Stock Review: Asian Hotels (East) and Asian Hotels (West)

THE sheer extent of returns the stocks of Asian Hotels (East) and Asian Hotels (West) have provided since their recent listings reflects investor optimism about their growth prospects. Each of the stocks attracted seven bulk deals on Monday.

   The two hotel companies are created by demerging operations of Asian Hotels. Asian Hotels (East) got listed at Rs 200 on August 11. It has doubled in nine trading sessions. Asian Hotels (West) has also shot up to Rs 331 after getting listed at Rs 242 on August 5. The humongous gains are not only limited to the new investors. Those who had invested in the undivided Asian Hotels have also gained immensely considering the fact that post demerger, they have got three shares of each new company in exchange of 10 shares of the undivided entity.

   The premise of splitting up Asian Hotels was the fact that three promoters intended to pursue their individual hotel business ambitions. For investors who are sitting on a windfall gain, the question is whether their investment will continue to grow further or whether it is the time to book profits. Industry trackers feel that the long-term investors should hold on for at least one more year.

   This is because both the newly-listed companies are currently in the expansion mode. At present, Asian Hotels (West) has a 400-room Hyatt Regency property in Mumbai. The company through its subsidiary, Aria Hotels, is developing a 525-room JW Marriott at Delhi Airport. The project is funded by an investment of Rs 80 crore in Aria Hotels by private equity investor IL&FS.

   It would take at least a year or two to see stable revenue flow from this project. The company's Mumbai property currently operates at 67% occupancy rate. Going forward, as holiday season arrives, occupancy levels are likely to increase.

   Asian Hotels (East) has Hyatt Regency Kolkata as part of the operating asset after the demerger. The company through its subsidiary, GJS Hotels (GJS), has its investment into the 335-room Hyatt Regency Chennai, which would open at the end of this fiscal. Here again, investors need to wait for about two years to see a constant flow of revenues from these projects. The company also has a seven-acre land in Bhubaneswar, which can be developed into another hotel property in future.

   Since these companies have got listed recently, historical financial numbers are not available and hence, it would be difficult to talk about their stock valuations. However, a positive factor is that both the companies are not saddled with huge debt. This makes it easier for them to attract necessary capital for future expansion. Going forward as these companies expand, it remains to be seen how well they cope with the capital-intensive nature of the hotel business.