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 fourth 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. Oriental Hotels Limited (OHL) posted share capital of Rs.93.42 Crore while Soaltee Hotel’s (SHL) share capital is the lowest at Rs.66.61 Crore. Taragaon Regency Hotel (TRH) has the highest share capital amongst the three which is standing at Rs.188.67 Crore. Although TRH posted the highest share capital, its reserves and surplus is the lowest among the three at Rs.43.03 Crore. While OHL has the highest reserves and surplus standing at Rs.111.91 Crore. SHL posted reserves and surplus of Rs.92.01 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 fourth quarter reports, Oriental Hotels generated Rs.117.26 Crore from its operation while Soaltee Hotel generated Rs.156.02 Crore and Taragaon Regency Hotel generated Rs.132.24 Crore.
Looking at the net profit posted by each of these hotels, OHL has posted a net profit of Rs.29.03 Crore which is the highest among the three even though it has the lowest revenue from operations. SHL having highest revenue from operation, was only able to post a net profit of Rs.21.29 Crore which is the lowest in the industry. TRH posted a net profit of Rs.25.71 Crore which is close to the industry average of Rs.25.34 Crore.
Earnings per Share
We can see huge disparity in the value of earnings per share posted by Soaltee Hotel and other hotels. This is because the par value of SHL shares is Rs.10 while that of the other two is Rs.100. If we assume SHL share prices to be at par value of Rs.100, the EPS of SHL stands at Rs.32 which is the highest among the three. Oriental Hotels posted an EPS of Rs.31.07 and TRH posted an EPS of rs.13.63 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 SHL shares’ par value with that of other hotels, its net worth per share will be at Rs.238.10 which is the highest in the industry. TRH posted net worth per share of Rs.128 which is the lowest in the industry while OHL posted net worth per share of Rs.219.79.
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. Having mentioned that, SHL posted the highest P/E ratio of 76.02 times while TRH posted the lowest P/E ratio of 20.11 times. OHL posted a P/E ratio of 20.98 times.
From the table above we can see that Oriental Hotels is leading in Reserves and Net Profit, Taragaon Regency Hotel is leading in terms of Share Capital and Soaltee Hotel is leading in rest of the indicators which are Revenue from Operations, EPS, P/E Ratio and Net Worth per Share. The industry average has also been mentioned below each indicator for comparison sake.
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.