Profit of ₹236 Crores Triggers SAMHI Hotels Turnaround?

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