Mahindra Holidays _ Resorts

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					Visit us at www.sharekhan.com                                                                                                June 22, 2009




   Mahindra Holidays & Resorts
   IPO Fact Sheet


Issue details                                                         The company will not receive any proceeds from the offer
Issue opens                   : June 23,2009                          for sale of 33.69 lakh shares by the promoters.
Issue closes                  : June 26,2009
                                                                      After the issue, the total number of issued shares would
Issue size                    : Rs254.8-301.1 crore                   increase to 8.42 crore shares from 7.83 crore shares (dilution
Offer size                    : 9,265,275 shares, forming 11.0%       of 7.53%) at present. Post-issue the shareholding of the
                                of post-issue shares
                                                                      promoter group will come down to 83.1% from 93.6%.
Face value                    : Rs10
Fresh issue of shares         : 5,896,084                             Shareholding pattern
Offer for sale of shares      : 3,369,191                                                      Pre-issue                 Post-issue
Net issue to public           : 9,265,275                                           No. of shares        %        No. of shares          %
Of which,                                                             Promoter
                                                                      M&M              73,354,833       93.6         69,985,642        83.1
QIB portion                   : At least 5,559,165 shares
                                (60%)                                 Others            4,978,855        6.4          4,978,855         5.9
                                                                      Public                    -                     9,265,275        11.0
Non-institutional portion     : Not less than 926,528 shares
                                (10%)                                 Total            78,333,688        100         84,229,772         100

Retail portion                : Not less than 2,779,583 shares        Company background
                                (30%)
Price band                    : Rs275-325
                                                                      Incorporated in 1996, Mahindra Holidays and Resorts Ltd
                                                                      (MHR) is the leading leisure hospitality provider, offering
Objects of the issue                                                  quality family holidays on a time-share model to its members.
                                                                      MHR offers its members the choice of holidaying at any of
The fresh issue of 58.96 lakh shares is aimed at raising
                                                                      its 27 resorts (11 resorts are owned by the company), for
Rs162.1 crore to Rs191.6 crore (at lower and upper end of
                                                                      seven days each year, in a season and apartment type of
the price band respectively) for
                                                                      their choice for 25 years. The company derives its revenues
   financing the expansion of some of the company’s                   from membership fees (sale of vacation ownership), annual
   existing resorts and new projects.                                 subscription fees, charges for food and beverages (F&B),
                                                                      and the use of the other facilities at its resorts. MHR’s
   For general corporate purposes.                                    revenues and profits grew at a compounded annual growth


Use of IPO proceeds           Cost       Utilisation of IPO   Remarks
                        (Rs crore)   proceeds (Rs crore)

Ashtamudi (Kerala)           36.8                     33.2    Expansion of the existing resort with 66 additional rooms along with a
                                                              restaurant, a bar, a conference hall and a swimming pool

Coorg (Karnataka)            16.3                     16.3    Expansion of the existing resort, by constructing 34 additional apartments,
                                                              another swimming pool and additional facilities

Ooty (Tamil Nadu)            12.2                      8.3    Renovation of acquired facility, which will have 90 rooms and two
                                                              restaurants, a marriage hall and a swimming pool

Tungi                        97.0                     80.5    Construction of 158 rooms, a restaurant and a conference room

Theog (near Shimla)          74.7                     72.7    A new resort with 150 rooms



                                                         Sharekhan Ltd
                    A-206, Phoenix House, 2nd Floor, Senapati Bapat Marg, Lower Parel, Mumbai - 400013, India.
 sharekhan ipo flash                                                                                Mahindra Holidays & Resorts

rate (CAGR) of 51.4% and 116.4% respectively over FY2005-            Presence at key holiday locations
08. However, FY2009 was challenging for the company with             The company currently has 27 resorts in some of the most
its revenues growing by 11.5% and net profit declining by            preferred holiday locations in India (refer list below) and
5% year on year (yoy) despite a 26.2% increase in the number         Thailand. These are either owned or leased by the company
of its members.                                                      on a long-term basis. These resorts have aggregate of 1,189
Revenue mix                                                          apartments and cottages (with ~2,378 rooms). To expand
                                                                     its portfolio of properties MHR is currently developing a
                                   Travel service
                        Resorts                                      new resort on 41.64 acres of land at Tungi near Lonavala
                                  and homestays
                        12.5%          0.3%                          and on 9.27 acres of land at Theog near Shimla (Himachal
                                                                     Pradesh). In addition, the company has purchased stretches
           Annual                                                    of land at various locations: 25.02 acres at Kadapakkam
         subscription                                                near Chennai (Tamil Nadu), 0.14 acres at Ashtamudi
            12%                                                      (Kerala), 20.8 acres at Hyderabad (Andhra Pradesh), 36.4
                                               Sale of
                                              Vacation               acres at Coorg (Karnataka), 100.32 acres at Kas
                                             Ownership
                                                                     (Maharashtra) and 20.42 acres at Varwade (Maharashtra)
                                               75.6%
                                                                     for developing new resorts. In all, the company intends to
Key positives                                                        add 500 rooms to its existing inventory by 2012.
Strong positioning                                                   Mixed-use model helps optimise revenues
Due to its strong brand, premium properties and service              MHR operates a mixed-use model whereby non-members
standards MHR’s membership enrollments have grown at a               have access to unutilised apartments on a per night tariff
CAGR of 32% over the last three years. Thus, the company             basis. We believe this enables the company to enhance
has 96,067 members under its belt as on May 31, 2009.                revenues through optimum occupancy and sales from
Also, MHR accounts for 72% of the total active members               restaurants and other services. Also, the mixed-use model
across the vacation ownership industry in India with RCI.            acts as a catalyst for growth by creating an interest in
While its flagship brand, Club Mahindra Holidays, caters             membership programme for non-members.
to families to target diverse sets of customers in the
vacation space, the company has in the recent past                   Strong financials
expanded its offerings under the brands Club Mahindra                With a good business proposition and growing portfolio of
Fundays (for corporates), Zest (to target the youth) and             holiday locations MHR witnessed a 33.9% CAGR in the
Homestays (primarily to cater to overseas travelers). The            number of members over FY2006-09. Driven by a robust
diversified portfolio and strong brand recognition put the           growth rate in memberships the revenues and profits of
company in a dominant position in the vacation ownership             the company showed a healthy growth of 51.4% and 116.4%
industry which will help it to grow its member base and              respectively over FY2005-08. However, despite a 26.2%
drive its revenues and profits at a good pace.                       increase in the memberships in FY2009 the revenues grew
Diversified offerings

  Club Mahindra Holidays              The company's flagship holiday product was launched in 1997. It enables the company’s
                                      91,997 members to holiday at any of its 23 resorts for seven days each year (for 25 years).

  Zest                                The new offering by MHR is targeted at young urban families and based on the concept
                                      of short breaks. The company currently has 4,070 Zest vacation members.

  Club Mahindra Fundays               The product is targeted at corporate customers and is based on point systems for
                                      tenure of ten years. The corporate members can use these points to offer family
                                      holidays to their employees.

 Clubmahindra.travel                  A one-stop shop for all travel related services, including holiday-planning, ticketing and
                                      other related services. The website was certified by IATA in 2008.

  Mahindra Homestay                   The product was launched in 2008 for overseas travelers wishing to experience the real
                                      India. Mahindra Homestay has built a pan-India network of 71 Homestays in cities and
                                      various tourist destinations.




Sharekhan                                                        2                                                        June 2009
 sharekhan ipo flash                                                                                      Mahindra Holidays & Resorts

by only 11.5% and the net profit declined by 5%, reflecting          Valuations
the tough time faced by the leisure industry in H2FY2009.            Our rough estimates suggest that at the lower and upper
MHR enjoys a healthy operating profit margin (OPM) of                band of the issue price the stock would discount its FY2010E
26.2% (however, the same has come down from 33.9% in                 earnings by 23.9x and 28x respectively and its FY2011E
FY2008). The business has high shareholder returns with a            earnings by 19.5x and 23x respectively. Thus, we believe
return on net worth (RoNW) of 47% for FY2009. The return             that despite good financials and strong visibility in business,
on capital employed (RoCE) at 18% is also at reasonable              the valuations appear to be a little high, which would limit
levels. Moreover, the business generates strong cash flow            the upside for an investor.
from operations (Rs158.4 crore for FY2009). However, as
the company is expanding, it did not have any free cash
flows for FY2009. We believe that while the company’s OPM            Existing properties

is likely to be maintained at a good level, the RoNW and             Location                       Number of       Owned / Leased
                                                                                           apartments/ cottages         (long term)
RoCE are likely to drop to ~30% and ~15% respectively in
FY2010 as a result of the equity issuance (ie the initial            Ashtamudi, Kerala                       26              Owned
public offering).                                                    Goa, Goa                               205              Owned
                                                                     Binsar, Uttaranchal                     36              Owned
Key concerns                                                         Coorg, Karnataka                       188              Owned
Current macro environment may affect new member                      Manali, Himachal Pradesh                33              Owned
additions                                                            Munnar, Kerala                         112              Owned
                                                                     Kumbalgarh, Rajasthan                   68              Owned
The company’s revenues and profitability are highly
                                                                     Puducherry, Puducherry                 125              Owned
susceptible to the slowdown in the leisure and travel industry
                                                                     Manipur Villa, Binsar, Uttaranchal      22              Owned
against the backdrop of the current macro environment.
Thus, the job uncertainties and dampened consumer                    Ooty, Tamil Nadu                        90              Owned

sentiments may affect the new member additions for the               Thekaddy, Kerala                        32              Owned
company, as leisure spends are the first to be avoided in            Auli, Himachal Pradesh                  10              Leased
times of income uncertainties. Such pressures may require            Bangkok, Thailand                        6              Leased
the company to reduce its membership fees or offer                   Corbett, Uttaranchal                     4              Leased
discounts for various packages which, in turn, might affect          Dharamshala, Himachal Pradesh           23              Leased
its profitability.                                                   Kodaikanal, Tamil Nadu                  11              Leased
                                                                     Mussoorie, Uttaranchal                  19              Leased
Bad debts may increase                                               Pattaya, Thailand                        6              Leased
About 94% of the company’s existing members are paying               Ooty, Tamil Nadu                        15              Leased
their membership fees on an installment basis. We believe            Masinagudi, Tamil Nadu                  20              Leased
the current business environment has increased the                   Yercaud                                 40              Leased
potential of bad debts, especially so considering that the           Naukutchiataal                          31              Leased
company has Rs482.6 crore debtors in its balance sheet as            Shimla                                  67              Leased
on March 31, 2009 (debtors days of 442 days).                        Total                                 1099




Sharekhan                                                        3                                                           June 2009
  sharekhan ipo flash                                                                                                                                                          Mahindra Holidays & Resorts

Financials
Profit & Loss account (consolidated)                                                                Rs (cr)          Balance sheet (consolidated)                                                                        Rs (cr)
Particulars                                      FY2006 FY2007 FY2008 FY2009                                         Particulars                                      FY2006 FY2007 FY2008 FY2009
Net revenues                 152.7                                  232.3          352.7           393.2             Sources of funds
Total expenditure            112.2                                  162.0          233.2           290.0             Equity capital                                       28.4            28.4           76.4            77.0
Operating profit              40.6                                   70.3          119.5           103.2             Reserves & Surplus                                   14.9            47.3           66.6           118.8
Other income                   4.0                                    9.0           24.5            48.9             Net worth                                            43.3            75.7          143.0           195.8
EBIDTA                        44.6                                   79.3          144.0           152.1             Secured loan                                         26.8             6.0           20.1            24.7
Interest & financial charges   3.3                                    3.6            3.3             7.0             Total loans                                          26.8             6.0           20.1            24.7
Depreciation                   7.8                                    8.9           11.3            16.8             Advances towards                                    226.3           324.2          482.5           641.0
Adjustments for restatements   0.7                                   -0.3           -0.2            -0.1             membership facilities
PBT                           32.8                                   67.1          129.6           128.4             Total                                               296.4           405.9          645.6           861.5
Total tax expense             12.8                                   24.6           45.6            48.6             Application of funds
Profit after tax              20.0                                   42.5           84.0            79.8             Gross block                    191.7                                225.7          273.4           429.3
                                                                                                                     Less: Depreciation              30.7                                 38.3           47.9            64.1
                                                                                                                     Net block                      161.0                                187.4          225.5           365.2
                                                                                                                     Expenditure pending allocations 0.8                                   2.9            6.0             8.5
Valuations                                                                                                           Capital WIP                      1.4                                  9.8           39.0            42.8
Particulars                                      FY2006 FY2007 FY2008 FY2009                                         Investments                      0.0                                  5.9            0.0             0.0
EPS (Rs)                                                7.1           15.0           11.0            10.4            Current assets                 180.5                                271.8          476.6           587.1
                                                                                                                     Less: Current liabilities      -38.2                                -51.8          -78.0          -112.6
PER (x) at lower band                                 39.0            18.4           25.0            26.5            and provisions
PER (x) at higher band                                46.1            21.7           29.6            31.3            Net current assets             142.3                                220.0          398.7           474.5
ROE (%)                                               55.9            71.5           76.8            47.1            Net deferred tax                -9.2                                -20.2          -23.6           -29.5
ROCE (%)                                              14.4            20.1           25.3            18.0            Total                          296.4                                405.9          645.6           861.5



  The "views" expressed in this report are our views only and have been arrived at after analysis of the public offering
  details. This is not a recommendation under our "Stock Idea" category. It may/may not be included in the Stock Idea by
  our analysts at a later date.




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Sharekhan                                                                                                       4                                                                                                   June 2009

				
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