Hotels October 25, 2012 CMP Rs. 16.7 BSE Code 532124 BSE ID RELIABVEN High/Low 1Y (Rs.) 16.8/ 9.8 Average Volume (3M) 1,845 Market Cap (Rs. Cr.) 18 Shareholding % Jun-12 Mar-12 Promoters 48.35 48.35 DIIs # - - FIIs # - - Public & Others 51.65 51.65 Stock Chart ( Relative to Sensex) 120 90 60 25-Oct-11 25-Apr-12 25-Oct-12 RELIABVEN Sensex Stock Performance (%) 1M 6M 1Yr Reliable Ventures. Ltd. 34.9 50.2 17.0 Sensex 0.3 9.5 7.4 Financials FY09 FY10 FY11 Revenue 10.8 11.4 13.1 Y-o-Y 1.5% 5.3% 14.8% EBITDA 3.0 3.2 3.3 Y-o-Y -15.0% 7.5% 2.9% Net Profit 2.3 2.8 1.7 Y-o-Y 89.5% 22.2% -37.3% EPS (Dil.) 2.07 1.56 1.58 EBITDA Margin 27.6% 28.2% 25.2% Net Profit Margin 21.1% 24.5% 13.4% P/E(x) 8.1x 10.7x 10.6x Financial year ends at March 31 on standalone basis All figures in Rs. crore except for per share data # FIIs- Foreign Institutional Investors # DIIs- Domestic Institutional Investors Reliable Ventures Ltd. Company Overview Reliable Ventures India limited (formerly known as Lakeland Hotels Limited) was incorporated as a private limited company on September 1, 1992. The company s principal activity is to run hotels, restaurants and provide related services in India. The company generates its revenues from rooms, food and beverages and other allied services such as telephone and telex. It was converted into a public limited company on November 18, 1995. The company is promoted by Shri Sikandar Hafiz Khan and Shri Mohammed Hafiz Khan of the "Reliable Group" of Bhopal. It operates a hotel undertaking in the name and style of Noor-Us-Sabah Palace located in the lake city of Bhopal in Madhya Pradesh. Company Fundamentals Rise in sales realization boosted revenue According to the standalone financial statements for FY11, the total revenue of the company edged higher by 14.8% to Rs. 13.1 crore. The rise was mainly attributed to the increase in net sales realization, particularly from room tariff, foods and beverages and other services, which included income from telephone and telex. EBITDA suffered on higher employee costs and other expenditure A significant rise in service cost, other expenses and employee costs pulled EBITDA down from 7.5% in FY10 to 2.9% in FY11. Moreover, the rise in exceptional items affected the profit before tax (PBT) in FY11. The net profit margin declined to 13.4% in the current fiscal compared to 24.5% in the previous year. The road ahead During the year, the company has expanded its operation with addition of offsite food & beverage outlets and also a bakery outlet named Wonder Bread was opened. On back of success of this outlet, the company finalized two more outlets, which will be commissioned soon. The other outlet commissioned offsite was The Spot, which is a natural food café. Moreover, the company has already extended its MoU with ITC Limited s WelcomHeritage, operating around 62 Hotels across India. WelcomHeritage brings along the expertise in terms of marketing, branding and promoting the hotel along with standard ITC procedures, which are strictly adhered to. A major initiative to open an industrial bakery production unit was approved by the group and work for setting up the same has already started during the year. Key Strengths - Constant focus on augmentation and upgradation of facilities. - MoU with ITC Limited. - Positioned in prime location. - Professional management. Initiative of the BSE Investors Protection Fund -1-
Company Business Reliable Ventures India Limited was formerly known as Lakeland Hotels Limited and is headquartered in Bhopal, Madhya Pradesh, India. It was incorporated as a private limited company on September 1, 1992. The company s principal activity is to operate hotels, restaurants and provide related services in India. It was converted into a public limited company on November 18, 1995. The company is promoted by Shri Sikandar Hafiz Khan and Shri Mohammed Hafiz Khan of the "Reliable Group" of Bhopal. The company operates a hotel undertaking, WelcomHeritage Noor-Us-Sabah Palace (Noor-Us-Sabah), specialized in serving business and leisure travelers. Noor-Us-Sabah is a five star hotel, which offers accommodation of luxurious rooms and suites, restaurants, banquets and other recreational facilities. It also provides various amenities and facilities, including gift shops, swimming pool, internet facility, and business centre. Moreover, the hotel operates a spa called Royal Hamam, providing wellness facilities and other therapies through three brands. The company offers a wide range of services under different categories like*: Dining Entertainment Banqueting Royal Living Under Royal Living following are the services offered by the company*: SPA & Health Club Wi-Fi Enabled Premises (Wireless Internet Connection) Swimming Pool In-Room Soft Bar Gift shops Fully-equipped business centre Personalised grooming and health facilities Money Changer Travel Assistance *Source: Company Website Initiative of the BSE Investors Protection Fund -2-
Industry Overview The growth of hospitality industry goes hand-in-hand with the growth in travel and tourism sector. Besides being one of the most profitable industries in the country, India s travel and tourism industry contributes significantly towards the country s foreign exchange earnings. However, existing weak global macro-economic scenario, European sovereign debt crisis, geo-political crisis in the Arabian countries, high interest rates, inflation and a muted domestic corporate performance during the current fiscal (year to March 31, 2012) have affected the industry s ability to sustain inflation adjusted Average Room Realizations (ARRs). * Industry performance and outlook: ICRA s October 2012 report on Hotel industry anticipates demand growth in the industry to weaken by ~5-6% during 2012-13. With supply addition of over 13-15% expected across key markets in the premium room segment, it expects y-o-y change in ARRs (premium segment) to range between -5% and 5%, as hotels fight it out to capture the precious few footfalls. Climbing out of the deep discounts (for tariffs) of 2009-10 is going to take more time than anticipated earlier, with the industry down cycle expected to stretch for another 3-4 quarters. While revenues for the industry are expected to grow by 9-12%, driven by incremental inventory, improved performance of some recently launched hotels and slow albeit steady growth in Food & Beverage (F&B) revenues, inflation adjusted RevPARs growth is expected to be negative. The weakness witnessed in the financials of hotel companies during 2011-12 is expected to continue with a further contraction in operating margins by ~300-400 bps during 2012-13.* Despite large supply, various roadblocks to development and the weak demand in the past few quarters have raised questions on the near-term viability of investing in hotels in India. ICRA remains upbeat on hotels being developed in the country, supported by long-term outlook for the Indian economy. At present, India is an underpenetrated hotel market with only around 0.17 million rooms, to service the large domestic population and the inbound traffic. With a demographic heavily skewed towards the young, middle class bracket which is witnessing increasing affluence, Indians are travelling more and more for leisure. Also, a growing economy draws more business travellers, driving demand. * Source: * ICRA Ltd Report on Hotel Industry (October 2012). Competitor Analysis We have compared Reliable Ventures Ltd. with its close peers in the domestic hospitality industry. Company Year End CMP* M Cap Revenue EBIT Margin Reliable Ventures Ltd Mar-11 16.7 18 13.1 17.5 1.58 10.6x Jindal Hotels Ltd Mar-11 32.0 19 15.7 21.6 5.04 6.3x Savera Industries Ltd. Mar-11 42.0 48 51.2 24.0 9.11 4.6x Source: Capitaline, Market cap and Revenue in Rs. crore. CMP and M Cap as of 25 Oct 12 EPS P/E Initiative of the BSE Investors Protection Fund -3-
Summary Financials Particulars (Rs crore) FY09 FY10 FY11 Net Sales 10.8 11.4 13.1 Other Op. Revenue 0.0 0.0 0.0 Total Revenue 10.8 11.4 13.1 Growth (%) 1.5% 5.3% 14.8% Cost of Goods Sold -3.6-4.0-4.5 Gross Profit 7.2 7.4 8.6 Employee Costs -1.7-1.9-2.4 Other Expenditure -2.5-2.2-2.9 EBITDA 3.0 3.2 3.3 Growth (%) -15.0% 7.5% 2.9% Depreciation -0.9-0.9-1.0 EBIT Profit 2.1 2.3 2.3 Finance cost 0.0 0.0 0.0 Other Income 0.3 0.2 0.2 Exceptional Items 0.0 0.0-0.5 PBT 2.5 2.5 2.0 Growth (%) 15.7% 0.1% -18.5% Income Tax -0.2 0.3-0.3 Profit after Tax 2.3 2.8 1.7 Extra Ordinary Items 0.0 0.0 0.0 Net Profit 2.3 2.8 1.7 Growth (%) 89.5% 22.2% -37.3% Rep. Basic EPS 2.07 1.56 1.58 Rep. Diluted EPS 2.07 1.56 1.58 Equity Capital 11.0 11.0 11.0 Face value 10 10 10 Ratio Analysis FY09 FY10 FY11 Margins EBITDA Margin (%) 27.6% 28.2% 25.2% Net Profit Margin (%) 21.1% 24.5% 13.4% Valuation P/E (x) 8.1 10.7 10.6 P/BV (x) 1.0 1.2 1.1 Profitability ROCE (%)* - - - RONW(%) 12.6% 17.5% 10.5% Solvency Ratio Debt/ Equity Ratio (x) 0.3 0.6 0.6 Interest Cover (x) 50.0 310.4 105.0 *Bifurcation between Long Term debt and Short Term debt is not available Initiative of the BSE Investors Protection Fund -4-
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