Savera Hotels Ltd- Rs.60.00

Established in 1969, Savera Hotels Ltd. (SHL) is a leading classified four-star hotel company. It owns the huge 260 rooms, centrally air-conditioned ‘The Savera’ hotel located in the heart of Chennai, which is just 11 km from the international airport and merely 5 km from the main railway station. The company also owns a pub in Bangalore and a restaurant cum pub in Hyderabad - both of which are doing extremely well. Notably, the facilities provided by the hotel are nothing less than five star category and are of an international standard. It has a hi-tech business centre with secretarial service, private office space, boardrooms, all modern communication devices round the clock service apart from Interpreters/translators on call. It boasts of having 9 conference halls of varying capacities starting from 50 people upto 800 people for conducting seminars, meetings and functions. Banquet facilities are also offered to host wedding receptions, birthday parties, anniversaries and get-togethers. Interestingly, the hotel has various restaurants including a 24 hour multi-cuisine restaurant cum coffee shop, a roof top restaurant offering authentic Mughlai Cuisine, a South Indian speciality restaurant, a cosy Bar offering a range of imported and Indian liquors and a cake shop. Besides, the hotel has a health club, fitness centre, swimming pool, florist, beauty parlour, men’s saloon, shopping arcade, book shop, travel desk, money changer etc.

SHL is taking significant steps to enhance the guest experience by improving its products and service levels in line with international standards. Furthermore, the company continued with its ongoing programme of investing in renovation and upgradation of rooms, suites and other public related services thereby improving the average room rate. To cash in on the ongoing boom in the hotel industry, the company has started exploring new business avenues in the pilgrims/business destinations and soon new hotel outlets with innovative measures will be launched in Madurai, Coimbatore and Hyderabad. SHL is also focusing on diversification in the floriculture business at Ooty by acquiring control of an existing company.

With infrastructure developments taking place in Chennai and huge commercial space being added, business in the city is bound to increase. Besides the tourism industry is growing significantly throughout the world and more particularly in India. The average room rate (ARR) and occupancy levels are quite high and expected to remain robust in future. For FY06, while the company’s topline increased by 20% to Rs.30 cr., its net profit zoomed by 190% to Rs.3.60 cr. due to higher room rates. H1 FY07 is much more encouraging with sales improving by nearly 20% to Rs.16 cr. and net profit doubling to Rs.1.60 cr. The second half is traditionally better for hotels; SHL is expected to end FY07 with total revenue of Rs.35 cr. and profit of Rs.4.50 cr. This means an EPS of Rs.8 on its equity of Rs.6 cr.

In spite of such strong fundamentals, the SHL scrip is trading every cheap at market cap of only Rs.35 cr. With real estate prices hitting sky high, the replacement cost is several times higher than its market cap. Lastly, with a book value of Rs.30 and dividend yield of more than 3%, the scrip has the potential to double in 15-18 months.