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Strong Occupancy at Kamat Hotels – BUY

November 4, 2007

Kamat Hotel posted surprising results for the quarter ended Sep 30, 2007 with 377% growth in bottomline. Topline saw a growth of 54% to 33 crore as against 21 crore last year. Kamat Hotel posted excellent numbers in a limp quarter for hospitality sector due to high occupancy rates in its Mumbai hotels and was able to keep average room rates(ARR) for the quarter above previous full year average approx by Rs 1000 on the back of firm demand. Company was also able to improve its operating margins by 488 basis points by improving on other operating costs by 276 bps and controlling employee cost by 173 bps.

Kamat Hotel was able post a 54% increase in topline at 33.14 crore. This increase was propelled by an increase of aprrox Rs 1000 in ARR over the full previous year average and occupancies remaining strong in the range of 80% in a slack quarter. Kamat Hotel also benefits due to the presence of its hotels in Mumbai which attracts around 24% of the India’s inflow of tourists.

By the last quarter two new hotel management properties will get added at Sindhudurg and Aurangabad. Also Orchid Heritage Fort, Pune is expected to go live with business very soon.

At the current price of Rs 194, the stock trades at P/E of 10.9x FY08E EPS of Rs 17.74 and at its historical lowest of 8.48x FY09E EPS of Rs 22.88. At a price to book value of 1.13 FY09E, Kamat Hotel is at extremely attractive levels. ICICI maintains OUTPERFORMER rating with a revised price target of Rs 245, 10.7x FY09E.

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