Stock Pick From The Travel & Leisure Sector

HERE IS WHY:

• Byke’s revenues and net profit have shown remarkable growth in FY13
• The FY13 margins were its best in the last five years
• The company has robust plans to open six new hotels

The fall in rupee, the rise in input prices, and many such factors constantly impact stocks and the markets. But here is a stock that has remained insulated from all such dramatic unfolding. Byke Hospitality (formerly known as Suave Hotels) has witnessed an incredible appreciation on the bourses, thanks to its superior financial performance. Consider this; if you had invested Rs 1 lakh in the shares of Byke Hospitality (Byke) in 2003, you would have made a delightful sum of Rs 5 crore by mid-2013. A consistent dividend history is also a big positive for the company.

Good locations and an overall growth in the tourism industry have benefitted the company. Besides, the rupee depreciation may lead to a rise in foreign tourists visiting India while restricting domestic travelers from travelling abroad. This will result in strong revenue growth for the industry and its well-placed players. 

The story of Byke can be divided in two parts, separated by the acquisition of Suave Hotels by its current promoters. Before acquisition, Suave Hotels operated three hotels. The business lacked high growth and the maximum turnover that it achieved during this phase was Rs 18 crore in FY08. In 2010, the current promoters through an open offer acquired a controlling stake in the company through an open offer. 

Shareholding Pattern As On  31/03/2013
Promoter	41.84
DII	1.73
Bodies Corporate	36.24
Public	20.19
GRAND TOTAL	100

After the success of the open offer, the company also changed the management and eventually the name of the company from Suave Hotels to The Byke Hospitality. The broader aim was to bring all the hotels under the same brand name. The current management was highly confident about the company and hence the open offer was priced at 37 per cent premium to the then market price of the shares. 

From the original three hotels, Byke now has six hotels - two in Matheran and four in Goa. These are widely sought-after tourist destinations. Besides, the company is also planning to open six new star category hotels at different locations comprising of Manali, Shimla, Lavasa, Jodhpur, Khopoli and Kudal. 

The change in management has brought about a growth perspective to the company. Also, with the opening of hotels at newer locations, the company has diversified its operations. The management’s proven track record in growing the business shows that the growth momentum is likely to continue. 

On the financial front, the company has reported fantastic numbers in the last three years. Revenues have crossed the Rs 100 crore-mark under the new management. The net profit of Rs 7 crore in FY13 is the best in its history and the EBITDA margins of 17 per cent for the same fiscal is its best in the last five years. Its debt to equity ratio stands at 0.2x, giving it ample scope to raise more capital if required. 

On the valuation front, the stock is available at EV/EBITDA multiple of 31x which looks slightly expensive as its larger peers are available at 27x-28x. Byke, however, has been charting fantastic growth and with a rise in the number of hotels, the future looks prosperous. The market is thus foreseeing huge value in the stock. We recommend that investors enter the counter at the CMP, and expect returns of about 15-20 per cent in FY14.

LAST FIVE QUARTERS (Rs/CR)
	Mar '13	Dec '12	Sep '12	June '12	Mar '12
Total Income	33.4	32.96	16.01	18.55	19.45
PBIT	5.25	5.03	1.51	1.57	2.33
Interest	0.56	0.61	0.58	0.55	0.46
Tax	0	0.92	0.2	0.21	0.47
Net Profit	5.12	3.53	0.77	0.82	1.43
Equity Share Capital	20.05	20.05	20.05	20.05	20.05