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Thursday, June 25, 2009

Galaxy Entertainment - A Lifestyle Stock To Buy That Can Grow Exponentially

This is one company which has been a very early entrant in the organised leisure and entertainment business -- running restaurants, a bowling alley and gaming centres. Galaxy was already into these businesses when they were just about picking up momentum in 2004.

Over the next few years, thanks to favourable demographics, economic expansion, changing lifestyle and an increasingly prosperous younger generation, lifestyle, leisure and entertainment sectors have boomed. An overwhelming majority of the companies in this segment is unlisted. Galaxy is one of the rare ones which is listed and must attract attention.

The business consists of several properties; all, except one, are in Mumbai. The biggest is The Bowling Company, a bowling concourse and video-game arcade spread across 30,000 sq ft which claims to offer “multiple, novel and unique leisure and entertainment options in an international setting with quality services in a secure environment”. Galaxy also runs the Sports Bar, which features a giant screen as well as regular TV sets screening sports events, pool tables and memorabilia of famous sports personalities; the Brew Bar, a premium beer lounge; the Rain Bar + Eatery, famous for its cocktails and exotic menu; a restaurant business at Regal Theatre, Lush, a restaurant and Chamosa, a chain of snack foods. Galaxy has also launched its first venture outside Mumbai - F-123 Leisure & Entertainment Centre at Indore which houses four bowling lanes, a video-game arcade and a cafĂ©.

However, despite a head start and ambitious growth plans, Galaxy has not been able to grow at all. In the monster bull run of the past five years, the stock has been falling and is hitting new lows even as the broader market scales new highs every day. One of the reasons for this was the lack of management focus. The company was controlled by Purnendu Chatterjee and run by Satish Chunder a former banker from Citibank. Unfortunately, Chunder died suddenly and the company became rudderless.

The company changed hands in early 2006; one of the largest and most experienced organised retailing chains, Pantaloon, bought 15.73% stake in it. A large chunk of equity is owned by the Ruias of Phoenix Mills, where several of Galaxy’s restaurants are located. This association at least gives Galaxy a chance to achieve its true potential. It recently amalgamated Pan India Restaurants with itself which has food courts in Pantaloon malls, especially in southern India. Galaxy’s financial performance has not been great. Revenues have been rising by an average 58% over the past five quarters, but it continues to make operating losses. It reported a marginal profit of Rs0.55 crore in the June quarter at a margin of 8%. If Pantaloon starts taking interest, which it should, the company will record exponential growth.
Source: MoneyLife

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