Hotels on this scale do not fetch PE multiples. If we assume a conservative EV EBITDA of 12 and 500cr of EBITDA would give 6,000 cr EV. Less say 2000 cr of debt gives 4,000 cr of Market cap, implying 20% upside in 2 years form current market cap of 3400 cr.
Thanks for the observation. Except for FIs, PE multiples are just another crude way to value almost any company. It may not be the only way though. Not sure why you said it wouldn’t work for hotels.
Second, if you look at EV/EBITDA multiples most hotel companies like Chalet, Juniper hotels, Lemon tree, EIH etc. are trading at average of ~25x EV EBITDA. SAMHI is infact at the lowest end of the spectrum at ~15x.
Even if the same multiple is maintained there will be a 61% upside. Plus it is wrong to assume debt will be constant as they are already recycling assets plus they have their monthly EMIs for term loan which will automatically reduce debt. Plus mgt. also aims to reduce debt by incremental cash flows.
Lesser debt will not only increase EV but may also coax market in giving a higher multiple.
Hotels on this scale do not fetch PE multiples. If we assume a conservative EV EBITDA of 12 and 500cr of EBITDA would give 6,000 cr EV. Less say 2000 cr of debt gives 4,000 cr of Market cap, implying 20% upside in 2 years form current market cap of 3400 cr.
Thanks for the observation. Except for FIs, PE multiples are just another crude way to value almost any company. It may not be the only way though. Not sure why you said it wouldn’t work for hotels.
Second, if you look at EV/EBITDA multiples most hotel companies like Chalet, Juniper hotels, Lemon tree, EIH etc. are trading at average of ~25x EV EBITDA. SAMHI is infact at the lowest end of the spectrum at ~15x.
Even if the same multiple is maintained there will be a 61% upside. Plus it is wrong to assume debt will be constant as they are already recycling assets plus they have their monthly EMIs for term loan which will automatically reduce debt. Plus mgt. also aims to reduce debt by incremental cash flows.
Lesser debt will not only increase EV but may also coax market in giving a higher multiple.