Comparative analysis of listed Hotels; Find out your suitable investment arena

Tourism is one of the few greatest strengths of our country. We are naturally endowed with great diversity in geography and natural beauty and yearly millions of tourists visit our country to enjoy the scenic beauty and experience the diverse culture and traditions. However so far only three big hotels are listed in our bourse, namely Soaltee Hotel, Taragaon Regency Hotel (Hyatt Hotel) and Oriental Hotel (Radisson Hotel).

Like all the other listed companies, these companies to publish their financial statement each quarter. Thus based on the 3^rd quarter report of these 3 Hotels, a comparative story has been developed here forth:

The comparison is done based on few major indicators of the report. They are:

Paid-up capital:

There is no minimum paid-up capital requirements for Hotels like Banks and financial institutions and insurance companies. As seen in the figure below Taragaon Regency has the highest paid-up capital of Rs 1.88 arba, whereas Soaltee Hotel has the lowest paid-up of Rs 66.61 crore. We can see a huge discrepancy between the values, so even though they belong to the same industry their operations vary widely.

Reserve and surplus:

The reserve and surplus is the safety cushion for the organization and basis for further expansion and development of the business. As seen in the figure below, despite the huge paid-up capital base the reserve and surplus of TRH is significantly lower amounting to Rs 41.60 crore only. On the other hand OHL has the highest reserve of Rs 1.02 arba followed by SHL standing at Rs 85.90 crore.

Net fixed assets:

Being in the service industry, the fixed assets says a lot about the hotel too. Large successful Hotels are often categorized with huge asset base and infrastructures. As seen on the graph below, Oriental Hotels have the highest fixed property worth Rs 228.55 crore and Soaltee has the lowest worth Rs 76.83 crore.

Income from room sales, banquets, restaurants & others

The main source of revenue for Hotels comes from the room sales, services provided, banquets, restaurants etc. provided to the customers. Soaltee Hotel has the highest income from room sales, banquets, restaurants and others amounting to Rs 112.75 crore, Taragaon Regency ranks second with Rs 91.58 crore. Finally Oriental Hotels has earned Rs 81.27 crore.

Net Profit:

Although the income from operating activities of Soaltee Hotel was the highest, it hasn’t performed so well in terms of the Net Profit. This means that it has significantly high operating and other expenses. Tara Gaon Regency has earned the highest net profit of Rs 27.54 crore. Similarly, Oriental Hotels has reported a net profit of Rs 19.51 crore.

Net worth per share:

As seen in the graph below, there is a huge discrepancy between the net worth per share of the Hotels. This is because the par value per share of Soaltee Hotel is Rs 10 and of Oriental Hotel and Tara Gaon Regency is Rs 100. So if Soaltee Hotel’s par value was also Rs 100 then its net worth per share would be Rs 229, which is highest among the three. Secondly, Oriental Hotels’ net worth stands at Rs 209.60 and finally Tara Gaon with Rs 122.05 per share.

Earning per share:

Similarly, like in the previous heading here too the Soaltee’s EPS is based on Rs 10 par share. So if it’s par were Rs 100 then it’s annualized EPS would stand at Rs 30.4 making it the winner among the three. Similarly, Oriental Hotels stands seconds with Rs 27.85 and finally Taragaon Regency with Rs 19.46.

Price to earning 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.

Among the companies under review, Soaltee has the highest p/e ratio of 81.95 times, followed by Oriental at 20.76 times and Taragaon at 13.36 times.

Return on equity:

ROE gives the return or profit generated per unit of Equity. Unlike other parameters, ROE of all three hotels are more or less the same, which means that the equity being used by these companies are being utilized at industry standard. However, for the sake of comparison we can see that the ROE of Taragaon is highest standing at 15.95%, followed by Oriental and Soaltee at a very close range of 13.29% and 13.27% respectively.

Overall scenario:

The below table gives the overview of all the indicators discussed above. Soaltee and Taragaon leads in three heading each and Oriental leads in two indicators. However no judgement has been passed on for p/e ratio as it may vary based on the investors’ opinion.

*The par value per share of Soaltee is Rs 10. So if it’s par were also Rs 100 it’s Networth per share and EPS would be Rs 229 and Rs 30.4 respectively making it the highest.