Look at the performance of the three listed Hotels by the end of the fourth quarter; are they ready for upcoming challenges?

As we inch close towards Visit Nepal 2020, hotel industries must be on their toes to attract as many visitors as they can. Nepal aims to welcome 2 million tourist in the year 2020. According to the latest report, Nepal’s tourist influx in first half of 2019 increased by 12.6% year on year to reach at 585,531. Though the number is not adequate, we expect the number to increase in the other half of this year.

As the days to come looks promising for hotel industry, let’s look into performance of Nepalese hotel industry in the past financial year 2075-76. There are only three Hotels that have been listed on NEPSE and they are Soaltee Hotel Limited (SHL), Taragaon Regency Hotel (TRH) and Oriental Hotels Limited (OHL).

EQUITY CAPITAL

Equity capital among the listed hotels differs at large, TRH equity exceeds that of SHL by more than Rs 1.1 arba. With 15% increase in its share capital, thanks to bonus dividend, OHL touches Rs 1 arba mark. If minimum paid-up capital requirement for hotel industry isn’t prescribed, such we would continue to see such disparity in future.

RESERVES AND SURPLUS

With Rs 1.17 arba as reserves and surplus OHL leads from the front, followed by SHL and TRH at Rs 87 crores and 53.5 crores respectively. TRH reserves witnessed double digit growth of 27.1% while that of SHL suffered loss of -5.4%.

REVENUE

Anchored by double digit growth of 11.7%, SHL bags highest revenue of Rs 1.75 arba. TRH and OHL lags behind with single digit growth of 8.8% and 5.4%. Their total revenue stands at 1.60 arba and 1.33 arba respectively. This revenue includes both revenue from operations and other sources.

NET PROFIT

TRH surpasses OHL in terms of net profit to be the highest earner this year. Dismal 2.4% growth costs OHL while with 25.4% growth, TRH leads comfortably. SHL also shows impressive growth rate of 28.8%, however, still lags behind both hotels.

EARNINGS PER SHARE

The effect of change in net profit could be seen directly on the EPS of these hotels. EPS of OHL falls from Rs 31.1 to 27.7 while that of TRH increases from Rs 14.9 to 18.7. Earnings per share of SHL improves from Rs 3.2 to Rs 3.7. This variation in EPS is due to face value of SHL share, which stands at Rs 10 unlike Rs 100 for other hotels. Thus, EPS of SHL would be Rs 37 if its par value is assumed at Rs 100.

NETWORTH PER SHARE

Only TRH witnessed increase in net-worth per share by 4.9% to reach at 128.4, while both OHL and SHL suffered decline in their net-worth. High increase in equity capital in comparison with its reserves and surplus led to decline in net-worth for OHL and SHL.

PE RATIO

The quarter end PE ratio of SHL stands at whopping 65.2 while that of OHL and TRH stands at 21.9 and 16.9 respectively. PE ratio basically helps investor to identify the value stock, and is also believed that companies with high PE ratio indicates investors have good faith in the company to provide superior return in future.

The hotel industry will definitely observe a substantial growth in revenue in the upcoming days. However, with the average spending and average days of stay in decline, as per government statistics, will the increased flow of tourist able to offset such declines to lift hotel’s profit as expected? Will upcoming new hotels dilute revenue of listed hotels? Are the listed hotels ready take on competition with internationally acclaimed brands like Marriott and its subsidiaries like Aloft and Fairfield? What do you think?