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Saturday, September 26, 2009

Small Cap Growth Stock - Viceroy Hotels

Hyderabad is fast turning out to be the hottest location for the hospitality industry with room capacity likely to touch nearly 6500 by 2010. Business travel being the primary growth driver of the hotel industry, the present demand-supply equation in Hyderabad has seen many players either setting up new facilities or scaling up operations of existing facilities.

One among the several 5-Star properties in Hyderabad, Viceroy Hotels has been gearing up to take advantage from this boom. The company recently tied up with Marriott International, one of the foremost hotel brands in the world, which now looks after the management of its facility in Hyderabad.VHL had scaled up its operations during the last few years and in addition, planned two new facilities in Chennai and Bangalore respectively. While the Chennai facility is to have a total of 550 rooms comprising of 350 executive rooms and 200 executive apartments, plans for Bangalore include a 237-room facility.

It raised Rs 460 crore for its Chennai expansion and expects to complete the project by these fiscal.This is funded by SBI and its associates, in addition to contribution by key shareholders of VHL, Rakesh Jhunjunwala and Sonata Investments.It also plans to set up two other hotels under Marriott's economy hotel brand, Courtyard, in Visakhapatnam and Hyderabad.

The hospitality sector in Hyderabad and all over the South is poised for a big leap. Viceroy is well-placed to take advantage of the boom. Though an increase in capacity is on the cards, average room rates are expected to go up to Rs 7000-8,000 by 09-10. Its average room rates are currently very low but the occupancy is close to 70%, which offers a good scope for players in the sector.

Market Cap 175.13
EPS (TTM) 0.46
P/E 89.78
P/C 13.81
* Book Value 56.71
Price/Book 0.73
Div(%) 0.00
Div Yield(%) -
Market Lot 1.00
Face Value 10.00
Industry P/E 20.05

If you look at the stock price, P/E ratio goes around 90! but thats because of the premium that people are paying anticipating growth and of course due to presence of Mr. Rakesh Jhunjhunwala. One good sign. it's book value is 56, more than it's stock price as of Sept. 09.

Keep a watch on and buy stocks of Viceroy when in corrective mode. Levels of Rs. 30 - 35 seems to be good deal for long term investment. At those levels of stock price, downsides seems to be minimal and as economy is slowly making a turnaround, it could fetch good investment returns.

1 comment:

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