About Asian Hotels:
· They operate three 5 star deluxe category hotels. Locations: Delhi, Mumbai & Kolkattta.
· They operate the Hyatt Regency brand on the above three locations.
The stock is still undervalued based on the following logics:
· The hotel sector is also recovering with the upturn in the economy. Going by the latest newspaper headlines, occupancies are back to 85% though ARRs are still 10-20% below normal peak levels. Hotels stocks are still down more than 50% below the crash levels.
· Usually the per room cost (excluding land cost) is considered to be 1 Cr for a good 5 star property. Asian Hotels has 1144 rooms in total and at CMP of 420, the per room M Cap works out to be around 80 lac only.
· The company is believed to have aggressive expansion plans post demerger
The most noticeable point based on the latest demerger scheme is – Promoters are going to infuse Rs. 341 Cr before the demerger by taking a preferential allotment @ 540…while CMP is 420.
Post demerger, the three hotels i.e. at Delhi, Mumbai & Kolkatta will get listed separately. So a shareholder holding 3 shares of Asian Hotels currently will get 1 share each of each of the separate entity.
Since long Asian Hotels hasn’t expanded its hotel base. It is said that there were conflicts between the promoters and hence the company wasn’t aggressive. With the demerger, the negative synergy should be removed.
The unlocking of the hidden value for the current shareholders can be expected with this demerger.