MAHINDRA HOLIDAYS & RESORTS
Reco price: Rs 346
Current market price: Rs 350
Target price: Rs 404
Upside: 15.4%
Brokerage: Edelweiss Securities
Mahindra Holidays & Resorts India (MHRIL)’s business model is self-sustainable with negligible debt and free cash flow of Rs 500 crore over FY10-12E. Expect the company’s membership to grow at 25 per cent CAGR over FY10-12E with its diverse product offering and regular addition of resorts.The Indian timeshare industry posted a CAGR of 15 per cent since 1998 and expects growth to pick up in the future with more Indians taking holidays. As MHRIL charges membership fees upfront, it helps the company build resorts without resorting to borrowed capital. Securitisation of membership fee receivables gives the company access to lump-sum money. As company retains the title of the property, it provides holiday resorts services over a period of time to members.
At Rs 346, MHRIL trades at 18.8 times and 13.8 times its estimated consolidated EPS for 2010-11 and 2011-12, respectively. Discounted cash flow analysis gives a fair value of Rs 404 for the next 12 months. Expect memberships to touch approximately 175,000 by 2011-12 from 98,224 members as of Q1 2009-10. Expect revenues and PAT to post CAGR of 33 per cent and 38 per cent, respectively, over FY09-12E. The brokerage initiates a buy on the stock.
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