“Indian Hotels, FY11 saw average occupancies across luxury hotels in major cities up 200-900bps yoy except for pockets of weakness like South Mumbai. Although Hyderabad and Chennai saw room inventory additions in FY11, robust demand meant occupancies were up 500-800bps. Our talk with metro-focused companies suggests H2 FY12 could see moderate 5-8% ARR hikes in major metros. Bangalore may be an exception and may see a subdued 3-4% rise as impending supply looms.”
“Tata Sons has infused Rs5bn through preferential & part conversion of warrants at Rs104/share which would help lower leverage (FY12E net D/E down to 1.1x from 1.5x in FY10). With a lightened balance sheet, the focus is now on turnaround of US operations, which posted cash loss of USD 22mn in FY11. In its post results meet, company indicated Pierre, its flagship US property in NY, could have additional USD 200 ARR headroom above its FY11 avg of USD 618, which would then put it at par with other comparable properties. FY11 consolidated EBIDTA margin fell to 15.8%, close to its FY02 level of 15.3% and not far from previous cyclical trough. We expect FY11 to be the low point in current margin cycle as sustained upswing in occupancies and moderate ARR hikes in H2 FY12 lead to revival in domestic operations. Encouragingly, IHCL Q4 FY11 standalone margin of ~35% was highest since Q3 FY09.”
Buy Indian Hotels; target of Rs 101: IIFL - Moneycontrol.com -
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