Taj GVK Hotels and Resorts

Low Debt And Good Dividend Record Make It A Safe Play For Investors

 

TAJ GVK Hotels & Resorts closed 6% higher on Tuesday. Besides the positive news relating to hotel stocks due to recovery in business and tourist travel, the company has been on the radar of investors and analysts for its properties at strategic locations such as Hyderabad, Chennai, Chandigarh and Jaipur. 

   In the past one year, the stock has given returns of more than 150%, while the benchmark Sensex has given 67% for the same period. The company's current market price of Rs 149 is quite lower than its new peak of Rs 163 on January 19 this year. The possibility of its stock gaining momentum from hereon is quite high. 

   Much of the good news is in the form of third Indian Premier League (IPL) season (IPL season 3) that would take place at venues such as Vizag, Chennai, and Mohali. The company has a strong presence in Hyderabad, Chandigarh and has recently launched a property in Chennai. The company may see its occupancy levels rising to more than 80% in Chandigarh and Hyderabad, because of IPL matches. The company is also building a new property in Begumpet, Hyderabad. In the December quarter, the company's room occupancy levels in Hyderabad surged to nearly 72% on a yearon-year basis, compared with around 64% in the December 2008 quarter. While in Chandigarh, its room occupancy levels were the same as last year's December quarter at 73%.

The company had been offering attractive room rates to increase occupancy at its properties in the past few months. However, room rates are now expected to move northwards, as the political turmoil in its key market Hyderabad (the Telangana issue) has subsided and there has been a general increase in business and tourist traffic across the country.

Investors could accumulate the stock at these levels, considering the possibility of an upside in revenues and profitability in the forthcoming quarters. What makes Taj GVK even more attractive is the fact that it is one of the least-indebted among all leading hotel companies. The company has a good dividend-paying record. In the past, it had routinely paid around a quarter of its net profit as dividend to the shareholders and the balance being utilised to fund growth.