D-Street finds a winner in Mahindra Holidays

Mumbai: When the traditional hotel industry is struggling to shrug off the Covid blues, Mahindra Holidays & Resorts emerged as the biggest winner among the hospitality sector, with its stock gaining 40 per cent in the last three months on the back of renewed demand.With nearly zero debt and a cash reserve of about Rs 950 crore, in addition to Rs 1,200 crore of instalment payments that are due from customers in the next 12 to 24 months, Mahindra Holidays can be a value buy with a mid- to long-term perspective, according to analysts.The business model of Mahindra Holidays — getting customers first and then building hotels, instead of the other way for the hotel industry — is not understood by the many investors, said Ambareesh Baliga, an independent analyst. “The stock even at current level can be a good buy among sector peers as the company has been able to generate positive cash flows even during the lockdown.”The company's flagship brand, Club Mahindra, sells memberships upfront, builds hotels from the cash thus generated and does not rely on debt. Its revenue streams also include food and beverages, spa, wellness, holiday activities and adventure tourism. In addition, the company takes an annual maintenance fee which covers a significant part of the fixed costs of operating the resorts.In FY21, the company improved its cash position by Rs 159 crore to Rs 940 crore. It has un-booked net profit of Rs 4,300 crore in the balance sheet, which it will book 4 per cent per year over 25 years.Mahindra Holidays reported 11 per cent revenue growth in the June 2021 quarter while its margin reverted to the 25 per cent-plus trajectory. In FY21, the company posted a net profit of Rs 126 crore, in comparison to a net loss of Rs 343 crore reported by EIH and Rs 525 crore by Indian Hotels on a standalone basis. 86149540According to the company management, it has achieved occupancy of 85 per cent during January-March 2021,72 per cent in July and 73 per cent in August. The management will be more focused on domestic holidays, particularly drivable destinations to increase the occupancies and the revenue from the resorts.“This pandemic has further strengthened the desire for extended family holidays, and this will give a boost to our membership addition at lower acquisition cost,” chairman Arun Nanda told ET. “We see a significant increase in opportunities for acquisition of new properties at attractive prices, both for purchase and lease.”“Mahindra Holidays with its unique business model is in a sweet spot to exploit the growth in domestic tourism while rising food & beverage and holiday activity revenue from members will increase profitability at the resort level,” Edelweiss Securities analyst Nihal Mahesh Jham said.

from Economic Times https://ift.tt/2YRXLqI