Saturday, October 26, 2013

COX AND KINGS LTD - ACCUMULATE




 

















The brand ‘COX and KINGS’  ( C&K) need no explanation not only in India but in many countries around the world.Founded in 1758 in UK ,C&K is the oldest travel  company in the world.After changing many hands ,now this company owned by UK born Mr.ABM Good and India based Mr .Ajit Kerkar.Company came out with an IPO in India in 2009 and listed its stocks both in BSE and NSE .



                                       C&K is one of the largest travel companies in the world with a network in more than 20 countries including India ,Australia,  United Kingdom,USA ,Japan, ,Newzealand ,Sri Lanka , United Arab Emirates..etc. Company offering a wide array of travel related services in the field of Domestic Tourism,Business travel,Outbound tourism,Travel Insurance,currency exchange,Destination management,Visa processing services...etc.Like many other companies,it is not mere an arranger of tours but owns valuable assets like hotels,Mobile homes ..etc.Its hotel chain - Meininger  - runs 16 hotels across 10 cities in Europe with 7340 beds capacity .Recently company started its  720 bed hotel in Brussels, the capital of Belgium . In addition to this ,Company having 1300 permanent  homes and 7000 mobile homes which is using for its Camping business .Added to  own hotels ,C& K having strong tie-up with large hotel chains across the globe .Company is the leader in packaged tours in India with its brands like ‘Duniya Dekho’ ,’Bharat Dekho’..etc.Its European subsidiary is leading  Education and Camping business with well known brands like PGL,NST,Eurocamp,Keycamp..etc.


                                         I know , I could not convey the mammoth picture of this company and its size of operations into your mind through this brief note.Don’t think ,this is a small travel company arranging tour operations  but  it is a true Indian multinational .To get a better insight into company’s business and offerings ,I request you to go through the links of websites of C&K and its subsidiaries listed below.


1)      Cox and Kings


2)      Holidaybreak


3)      Meininger


4)      Eurocamp


5)      Keycamp



Investment rationale


Cox and Kings came out with an IPO in 2009 @ Rs.330  which oversubscribed 6 times.Thereafter  it divided its FV to Rs.5 and currently trading at its all time low price of Rs.87.This sharp price erosion happened mainly  due to the fear of  increasing  debt level which the company raised for acquiring ‘Holidaybreaks’ of UK for an amount of Rs.2250 Cr in an all cash deal. In many cases we have seen the failure of many companies due to high debt acquisitions .It happened  mainly due to lack of synergies in business and  failure to  integrate the business of acquired companies.Here the case is different,the acquired company having wonderful assets and a market leader in many of the segments it is operating and a perfect fit for C&K Almost 90% of its total capacity for education and camping business for 2014 is already booked and this point alone indicating its dominant position in UK market .Its integration with C&K  happened smoothly and the latest financial results giving a clear indication for that.C&K is now planning to introduce many new concepts of acquired companies in India too in near future.In the last FY ,company reported a consolidated turnover of Rs.1808 Cr and a net profit of Rs.248 Cr. In the recent June quarter alone company reported a Sale of Rs.586 Cr and a net profit of Rs.135 Cr. The past few years were not so good for travel and tourism sector due to various reasons.The severe recessionary pressure in western countries affected both tourism and business travels. But now the situation is changing  slowly in favor.The sharp depreciation of Indian currency making India as a preferred destination for many western travelers.On the other side, touring outside the country is becoming a passion even for middle class families in recent times even after rupee depreciation. Malaysia ,Singapore,Hong-Kong,Middle East ,USA ..etc are turning as hot destinations for Indian tourists.With revival in western economies , Business tours are expected to improve in future .With vast network in all these countries   Cox and kings will be one of the biggest beneficiary  of this changing trends.



Some more positive indications




Higher level of debt is considered as the major dampener for C&K .But company already initiated various steps to reduce its debt.In recent past City Venture Capital purchased a 30 % stake in one of C&K’s UK arm (Prometheon Holdings UK) for Rs.765 Cr. In last FY itself  Company re-paid Rs.200 Cr from its free cash flow. Management recently indicated that, their first priority will be the reduction of debt. As an indication of promoters increasing confidence in their company ,they recently hiked their stake through open market purchases. Even one of the most conservative investor in Indian Market - Life Insurance Corporation of India- declared their faith in the company  by acquiring  a 2 %   stake in the latest September  quarter.





                                                                                I believe ,this is a great Indian MNC ( now ) available at an attractive valuation at a time many positives are started to kick in.With robust cash flow and well experienced promoters ,company can manage the debt and move to new heights.Recommending to accumulate the stock . CMP Rs.87


Link to latest Annual Report HERE














 Disc: I have vested interest in C&K

29 comments :

  1. Dear sir,

    Your views about wockhardt results & the concall?

    ReplyDelete
    Replies
    1. Frankly speaking it was slightly above my expectation .During the concall , many questions raised about regulatory actions and management clarified it is not practical to give a time frame to resolve everything because the final verdict should come from inspecting authorities.All plants will be at CGMP standard in 6 months and they will apply for re-inspection thereafter .But we can't say exactly when USFDA will do it and certify them.I expect Utmost 1.5 year to clear everything .Full transcript of concall may available in company website by next week.

      Delete
  2. Cox & Kings raised $ 65-mn through GDR issue and since then the GDR shares are being slowly dumped into the Indian market. From a level of 44 lakhs shares in 2010 there is still an overhang of 14 lakhs shares. Till the time those are fully absorved, I don't think Cox & Kings's share price would rise beyond a trading range. I would even say that it may fall further to 50-60 levels. While appreciating your efforts, may I ask you if you considerd these GDR shares a thought while recommending ?

    ReplyDelete
    Replies
    1. I don't think they will sell it at any rate. Not sold anything in past three months.On the other side ,domestic institutions are hiking their stake for the past one year.

      Delete
  3. Hello Mr.VP, Panacea biotec is looking for an extra ordinary meeting on Nov 22 to consider the company to be declared as sick company as its net worth has eroded as per the SICA.... Where is this company heading now..just now they got the WHO pre approval etc..... will it impact the share price now? this news is looking a bit scary....

    please comments....
    regards

    ReplyDelete
    Replies
    1. This is part of procedure when networth falls below certain level.I hope , resumption of WHO related business within few quarters will help the company to increase its networth and come out of the Preview of SICA ,few quarters down the line.

      Delete
  4. Dear VP sir what is your complete view on
    INSECTICIDES (INDIA) LTD , I would like to add on my portfolio

    ReplyDelete
    Replies
    1. Not strictly tracking this stock.Bottom line growth seems muted for this company for the past many years.

      Delete
  5. Hi,
    What is your view on Kale Consultancy after results? Should one accumulate at this time or Hold?

    Rgds
    Girish

    ReplyDelete
    Replies
    1. Stock recommended around Rs.120 which is now trading above Rs.550 .Not recommending a BUY at CMP

      Delete
  6. Sir,
    Your post and recommendation of 2 stocks in the oil exploration sector was very enlightening. Deep inds is another stock in this field .It is available at a mouth watering cmp of Rs.28. What is your take?

    ReplyDelete
  7. Dear V P

    Your view about Granules

    ReplyDelete
    Replies
    1. No change in previous views on Granules.

      Delete
  8. sir your view on ajanta pharma,suven life
    thank you

    ReplyDelete
  9. Dear VP ji,

    Please share your thoughts on Gujarat Pipavav if you are tracking it.

    Regards,

    Vishesh

    ReplyDelete
  10. Whats your view on epc sep result

    ReplyDelete
    Replies
    1. Hold the stock for long term,if you have patience.

      Delete
  11. Dear VP,

    Acrysil's results were not that great. What are your views on the same?

    ReplyDelete
    Replies
    1. Still I expect better performance going forward

      Delete
  12. Should I keep holding Cummins India or exit?
    ~ Lopa, WB

    ReplyDelete
  13. Dear sir,

    Kindly comment about your views on the stunning results produced by your earlier pick Astra microwave.

    ReplyDelete
  14. Dear sir,
    your esteemed views on Granules india results & Astra Microwave Results, & wishing you a happy Diwali.

    ReplyDelete
  15. Granules closing Singapore unit, results still not reflecting expansion, do you still see a silver line to black cloud?

    Rgds
    Girish

    ReplyDelete
    Replies
    1. What Singapore Unit brother ? ,there is no unit there ,it is only a subsidiary floated there and no operations so far.

      Delete
  16. Dear Value Pick , What is your comment on Engineers India LTD

    ReplyDelete

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