This is the biggest risk for me. While this might not blow up the company but this can keep the stock underperforming. I might want to reconsider in that case.
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Hello everyone. I am new to investing so please pardon my basic question. This is the only thread where I came across discussion where we are discussing ebitda pre esops? Any reason for doing the same in case of Samhi? Thanks for explaining!
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Just a add on on hotel industry as a whole
Given the event business growing at 20% (we r seeing coldplay, dua lipa , bryan adams) many more artist coming to India, n this will continue probably for coming years
Hotel industry will definitely be benefitted coz of this.
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Just a word of caution on return expectations on this industry going forward. Now, we no longer have the low base effect (post-covid years). Now, that the base returns are high, expectations need to be set accordingly in this asset-heavy, shallow cyclical business.
I.e. do not expect this sector to be rerated per se. Individual turn-arounds can happen.
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SAMHI Hotels -
Q2 FY 25 results and Concall highlights -
Company profile - Operate a total of 31 Hotels, 4800 rooms in 13 cities under 8 brand names
Upscale Hotel rooms - 1074. These include properties like -
Hyatt @ Gurugram and Pune
Sheraton @ Hyderabad
Renaissance @ Ahemdabad
Courtyard @ Bengaluru
Total - 5 hotels
Upper Midscale Hotel rooms - 2163. These include properties like -
Four Points @ Pune, Vizag, Jaipur, Chennai
Fairfield by Marriot @ Bengaluru (03 hotels), Coimbatore, Chennai (02 hotels), Hyderabad, Goa, Ahmedabad
Caspia @ Delhi
Total - 14 hotels
Midscale hotel rooms - 1564. These include properties like -
Holiday Inn Express @ Pune (02 hotels), Ahmedabad, Bengaluru, Nasik, Hyderabad ( 02 Hotels ), Gurugram, Chennai, Nahsik
Caspia Pro @ Noida
Total - 12 hotels
Capex schedule to be operationalised by Q3 FY 25 ( a total of 302 additional rooms with an annual revenue potential of 25-30 cr ) -
Opening of Holiday Inn express - Kolkata ( will add 110 rooms )
Addition of rooms in Holiday Inn express - Bengaluru ( will add 54 rooms )
Renovation and rebranding of Caspia Pro greater Noida to Holiday Inn Express ( will add 137 rooms ) Addition of 22 rooms @ Hayatt regency Pune
Addition of 12 rooms @ Sheraton Hyderabad
Q2 financial outcomes -
Revenues - 266 vs 221 cr, up 20 pc
EBITDA - 97 vs 54 cr ( margins @ 36 vs 24 pc YoY - massive improvement )
PAT - 12 vs (-) 88 cr ( due steep fall in interest costs from 114 to 56 cr YoY )
RevPar growth @ 16.5 pc YoY
Net Debt @ 1878 vs 1797 cr YoY. Annualised interest cost @ 196 cr
In Q2, company signed a long term variable lease agreement with Hitech City Hyderabad to develop an Upper Upscale hotel with 170-175 rooms. It is an office building with 270k Sq Ft of built up area to be converted to a Hotel resulting in a shorter - Capex to Revenue cycle. This deal improves SAMHI’s mkt position in Hyderabad which is the fastest growing office and aviation mkt in India. Post the operationalisation of this asset, company’s inventory in Hyderabad Mkt shall go up from 825 to 1000 rooms. Company aims to operationalise this Hotel in about 18 months
Company also acquired an operating 142-room hotel in Whitefield, Bangalore, along with surplus land for potential development of an additional 200-220 rooms in the Upper Upscale segment. This acquisition costed them 205 cr. This additional development of 200-220 rooms is likely to be operationalised in about 36 months
These acquisitions combined, add about 500 rooms for the company in the Upper Upscale segment. This should help the company to keep growing its topline well into FY 28 ( The upper upscale generally have a RevPar of 2X the company avg. So this addition of 500 rooms should actually be like addition of 1000 rooms going by company’s avg RevPar !!! That’s about 25 pc growth from current base )
Hyderabad and Bengaluru continue to be the fastest growing Air Traffic and Office Space markets in India in Q2 FY 25 as well
Holiday Inn Express in Kolkata, Bengaluru and Noida ( a total of 110 + 55 + 135 = 300 rooms ) should go live in Nov 24
All these initiatives + seasonally strong H2 should result in even better EBITDA growth in H2
Company is also looking at sale of some of their non-strategic assets ( land bank in Navi Mumbai ). This should help them further de-leverage their balance sheet
Capex required to fully operationalise all the newly acquired assets in Bengaluru and Hyderabad should be - 80 cr to rebrand the existing Bengaluru hotel + 270 cr to add 200 to 220 rooms at the Bengaluru site + 180 cr of Capex at the Hyderabad site to convert the Office building into an Upper Upscale hotel. So this amounts to a total of 480 cr of Capex to be incurred over next 2 yrs. This should also take care of growth for next 2-3 yrs
The Hyderabad Office Building to be converted to hotel is on a long term variable lease model. Variable lease basically means a rental / lease payout as a proportion of revenue generated by the asset. So - its a win-win for both parties
At present, 13 pc of company’s revenues come from assets on Variable leases. Company aims to take this to 25 pc in medium term
Company believes that the two deals that it has been able to strike in Hyderabad and Bengaluru in Q2 are at significant discount vs the kind of assets ( in the Upper Upscale category ) that they can become
In the long to medium term, company aims to bring down its Debt/EBITDA to 3.5 to 3 levels from 4.5 currently
Company is carrying forward aprox Rs 2500 cr of accumulated losses from the past. So, that gives them a tax break of aprox 600 cr for future. Hence the ll keep offsetting this amount and keep paying lower tax rates for foreseeable future
Disc: holding, biased, added more recently, not SEBI registered, not a buy/sell recommendation
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Tax won’t be zero. Company will have to pay MAT at 15 percent in case of Book Profit.
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Hi,
According to me , It will be much more lower than actual tax rates and will not impact PBT much.
Disc - Invested.
@Apandey under certain provision of Income Tax Act MAT is not payable. So it depends on cost benefit analysis by the company.
Samhi hotel looked undervalued as compared to the peers, the growth prospective looks good, However I wanted to know about the anti thesis also, as I hardly saw a management coming and telling that growth would slow down in coming quarters, the latest example could be banks. I found this video by some VP member on his channel randomly and it seems to explain why some of the hotel stocks have come down from their peak. Thought of sharing with community…
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Thank you for sharing, Quite informative crisp and concise on last cycle,
History may not repeat itself exactly, but it rhymes
One point I would like to add to this video which everyone knows already , one of the main reason that previous hotel cycle would have ended sooner than expected due to GFC (Global financial Crisis), It had hit at the start of 2008,
incidentally the growth has been slowed in 2007-2008 FY inline with that, so I think over the span 2008-10, lot of rooms would have been built (which was started their capex on 2006-07 at the peak of the occupancy rate)
From 2000-2008 the supply increase at the rate of 10-12% and flurry of supply was about to hit the market by the end of 2008 which was started earlier, bad timing with GFC
One good insight we can derive from this video is that cumulative weakness or decline in occupancy rate across the hotel sector would be good time exit and substantial decrease in occupancy rate of overall hotel sector would be good indicator for the peak of the cycle
Disclosure: Invested in both core and satellite portfolio, 4-5% aggregated weightage
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Samhi Hotels is mainly in major metro cities and catering to corporate travel, new Capex related travels and most suited for foreigners travelling to major cities. Most of demand will be Govt dependent if i am not mistaken, Weddings, Commercial office revenue, corporate travel will keep intact at least for next two years in major metro’s. Holiday tourism is slowing down as i see lot of articles due to sheer expensiveness.
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IAS 20_20
Notes on investors/funds
Organisation: @soicfinance
Speaker: @ishmohit1 sir
Sector: Hotels
Company name: Samhi Hotels
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In the recent calls, many new key addition and variable leases have been spoken about. Are these part of the 5400 projected rooms by FY27 or are these separate?
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Can anyone explain how and why air passenger growth a reliable indicator ?
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As per FY 24 AR the auditor has qualified the report due to material weakness
identified in the operating effectiveness of the Company’s internal controls. Isn’t it a major point to consider.
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Good catch! Yes, definite point of worry and very surprising given the professional nature of management.
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