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Wednesday, July 2, 2008

Bhagwati Banquets & Hotels Ltd:-A must have in your portfolio

Scripscan:Bhagwati Banquets & Hotels Ltd
Cmp:63
Target:100
Duration:4-6 months
Traded in:Nse-Bse


[Bhagwati Banquets & Hotels Ltd news,views and analysis/narendra somani/one of the finest growth stories/unique monopoly business/target of bhagwati banquets/what should be done with Bhagwati Banquets & Hotels Ltd?/analyst positive on bhagwati/a pure catering player/company vision and future prospects/robust potential and attractive valuations/making 5 star hotels/outperforming the bear market/a safe bet/a scrip with multibagger potential/buy it for huge returns]


Business contributor:Bhagwati Banquets derives revenues from three major sources.Presently more than 1/3rd of its revenues comes from the banquet facility, 25% comes from club management and the rest from outdoor catering. The prime is the Banquets Hall facility and the company has also got four halls in Ahmedabad.BHagwati has been doing club management for three major clubs namely Rajpath Club, Karnavati Club, GCAC and the revolving restaurant called Patang".As these are seasonal businesses, if one of the businesses gets affected, the other two businesses can support them.The company has 1,000 people, consisting of 10 master chefs and a catering staff of 650 for Ahmedabad and 45 for Surat.

Company vision:The company has set a target to set up 5-star hotels in Ahmedabad,Jaipur,Hyderabad,Lucknow and Mumbai in the coming 10-12 years.It is also evaluating several proposals to acquire property for its new hotel at Ahmedabad. These company dreams really big and if it can acheive its desires then Bhagwati banquets can just become one of the scrips to watch out for in the days to come.

A catering player to boost your wealth:You have been invited to a wedding ceremony or a party or say in any occasion and yup our "Bhagwati banquets" is there to satiate all your desires but at an expense.It charges from Rs 350 to Rs 900 a meal and provides personalized service.A minimum order has to be for 300 people (off-season) and 500 in season, resulting in revenue ranging from Rs 1 lakhs--4.5 lakhs on each order.It would be prudent to note that the catering business generates free cash, as it receives payments in cash and obtains credit from its suppliers. Hence, the working capital required is low.What a satisfaction folks-Just consider,You are the owner of the company and your freind has hired your company for all the meal and party arrangements.

5-star hotel at Surat:The company is setting up a 5-star hotel at Surat with 65,000 square feet (two halls of 32,500 square feet each) a convention and banqueting hall to accommodate at Least 3,000 people at a time for any event.This hotel will have 100 rooms (deluxe, suites and a presidential suite).It will have two large banquet halls, which can be partitioned into smatter halls as required, to accommodate at Least 3,000 people.The hotel will also have a business center with boardroom, conference rooms, world-class spa, pub, discotheque, etc.The hotel is likely to commence operations in FY10.It expects Rs 50 crores in revenue and Rs 15 crs in operating profit from the Surat hotel in the first year of operation.The typical room rate in Ahmedabad is Rs 5,000 per day and average occupancy is 75-80%.Though construction project is already in process but any delay in implementing the Surat project might affect profitability.


Wow,so much,anything else its planning:-Watch out...........

1)It has already commenced catering services in Mumbai and plans to branch out to other cities like Jaipur,Jodhpur etc.

2)It has futher plans to enter into tie-ups with clubs for providing its services.

3)It plans to serve companies and MNCs, BPO centres, shopping malls, cinema halls, etc. catering for them and providing food packs.

4)The company plans to develop a separate club adjoining the surat hotel,resulting in additional revenues and thus an increase in profits.

Facts to comfort:Its global india and companies having unique business models gave tremendous capital appreciation in the last few years.Few of the notable examples being Educomp,aurion pro,mic tech,Opto circuits,country club and many more.Bhagwati is a tremendously agggresive company and it has got a monopolistic business with high operating profit margin ratio.

Very recently, Morgan Stanley Mauritius bought 467,500 shares at Rs 84 a share and The GMO Emerging Illiquid M. bought 271,000 shares at Rs 82 a share of Bhagwati Banquets and Hotels.The company is expected to find many more renowned takers because of its unique and monopolistic business.

Whats most inspiring is the main promoter of the company and the largest stake holder,Mr Narendra somani-one of the finest vision oriented man bought nearly 13 lakh 50 thousand shares of his own company from open market purchases in the last 2-3quarters.

Conclusion:In April '07, Bhagwati came out with a public issue of 2.3 crs shares at Rs 40 each, aggregating Rs 92 crs.Simultaneosly equity capital then rose–-from Rs 6.3crs to Rs 29 crs.The issue got decent response and was oversubscribed.The catering service has done well in the past five years. The number of meals supplied per day has jumped from 200/300 in FY03 to 1,500/2,000 in FY07.At the CMP of Rs 63,the stock trades at 8x FY09E EPS of Rs 8.A great business model backed by a very strong and ambitious pedigree,a market leader with hardly any competition,A pure play on indian consumption and growth story,anything else is required to ventitale for inspiring?To me its a great buy at the present levels.



Regards,
Arun
I can be reached at:arunanalyst@rediffmail.com

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