Comparative analysis of hotel industry: Find out the performance of the only three listed hotels in the recent quarter

  • -ShareSansar
Sun, Jun 2, 2019 7:27 PM on Exclusive, Financial Analysis, Stock Market,

Nepal has been gifted with natural scenic beauty which is a huge tourist attractor. Many tourists visit Nepal for the purpose of exploring the natural beauty of our country and to experience the diverse culture and tradition that exist in Nepal. The inflow of tourists works in favor for the Hotels industry in Nepal. However, currently there are only three Hotels that have been listed on NEPSE and they together make up the Hotels sub-index on NEPSE. They are Soaltee Hotel Limited, Taragaon Regency Hotel (Hyatt Hotel) and Oriental Hotels Limited (Radisson Hotel).

Like all listed companies, these Hotels also have to publish their quarterly reports in the prescribed format. Thus, based on the third quarter reports published by these hotels; we have prepared a comparative analysis to give a clear picture to the investor about the performance of listed hotels and to take decision accordingly. We have compared some key indicators that will give a clear picture regarding the performance of hotels.

Share Capital and Reserves & Surplus

Since there is no minimum paid-up capital requirement for listed hotels, high disparity can be seen in the share capital of the Hotels. Taragaon Regency Hotel (TRH) has the highest share capital among the three which is standing at Rs.1.88 arba. Oriental Hotels Limited (OHL) posted share capital of Rs.1.07 arba while Soaltee Hotel’s (SHL) share capital is the lowest at Rs.66.61 Crore.

Although TRH posted the highest share capital, its reserves and surplus is at lowest highest among the three at Rs. 77.78 Crore. Oriental Hotels Limited (OHL) has the highest reserves and surplus standing at Rs.1.08 arba. SHL posted reserves and surplus of Rs 89.43 Crore.

Revenue from Operation

Hotels’ major source of revenue is from its core operation of providing hospitality services to its guests which includes sale of rooms, revenue from restaurants and banquets etc. As per the third quarter reports, Soaltee Hotel Limited (SHL) generated highest revenue worth Rs. 1.31 arba from its operation while Taragaon Regency Hotel (TRH) generated Rs.86.97 Crore. Oriental Hotel (OHL) generated Rs.83.34 Crore as operating income.

Net Profit

Looking at the net profit posted by each of these hotels, Taragaon Regency Hotel (TRH) has posted a net profit of Rs.35.66 Crore which is the highest among three. Soaltee Hotel Limited (SHL) was able to post a net profit of Rs.23.10 Crore. Oriental Hotel Limited (OHL) posted a net profit of Rs.20.75 Crore which is lowest in the industry. The profit of TRH is the profit before bonus and tax deduction so, this factor might change the position of net profit and EPS of hotels.

 Earnings per Share

We can see huge disparity in the value of earnings per share posted by these hotels due to the difference in their par value. The par value of SHL shares is Rs.10 while that of the other two is Rs.100. If we assume Soaltee Hotel Limited (SHL) share prices to be at par value of Rs.100, the EPS of SHL stands at Rs.46.2 which is the highest among the three. Oriental Hotel Limited (OHL) posted an EPS of Rs.25.75 and Taragaon Regency Hotel (TRH) posted an EPS of Rs.25.20 which is the lowest in the industry.

Net Worth per Share

 As mentioned earlier, SHL shares’ par value is Rs.10 due to which there is disparity among the posted values. If we are to equate Soaltee Hotel Limited (SHL) shares’ par value with that of other hotels, its net worth per share will be at Rs.234.30 which is the highest in the industry. Taragaon Regency Hotel (TRH) posted net worth per share of Rs.141.23 which is the lowest in the industry while Oriental Hotel Limited (OHL) posted net worth per share of Rs.200.66.

P/E Ratio

There are always two ways of interpreting the P/E ratio. On one hand high P/E ratio indicates that the scrip is overvalued and is costing more than its earning capacity. On the other hand higher P/E ratio also indicates the goodwill and image of the company because of which the investors are willing to pay higher for per unit earning. Soaltee Hotel Limited (SHL) posted the highest P/E ratio of 51.89 times while Taragaon Regency Hotel (TRH) posted the lowest P/E ratio of 10.12 times. Oriental Hotel Limited (OHL) posted a P/E ratio of 25.40 times.

Summary

Although currently there are only three Hotels to choose from when it comes to investment aspect, Nepalese investors may get other options to invest in the coming years as many renowned Hotels are opening their chains in Nepal and might choose to go for IPO to invite investment from the public.