EIH Ltd. - Hotel industry Giant - Mid Cap Stock Recommendation

Scripscan:EIH Ltd
Cmp:140
Target:180
Duration:2-3 months
Traded in:Bse-nse

Story:
EIH owns and operates luxury hotels and resorts in India under the name ‘Oberoi’. The company also manages a mid-price hotel chain in India, in addition to hotels in Egypt, Australia, Sri Lanka, Indonesia and Saudi Arabia.The company recently said it would invest around Rs650 crore in its two properties in Bangalore and Goa.Based on an investment of Rs1.4 crore for each room,the total project cost for both the properties would be around Rs 650 crore.Bangalore will be a 400-room property on an eight-acre plot while Goa will have both hotel and villas on a 50-acre plot.In line with the strategy to expand its operation by management contracts, the company will be managing seven new upcoming hotels in both domestic and international locations.
Now there are strong reports that the group is looking to divest the stake to some corporate houses and private equity firms.Reports indicated that the deal is expected to be signed at a substantial premium over EIH’s current market price.It is speculated that inking of the deal would happen at a price of over 200rs.Reliance Industries through various associate companies is one of the front-runners for the stake. EIH promoters hold 46.37% in the company(as at end June 2008).So one can have a position in the counter if she feels the same is about to vindicate soon.Even if teh deal doesnt happen EIH stock is a good investment option for a moderate risk portfolio and an investment horizon of at least one-two year horizion.Buy the stock for a target of 180rs within 2-3 months as some major developments are expected to happen within the same period.
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