Sound sleep providers ..CYCLE is on HOTELS

Hi,
Thanks for Visiting and posting your queries which will help me to dig further

“ Point no 1: Hope you have factored in poor state of balance sheet of Leela in decision making””

Ans: Being Indian, We look for bargain almost everywhere nothing bad in that we are born value cautious .My take to select the Leela is it is having mpore pricing power as its customers are high income bracket 4 or 5 star where Value or service matter the most than the amount one pay per night .You are right the Leela’s is not have so great balance sheet . “But when we have to study the CYCLICALs we have to take an account of normalised earning i.e average of 5 to 6 years “and in my opinion that is not so bad

“Point no 2: I see that you be taken only big chain. Is it a pre selection criteria because some of small chains (200 to 600 room capacity ) have best of balance sheet and return on capital metric available at reasonable relative valuation. So, I m curious why they be been left out in study ?”

Ans : I have study the following hotels Hotel Leela , Lemon tree Hotels ,Royal Orchid ,Kamath Hotels, Indian Hotels, ITC (Droped because of not purely Hotel it is diversified ) , Viceroy Hotel, Taj GVk (Dropped due to High valuations of Mr market ), Byke Hospitality ,EIH limited ,Asian Hotel (W) ,Asian Hotel (E), EIH Associate, Sinclair Hotel., UP Hotel CLARK’S( Dropped due to No so great on the management front )
Additional player where one can bet consider EIH (ICICI is more positive), Asian hotel (E) .
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“Point no 3: There are certain chains sitting on high cash n can do deals n there r certain chains which r at their life time low of asset turns because significant WCIP is under process n they Might double capacity. If you remove WCIP they ve historically again good quality return . Any reason for ignoring them ? “

It will be great if you can share some other names which you think can be considered .I might had skipped a few great players .But what I feel the current CAPEX by the companies in the Hotel industry is not very large Moreover creating additional capacity will be costly in terms of TIME and MONEY .It require lots of approvals of the regulations and finding additional land or developing a new land are creating the barricade for the new Players

Regards

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