EIH Associated Hotels Ltd - Multibagger (by Ashish Chugh, Investment Advisor )

Reco Price Rs. 128.40 CMP: Rs.141.85 (Gain 10.48%)

With the current market cap at just Rs.250 crores and its current enterprise value; the valuation is at a significant discount to the intrinsic worth of the company.

From a mere 2 hotel properties two years back, EIH Associated Hotels now boasts of 8 hotel properties - thanks to the restructuring and reorganization which the Oberoi Group underwent over the last 2 year.

EIH Associated Hotels is a part of the Oberoi group and owns 8 Hotel properties in the country. The company initially had two Hotel properties – Oberoi Rajvilas, Jaipur and Trident Hilton, Chennai. Pursuant to a scheme of arrangement between EIH Ltd. and EIH Associated Hotels Ltd., The Cecil at Simla and Trident Hilton, Bhubhneshwar were transferred to EIH Associated Hotels. The merger of Indus Hotels Corporation Ltd. with EIH Associated Hotels led to 4 more properties – Trident Hilton, Agra; Trident Hilton, Jaipur; Trident Hilton, Kochi and Oberoi Udaivilas, Udaipur, coming into the fold of EIH Associated Hotels.

The company now has the following 8 Properties :-

1. Oberoi Rajvilas, Jaipur
2. Oberoi Udaivilas, Udaipur
3. The Cecil, Simla
4. Trident Hilton, Chennai
5. Trident Hilton, Bhubhneshwar
6. Trident Hilton, Agra
7. Trident Hilton, Jaipur
8. Trident Hilton, Kochi

Oberoi Rajvilas, Jaipur

Oberoi Rajvilas, Jaipur is a Five Star premium property located in over 32 acres of landscaped gardens with pavilions and reflection pools that create the romance and grandeur of Rajasthan. The Hotel has rooms, luxury tents and villas with private pools in a richly embellished Fort setting.

Oberoi Udaivilas, Udaipur

Oberoi Udaivilas, Udaipur is located on the banks of Lake Pichola and captures the romance and splendour of the royal era. The grand setting combined with palatial architecture and a beautiful spa offers an luxury experience for its guests. The Resort has 63 rooms with private walled courtyards, private pools, with Rajput inspired decoration and overlook the Lake Pichola or the wildlife sanctuary at the rear of the hotel.

The Cecil, Shimla

Built in 1884, The Cecil, Simla has been extensively renovated and reopened in 1997. Located in the majestic Himalayan ranges, The Oberoi Cecil is a part of Shimla’s colonial history. The hotel has been restored to its original grandeur with wood floors, period furniture, crackling fires and an inviting ambience. Built around a beautiful atrium, the rooms offer splendid views of the mountains and valleys. The hotel has 79 rooms, a heated swimming pool, billiards rooms and children’s activity centre and many opportunities for nature walks, make this luxury resort an all season destination.

Trident Hilton, Chennai
Trident Hilton Chennai is conveniently located near the airport, and close to the new business centres of Sriperumbudur, Maraimalainagar and Guindy Industrial Estate. The hotel is situated in five acres of tropical gardens with 167 well appointed rooms. All rooms are centrally air-conditioned and have Wireless Internet access, mini-bars, electronic safes, complimentary tea and coffee making facilities, direct dial telephones with data port and television sets with satellite transmission.

Trident Hilton, Bhubhneshwar
Trident Hilton Bhubhneshwar is spaciously set amidst fourteen acres of lush green lawns and fruit orchards with a one-kilometer jogging track winding through its beautiful gardens. The hotel has 62 elegantly appointed rooms and suites with wireless internet access. The newly renovated rooms are fully refurbished with all modern facilities and amenities and offer scenic views of the landscaped surroundings. The interiors of the hotel are inspired by the traditional temple architecture of Orissa.

Trident Hilton., Agra
Trident Hilton, Agra is set amid 6 acres of tropical gardens and has 140 elegantly furnished rooms. All rooms are centrally air-conditioned and equipped with modern facilities like a mini-bar, complimentary tea and coffee making facility, direct dial telephone, data port connectivity, television set with satellite transmission and a personal safe. The hotel is just a few minutes walk away from the famous Taj Mahal. The hotel is built of the red stone reminiscent of the Mughal era, designed around landscaped central courtyard with swimming pool and fountains.

Trident Hilton, Jaipur
Situated close to Jaipur's renowned Amber Fort, the hotel overlooks the scenic Jal Mahal on the Mansagar Lake. The hotel has 138 rooms that overlook the Mansagar Lake or the Aravali range. Elegantly furnished, the rooms are equipped with mini-bars, complimentary tea and coffee making facilities, direct dial telephones and television sets with satellite transmission.

Trident Hilton, Kochi
Located on Willingdon Island, Trident Hilton Cochin is twenty minutes from the business district and within easy distance of Fort Cochin, a well known tourist attraction. The hotel has 85 well appointed rooms built around a picturesque central courtyard with its swimming pool and beautiful landscaped garden.

Financials

The latest financials of the company are given as under :-

QUARTERLY - LATEST RESULTS - EIH Associated Hotels Ltd (Curr: Rs in Cr.)

Particulars	Quarter Ended	Quarter Ended	Quarter Ended	Year Ended	Year Ended	Year Ended
	(Jun 07)	(Jun 06)	(% Var)	(Mar 07) (12)	(Mar 06) (12)	(%Var)
Sales	28.88	24.99	15.6	159.04	109.62	45.1
Other Income	0.62	0.33	87.9	2	1.98	1
PBIDT	6.74	4.26	58.2	51.73	34.26	51
Interest	5.49	3.93	39.7	17.56	17.2	2.1
PBDT	1.25	0.33	278.8	34.17	17.06	100.3
Depreciation	2.81	3.01	-6.6	12.42	8.77	41.6
PBT	-1.56	-2.68	41.8	21.75	8.29	162.4
Tax	0.1	0.08	25	0.56	0.33	69.7
Deferred Tax	-0.65	-1.49	56.4	7.48	-1.03	LP
PAT	-1.01	-1.27	20.5	13.71	8.99	52.5

(Source : Capitaline)

Latest Data As On 29/10/2007
Latest Equity(Subscribed)	19.59
Latest Reserve	69.67
Latest Bookvalue -Unit Curr.	45.56
Latest EPS -Unit Curr.	8.5
Latest Market Price -Unit Curr.	128.25
Latest P/E Ratio	15.03
52 Week High -Unit Curr.	195
52 Week High-Date	1/4/2007
52 Week Low -Unit Curr.	112
52 Week Low-Date	4/2/2007
Market Capitalisation	251.2
Stock Exchange	BSE
Dividend Yield -%	0.63

(Source : Capitaline)

Conclusion

The reorganization and restructuring which the Oberoi group underwent over the last 2 years has put EIH Associated Hotels in a sweet spot – from mere 2 Hotel properties till about two years back, the company now has 8 Hotel properties. The inventory of the company has increased to around 850 rooms from 225 before restructuring. Promoters hold 76% of the Equity Capital of the company.

Infact, the premium properties of the company – Oberoi Udaivilas, Udaipur and Oberoi Rajvilas, Jaipur have consistently been ranked amongst the best hotels of the world. In the latest Travel + Leisure, 2007 Readers Poll, Oberoi Udaivilas has been ranked as “THE BEST HOTEL IN THE WORLD” and Oberoi Rajvilas as “THE 11TH BEST HOTEL IN THE WORLD”. Besides, one can read a long list of awards won by these hotels from various Travel Magazines and Travel Guides in various years, if one browses through the websites of these hotels. These properties also command high Tarriffs - Oberoi Rajvilas, Jaipur and Oberoi Udaivilas, Udaipur have their room tariff starting from Rs. 26,000 per day going upto Rs. 1.68 lacs per day for the Kohinoor Suites with private pools.

The results of the restructuring and reorganization are reflecting on the financials of the company too – the company which was making small operating profit and a loss at the Net Level till 2004, suddenly saw operating profits of Rs.34 crores and Rs.52 crores for FY 05-06 and 06-07 respectively, with Net Profits of Rs. 8.99 crores and Rs.13.71 crores for FY 05-06 and 06-07 respectively. The company is back on the list of dividend paying companies after a gap of 7 years.

The second half of the year is generally much better for the company – given the buoyancy in room tariffs and occupancy levels, it would not be unfair to expect the company to come out with its lifetime best performance in the current FY and hoping the buoyancy remains, better it in the years to come.

With the current market cap at just Rs.250 crores and its current enterprise value; the valuation is at a significant discount to the intrinsic worth of the company, which may be a few times over and the pedigree of the parent, make the stock of EIH Associated Hotels, an attractive investment at the current price.

Ashish Chugh is an equity analyst and investment consultant based at New Delhi, INDIA. At the time of writing this article, he, his firm and dependent family members have a position in the stocks mentioned above. The author, his firm or any of his dependent family members may make purchases or sale of the securities mentioned in the report while the report is in circulation. The author invites readers to send him email and welcomes comments, feedback & queries at nexgenfin@yahoo.com.