Stock Review: Asian Hotels

Asian Hotels (North)'s stock looks cheaper compared to its peers. Considering the company's dividend paying record, investors can buy it

 

DELHI-BASED Asian Hotels (North) owns a premier five-star hotel in the Capital. The company plans to expand in the apartment space after it got split into three different entities earlier this year.

BUSINESS:

Asian Hotels (North) is the parent entity of the erstwhile Asian Hotels, which was demerged into three independent companies — Asian Hotels (North), Asian Hotels (East) and Asian Hotels (West) earlier this year.

   Jatia family-owned Asian Hotels (North) controls the flagship property in Delhi. With nearly 520 rooms and suites, Hyatt Regency, New Delhi, is one of the largest five-star properties in the country. This helps the company command the most lucrative operating margins in the industry. Moreover, being present in the NCR region, it provides an edge to the company over its immediate peers. Delhi has a strategic advantage of being a hub of diplomatic, cultural and business activities. This ensures consistent buoyancy in business and leisure travel to the city.

   In the September 2010 quarter, the company reported six-times jump in net profit due to momentum generated by the Commonwealth Games in Delhi. According to an independent survey by HVS, a leading consulting and services organisation focused on the hotel, restaurant, shared ownership, gaming, and leisure industries, Delhi commanded the highest revenue per available room of 4,699 in the country. Hotel players in Delhi are expected to charge higher room rates in the near future, given the sustained momentum in leisure and business travel in the city.

GROWTH PLANS:

The company is expanding its existing Delhi property by adding 35 rooms. Besides, the company is also erecting a new tower with a total built in area of around 1.66 lakh square feet. With this new tower, the company has forayed into the service apartment segment. These service apartments would be up for business by the middle of the next fiscal. With these apartments, Asian Hotels (North)'s capacity would increase by 60%. The company has struck a joint venture in an overseas company, which is into hospitality consulting services. The overseas company has subscribed to equity and preference shares
of 53 crore and Rs. 347 crore. These funds would be used for capacity expansion.

VALUATION:

At CMP, the company's stock trades at a price-earnings multiple of 6 times. Its stock is yielding earnings per share of 47. This is quite cheaper compares to its peers, Oriental Hotels and Taj GVK Hotels & Resorts, which are trading at a P/E of 30 and 20 times, respectively. More so, the company has low debt and has a good dividend paying record. Besides, it has very little debt on its books compared to its peers and it also has one of the best operating margins in the industry. All these make it an attractive investment in the mid-sized hotels segment.