Maintain ‘outperform’ on ITC with target price of R440 per share. ITC has acquired the Park Hyatt Hotel, Goa Resort and Spa for R515 crore.
The hotel was owned by Blue Coast Hotels and was put up for sale by IFCI. The Park Hyatt, Goa is a 250 room, 45 acre property that was commissioned in 2004. The property was owned by Blue Coast Hotels and managed by the Park Hyatt group. IFCI, under the Sarfesi Act, had invited tenders for the sale of the property in October 2014 with a reserve price of Rs5.43bn.
The property had an occupancy rate of 75.2% and an average room rate of R9,610 in FY14. The deal provides ITC entry into the Goa market, the largest tourism destination in India.
The deal has been finalised at a 6% discount to the reserve price and at an EV/ room of R206 crore, including the land. The valuation is for an asset that operated at 75% occupancy and generated 19%-plus ebit margin in FY14, which are ahead of ITC’s average occupancy and margins in FY14.
Profitability could be higher under ITC as the 6-7% management fee would now not be required to be given as ITC would be operating the property under its own brand. Based on current financials, the acquisition would increase the ITC’s owned room inventory by 7%, hotel revenues by 10% and hotel ebit by 14% in FY16e. We believe the deal has been done at an attractive price and is extremely accretive for ITC’s hotel segment.
By IDFC Instiutional