Published on Wednesday, January 30, 2019 by
Raheja Corp. promoted Chalet Hotels Ltd., which is best-placed in the premium segment, has a strong business model with robust brands and a significant presence in key markets with strong locational advantages in micro-markets within cities. In its segment, demand (FY18-22: 12%) growth is outpacing supply growth (FY18-22: 7%).
Brokerage house analysts have appreciated the 'Premium Play at Relative Discount' offer. Chalet Hotels has a strong partnership with globally renowned Marriott chain in India.
ICICI Direct report states that the IPO is priced attractively in comparison to listed premium players. "At the IPO price band of Rs. 275-280, the stock is available at one-year forward EV/EBITDA of 19.4-19.7x while comparable peers are trading at average multiple of 21-22x. Given the uptrend in the industry cycle led by strong demand and balanced room supply supported by strong brand, we recommend SUBSCRIBE to the issue from a long-term perspective."
Calling Chalet Hotels Ltd. 'Best-placed in the premium segment', Phillip Capital report states, "The Company's FY14-18 revenue and EBITDA CAGR was 18%/33%. Currently all properties are operating at peak occupancy of 70%+ and are looking at increasing prices (ARR improvement). Its balance sheet should get better as it plans to reducing its debt through IPO proceeds - expect debt to fall to Rs 16.4bn from Rs 23.6bn in FY18. All incremental capex over FY20-21 will be through internal accruals. We expect revenue/PAT CAGR of 8.3%/13.4% over the next two years (FY18-20). At the upper band of Rs 280, CHL would trade at an FY19/20 EV/EBITDA of 19x/17x (25% DISCOUNT TO INDUSTRY AVERAGE). We like the business model, brand association, and presence - which should lead to higher than industry margins and ROCE. We recommend SUBSCRIBE.'
According to some analysts, occupancies have reached 75% for Chalet portfolio - ARR growth to follow. Chalet EBIDTA (FY18) at 41% Vs industry (All India 5 star Deluxe Average) is at 34%. Chalet Hotels offers the highest return on capital - Lower per room construction cost.
The Company attracted marquee anchor investors and allotted 1,75,84,071 equity shares to 27 anchor investors at Rs. 280 per equity share (upper end of the Price Band) aggregating to Rs. 492.35 crore. Anchor investors include: Goldman Sachs, Fidelity, Blackrock, Macquarie, BNP Paribas, Kuwait Investment, Reliance Capital, HDFC, SBI, ICICI Prudential and UTI amongst others.
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