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FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » Hotel Sector Growth- Tourist Arrivals revised to 800,000

Hotel Sector Growth- Tourist Arrivals revised to 800,000

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nuwank


Senior Equity Analytic
Senior Equity Analytic


I personally think that this is just the start of the growth in the hotel sector.
There are still a lot of hotels that are undervalued in both Book value valuations and also the fact that they have spent a lot of fund on remodeling the hotels that are still to generate revenues from those improvements.
One such gem I found is CHOT. CHOT has a book value that is almost the same as the stock price. This is a very conservative valuation as they haven't revalued their assets for the last decade or so. They have spent a lot money on renovating the 20 or so hotels that are scattered in some of the best locations in the country that cannot be bought even if you have enough money. Hard to find another listed hotel company with such a diverse hotel holding and I think is a great candidate for a foreign partnership or a takeover, with these kind of valuations. The revenues will undoubtedly increase a few fold within the next few quarters and so will the profits.

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics

nuwank wrote:
I personally think that this is just the start of the growth in the hotel sector.
There are still a lot of hotels that are undervalued in both Book value valuations and also the fact that they have spent a lot of fund on remodeling the hotels that are still to generate revenues from those improvements.
One such gem I found is CHOT. CHOT has a book value that is almost the same as the stock price. This is a very conservative valuation as they haven't revalued their assets for the last decade or so. They have spent a lot money on renovating the 20 or so hotels that are scattered in some of the best locations in the country that cannot be bought even if you have enough money. Hard to find another listed hotel company with such a diverse hotel holding and I think is a great candidate for a foreign partnership or a takeover, with these kind of valuations. The revenues will undoubtedly increase a few fold within the next few quarters and so will the profits.

This is one of the shares I'm also closely monitoring...

CHOT is a good share to buy at current market prices. Most of the hotel sector companies are trading at a premium & to justify these prices we need to attract 1,800,000 visitors not 800,000 visitors. Also most of these companies badly need refurbishments.

Sajeev Gardner is a master of this sector and CHOT just need to go few more steps before making profits. They already refurbished & upgraded some of their resorts.
KHC also comes under CHOT & it is already start making small profits. Hotel suisse is going through a refurbishment process & Queen's Hotel will be the next.

reasonable public shares also make it very attractive. Yes you found a gem. Smile
If it goes below Rs 30 I'll be there to buy some.

3Hotel Sector Growth- Tourist Arrivals revised to 800,000 Empty CHOT Mon Apr 25, 2011 3:42 pm

nuwank


Senior Equity Analytic
Senior Equity Analytic

UKboy, thank you for the comment.
The only thing is that CHOT will not hit 30 as there are buyers coming and collecting once the price reaches 32 levels. Also, in the long run a buck or 2 will not make a difference as long as the company is doing well. Your right, the Gardiners are into making money. They will do that if they revalue the assets and sell a stake to an investor like they did with EPF at 35. Reasonably, even if you look at the book value, a revaluation should make CHOT about 2 to 3 times the current book value. i.e above 80 levels.When you look at their portfolio of hotels, even if you have enoguh funds you can't buy these locations. They pretty much have a monopoly in Kandy with the swiss and the Queens. They can charge 200% the current price for a room and foreigners will stay there during the season.
So, regardless of the profits in the short term, the money is in a stake being sold at the REAL valuations. i.e the all the CHOT assets, the potential is endless. They just need the cash to renovate these great locations. That's when a foreign investor or an outside investor can come in. Upside on the revaluation- above 80 for a CHOT share.
Good Luck

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics

nuwank wrote:UKboy, thank you for the comment.
The only thing is that CHOT will not hit 30 as there are buyers coming and collecting once the price reaches 32 levels. Also, in the long run a buck or 2 will not make a difference as long as the company is doing well. Your right, the Gardiners are into making money. They will do that if they revalue the assets and sell a stake to an investor like they did with EPF at 35. Reasonably, even if you look at the book value, a revaluation should make CHOT about 2 to 3 times the current book value. i.e above 80 levels.When you look at their portfolio of hotels, even if you have enoguh funds you can't buy these locations. They pretty much have a monopoly in Kandy with the swiss and the Queens. They can charge 200% the current price for a room and foreigners will stay there during the season.
So, regardless of the profits in the short term, the money is in a stake being sold at the REAL valuations. i.e the all the CHOT assets, the potential is endless. They just need the cash to renovate these great locations. That's when a foreign investor or an outside investor can come in. Upside on the revaluation- above 80 for a CHOT share.
Good Luck

A very good research Nuwan, + rep from me. This is an excellent share & still people have not noticed that much. See what happen to BINN today. people paying a premium to buy someone's debts.

I always try to buy the shares at the lowest possible price. So it is bit hard for me to go above 30-31 range. Ideally looking to buy this below 30 but will split the buying order. Looking forward to see whats on the table tomorrow.

Thanks



smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics

Good finding.. I'm wondering whether this re-valuation is like the CFLB land re-valuation thing that never comes to the books and all that..
can you explain a bit more..
pls if possible, put down some analysis with figures and their entire portfolio of hotels with prospects.. would be worthy for all Wink

6Hotel Sector Growth- Tourist Arrivals revised to 800,000 Empty CHOT Re-valuation of Assets Tue Apr 26, 2011 11:04 am

nuwank


Senior Equity Analytic
Senior Equity Analytic

smallville- to expand a bit on the revaluation- The main shareholders have been holding the share for a long time. Look at it this way. How can they make money in the long term. One is to make enough profit for CHOT and the company pays a dividend. The dividend will take some time due to the expansion, I personally think.
The next situation is to increase revenues and to improve the overall company and then sell it partly or fully to another investor at a premium. This is where the real money is.
In this case the main shareholders, the Gardiner family is not going to sell the company at the current prices. If you can remember they sold about 20 million shares to the EPF at 35. At that point there was a small premium to the trading price of the stock. This was without any revaluation of assets.
Consider if they re-value only the land of the 20 or so hotels that they own and not consider the future cash flow from those hotels. Imagine how much those land and assets have increased in value for the last 10 or so. That increase in the Net asset value per share would increase who knows 300% , 400%, 500%. Then you can see the real value of the company and the NAV will increase from the current 27 to who knows 80, 100?
Then they can demand an investor coming into CHOT to pay at least the NAV, if not as always a premium.
Look at most of those companies that have huge amounts of undervalued assets that no one really knows about.
The best example are companies that are sitting on large land banks in the city, which have not been re-valued for decades. Colonial Motors- Even though it say "Motors" on their name, look at the asset portfolio of listed stocks the company is holding. It's more like a unit trust. The stock was trading at 25 levels a few years ago and no one was buying it.
CHOT - currently the same way in undervalued assets. Regardless of the increasing revenues and making small profits every quarter, the real value are these assets, I personally think. Forget even that fact and consider this, look at all the CHOT hotel locations, including Kandy and Galle Face and all the other locations. Even if you have enough money, can you start hotels in these locations now? Specially the 2 hotels in Kandy. There isnt any land available and they are not going to get the authorization to build it anyway. So, CHOT can demand a premium on top of the NAV after a revaluation from any one who is willing to buy a stake. And, trust me, there will always be investors to buy premium assets.

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