Hotel Leela

 

At Current Price Of Rs 51, Co Trades At 39 Times Its Trailing 12-Mth Earnings

 

IN the past one year, hotels stocks have been immensely rewarding to investors — these stocks have appreciated almost two-folds. This appreciation had come at a time hotels slipped in terms of revenues and profit growth.

   But investors, it seems, are betting on higher earnings in future. Going by the June '10 quarter performance of Hotel Leela venture, investors' optimism about the sector seems justified.

   On a year-on-year basis, Leela venture's sales increased by 25% to Rs 104 crore from Rs 83 crore in the last year's June quarter. Improvement in the overall travel situation — both in leisure and business —, and attractive peak rates in comparison to last year, have contributed to higher revenues for the company.

   Better management of operating costs resulted into an even higher growth of 63% in operating profit before depreciation (EBIDTA) at Rs 19 crore. The company saw an extraordinary jump of eight times in its profit for the June quarter on a year-on-year basis.

   Hotel Leela venture has six properties stretching across Bangalore, Mumbai, Gurgaon, Goa, Kerala and Udaipur. The management credits the sharp growth in revenues and net profit to the improvement in the occupancy levels at these locations.

   For instance, its Bangalore property reported a 15% jump in average room rates during the quarter. Considering the fact that all big hotel chains have their presence in these locations, the overall sector is likely to do well in the June quarter on the operational front.

   Overall, on a sequential basis, Leela venture's occupancy level increased from 59% to 64%. The company is expected to continue its growth streak considering the improvement in business and leisure travel. At the current price level of around Rs 51, Hotel Leela venture is trading at nearly 39 times its trailing 12-month earnings. Its peers such as Asian Hotels North and East India Hotels are trading at a P/E of 10 and 83 times, respectively.