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Sri Lanka Equity Forum » Stock Market Talk » AHUN, is this Undervalued?

AHUN, is this Undervalued?

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1AHUN, is this Undervalued? Empty AHUN, is this Undervalued? on Sat May 14, 2011 2:53 pm

xhora

xhora
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
I have done some research into AHUN.N as I brought this at 90.40. This is my first time publishing something like this so this may be completely wrong. And please correct me if I'm wrong. So here we go.

I have collected data from financial statements available from June 2009
Note that all figures in Millions and rounded to the nearest integer.







FY 2009/2010



Q4 March 2010



Q1 June 2010



Q2 Sep 2010



Q3 Dec 2010



Revenue



7,326



2,416



1,514



1,783



2,076



Oprating Prof.



1,152



698



5



195



351



Net Profit to

Equity Holders



523



419



18



152



272



NA



5189



5189



7585



8292



8549



Shares



38.4



38.4



48



48



336


Comparison of results between 2010 & 2009







Q1 June



Q2 September



Q3 December



Q4 March



2009/2010



(114)



8.5



210



419



2010/2011



18



152



272



N/A



Change %



220%



160%



30%



N/A


The drop in profitability in June quarter is evident from results as far as from 2008. This maybe due to low tourist arrivals in summer season. But overall we can see that profitability has gone up. And AHUN has expanded it's portfolio of hotels in the past year.

Trailing PE calculation

Profits attributable to Equity Holders
419+18+152+272 = 861 Million

Weighted average Shares
38.4X3/12 + 48 X 6/12 + 336 X 3/12 = 117.6 million

So EPS as per accounting Standers using weighted average
861/117.6 = 7.32

Using current shares of 336 million
EPS would be 861/336 = 2.56

Using the latest closing price of Rs.91.20
Accounting PE (91.20/7.32) = 12.46
Normal PE (91.20/2.56) = 35.63

Expected Earnings
With the growth of overall tourism sector and considering the peak tourist arrivals in March quarter it would be safe to assume that we can see at least 20% growth in March 2010 quarter with respect to March 2009 results.

So Expected Profits = 419 X 120% = 503

With this expected earnings for FY 2010/2011
18+152+272+503 = 945
This is a 80% growth compared to last year.

Weighted average shares
48 X 6/12 +336 X 6/12 = 192

Accounting EPS = 945/192 = 4.92
Corresponding PE ration (91.20/4.92) = 18.53

Normal EPS (945/336) = 2.81
Corresponding PE ration (91.20/2.81) = 32.45

Technical Analysis

AHUN, is this Undervalued? Ahun10

I'm not a master of Technical Analysis but yesterday AHUN has formed a pattern called "MORNING STAR" Pattern. This is a bullish reversal Indication. And also note that the MACD has crossed over and volumes are growing. Is this a start of a Bullish run from AHUN? If so what will be the upper limit for this counter?

Summery







Accounting



Normal



Trialling PE



12.46



35.63



Expected PE



18.53



32.45


Experts what is a suitable PE ratio for Hotel industry?
According to CSE, Hotel and Travel sector has a PE ration of around 100. And Most of the resorts that are similar to AHUN has PE around 40~50.

Is this share overvalued at the current price? What will be the future of AHUN?

2AHUN, is this Undervalued? Empty Re: AHUN, is this Undervalued? on Sat May 14, 2011 3:15 pm

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Xhora

Very good effort and analysis. Rep from me though I don';t own this share as of now.


I admit I did not have time to look at all your numbers. I cannot say AHUN is undervalued still. Maybe compared to most other hotel sector shares which are highly overvalued to start with. Some trade at amazing PEs . Everybody is paying premium still expecting higher growth from this sector.

However out of the big bunch , AHUN is a solid hotel stock which paying a premium will not prove not too bad for long term. They have clear growth plans and as I recall they the sixth sense project etc will bring more profit in the future. If you can hold long term AHUN is a decent bet.



Last edited by slstock on Sat May 14, 2011 3:27 pm; edited 1 time in total

3AHUN, is this Undervalued? Empty Re: AHUN, is this Undervalued? on Sat May 14, 2011 3:27 pm

StocksWatch

StocksWatch
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Xhora, very good post. + Rep from me as well.

In general, I am not interested in investing in Hotel stocks for sometime as most of them are massively overvalued. (Other than RENU which is not based on generating revenue from only hotel operations)

Assuming your calculations are correct (no doubt though), AHUN seems to be a better selection in the sector. But nothing can be said for short term.

4AHUN, is this Undervalued? Empty Re: AHUN, is this Undervalued? on Sat May 14, 2011 3:37 pm

seyon


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Nice analysis xhora.......

Nine months as of 31.12.2009 consolidated profit.... 508Mn and EPS for the nine months about 1.51...( 508Mn/336Mn),Further if expect 400Mn for the last quarter then PE would be in the range of 32x-35x.... Which is slightly high comparing with the Mkt PE (27X). However when u compare with REEF, MARA, STAF and others.... this is a good choice for the long term.. Further AHUN is joint partners of Six Senses hotel project which is worth of USD 35-40 Mn http://www.cse.lk/cmt/uploadAnnounceFiles/1741285843549_521.pdf and recent BBH take over also will boost the group earnings....

I guess that most of the hotels are reflected their future earning in their value... Some of the hotels are under refurbishment ( PALM,BHR,MARA) We do not know that how long time take to break even their cost of refurbishment... So do more analysis before enter to hotel sector...

Happy Trading

5AHUN, is this Undervalued? Empty Re: AHUN, is this Undervalued? on Sat May 14, 2011 4:05 pm

Monster

Monster
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Excellent analysis xhora. Even I do not hold AHUN. But AHUN is one of the best stock in the hotel sector. +Rep from me as well for your hard work.

6AHUN, is this Undervalued? Empty Re: AHUN, is this Undervalued? on Sat May 14, 2011 5:20 pm

Quibit

Quibit
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
I am beginning to believe in hotel stocks. AHUN is undoubtedly one of best Srilankan hotel chains. Thanks!! + from me for your wonderful contribution and look forward in seen more contribution from you.

7AHUN, is this Undervalued? Empty Re: AHUN, is this Undervalued? on Sat May 14, 2011 5:57 pm

RockStock


Manager - Equity Analytics
Manager - Equity Analytics
Great analysis, + rep from me as well

8AHUN, is this Undervalued? Empty Re: AHUN, is this Undervalued? on Sat May 14, 2011 6:37 pm

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
Good report..

Since there was a sub division of 1:7, last quarter EPs could be calculated as per the original no of shares for the last qtr..
EPS in each quarter for last 3 qtrs = 18/48 + 152/48 + 272/(336/7) = 0.375 + 3.16 + 5.66 = 9.195
If annualised =12.26.. So accordingly other calculations follow..

9AHUN, is this Undervalued? Empty Re: AHUN, is this Undervalued? on Sat May 14, 2011 8:00 pm

Gaja


Associate Director - Equity Analytics
Associate Director - Equity Analytics
Presently i don't have any hotel stock in my portfolio, in my personal opinion AHUN and KHL is UNDER VALUED SHARES FOR THE LONG TERM INVESTMENTS and if anyone think for short term gains don't touch it these

10AHUN, is this Undervalued? Empty Re: AHUN, is this Undervalued? on Sat May 14, 2011 8:10 pm

xhora

xhora
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@smallville wrote:Good report..

Since there was a sub division of 1:7, last quarter EPs could be calculated as per the original no of shares for the last qtr..
EPS in each quarter for last 3 qtrs = 18/48 + 152/48 + 272/(336/7) = 0.375 + 3.16 + 5.66 = 9.195
If annualised =12.26.. So accordingly other calculations follow..

I don't understand the rationale behind taking 48 million shares as for the entire year. according to your calculation EPS would be (91.2/12.26) 7.44 Way bellow average.

But since I believe we always has to account for the conditions that will be prevailing in the foreseeable future because share prices are always valued for future earnings. So I think taking 336 million shares is the best approach.

11AHUN, is this Undervalued? Empty Re: AHUN, is this Undervalued? on Sun May 15, 2011 9:51 am

udeni

udeni
Manager - Equity Analytics
Manager - Equity Analytics
xhora,
Thanks for the very informative post. Hope to see many more of this calibre reports.

12AHUN, is this Undervalued? Empty Re: AHUN, is this Undervalued? on Sun May 15, 2011 9:52 am

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@xhora wrote:
@smallville wrote:Good report..

Since there was a sub division of 1:7, last quarter EPs could be calculated as per the original no of shares for the last qtr..
EPS in each quarter for last 3 qtrs = 18/48 + 152/48 + 272/(336/7) = 0.375 + 3.16 + 5.66 = 9.195
If annualised =12.26.. So accordingly other calculations follow..

I don't understand the rationale behind taking 48 million shares as for the entire year. according to your calculation EPS would be (91.2/12.26) 7.44 Way bellow average.

But since I believe we always has to account for the conditions that will be prevailing in the foreseeable future because share prices are always valued for future earnings. So I think taking 336 million shares is the best approach.

From this calc (91.2/12.26) = 7.44, wat u get as 7.44 is the P/E not EPS..

Taking 48 mil was due to the last subdiv happen on dec qtr and we only have 3 qtr results so far.. from Q2, u can take the new 336 Mil shares for calculations.. This is becuz the financial year ends on 31 March and its not fair to dilute the EPS in the middle.. well thats how I think..
When companies do subs, EPS gets diluted... Approaches are different from person to person..

13AHUN, is this Undervalued? Empty Re: AHUN, is this Undervalued? on Sun May 15, 2011 10:45 am

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
@smallville wrote:
@xhora wrote:
@smallville wrote:Good report..

Since there was a sub division of 1:7, last quarter EPs could be calculated as per the original no of shares for the last qtr..
EPS in each quarter for last 3 qtrs = 18/48 + 152/48 + 272/(336/7) = 0.375 + 3.16 + 5.66 = 9.195
If annualised =12.26.. So accordingly other calculations follow..

I don't understand the rationale behind taking 48 million shares as for the entire year. according to your calculation EPS would be (91.2/12.26) 7.44 Way bellow average.

But since I believe we always has to account for the conditions that will be prevailing in the foreseeable future because share prices are always valued for future earnings. So I think taking 336 million shares is the best approach.

From this calc (91.2/12.26) = 7.44, wat u get as 7.44 is the P/E not EPS..

Taking 48 mil was due to the last subdiv happen on dec qtr and we only have 3 qtr results so far.. from Q2, u can take the new 336 Mil shares for calculations.. This is becuz the financial year ends on 31 March and its not fair to dilute the EPS in the middle.. well thats how I think..
When companies do subs, EPS gets diluted... Approaches are different from person to person..

It would be easier to go with the EPS calculation AHUN already did for us considering shares in the market during different periods

9 Month EPS as at DEC is 1.29

If expecting profit of 503 mil for march then : March eps = 503 / 336 = 1.497
( but we need to remember to leave out any minority interest also)

SO Annual eps = 1.29 + 1.497= 2.79

PE = 91.2/2.78=32.68

Thats why I mentioned "I cannot say AHUN is undervalued still. Maybe compared to most other hotel sector shares which are highly overvalued to start with. Some trade at amazing PEs . Everybody is paying premium still expecting higher growth from this sector.

However out of the big bunch , AHUN is a solid hotel stock which paying a premium will not prove not too bad for long term. They have clear growth plans and as I recall they the sixth sense project etc will bring more profit in the future. If you can hold long term AHUN is a decent bet. "

14AHUN, is this Undervalued? Empty Re: AHUN, is this Undervalued? on Mon May 30, 2011 7:41 pm

xhora

xhora
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
AHUN has exceeded my expected earnings figure and had made a Billion rupee profit for the year
http://www.cse.lk/cmt/upload_report_file/521_1306748885393.pdf

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