Stock Pick From Miscellaneous Sector

Choice Scrip is a fundementally strong stock pick that is expected to give returns within a 1 year horizon. The recommendation is based on a fundamental analysis of the company.

With an impressive growth in the economy and spending power of the countrymen has been witnessing a steady upwards trends, both salaried and business communities have been spending higher on leisure and professional travel these days. In such a scenario, companies like Cox & Kings are bound to benefit and so are the investors of these companies.

Cox & Kings (CKL), the tours and travel major, operates in 22 countries across four continents. It offers a range of business travel services to over 200 corporate clients, including multinational companies. CKL also acquired LateRooms from TUI Group recently. LateRooms is a profitable, leading online hotel booking specialist based in the UK and has a net revenue of GBP 50 million (Rs 496 crore). Its offerings include over 54800 properties globally and the acquisition has definitely strengthened the presence of CKL in this segment, not only within India but also globally.

Recently, CKL sold Explore Worldwide through its subsidiary, 'Holidaybreak Plc' to Hotelplan UK Group for GBP 25.8 million (Rs 259 crore). The proceedings from the 100 per cent equity divestment will be used to lower the debt level in Holidaybreak. It would also rebalance CKL's leisure business portfolio. According to the company's management, proceedings of the sale will help to focus on the three key verticals such as Leisure, Education and hybrid hotels (Meninger).

CKL currently operates 16 hotels under Meininger with a total of 7025 bed capacity in 10 European cities. During second quarter of the current financial year, the company explored new locations such as Budapest, Hungary and Barcelona, Spain where it is expected to open new hotels by end of 2018. Its hotel at Budapest will have 184 rooms and 751 bed capacity. On other hand, the proposed hotel at Barcelona will have 186 room with 682 bed capacity. CKL is going to start construction of both the hotels by end of 2015.

Considering financially, CKL divested its camping business in Britain in last quarter. While comparing financials we have not taken consideration of the sold business. The company's revenue increased by 9 per cent to Rs 1369 crore in H1FY16 on yearly basis. Its EBITDA also rose by 8 per cent to Rs 651 crore in H1FY16. During latest quarter, CKL's top line increased by 13 per cent to Rs 685 crore in Q2FY16 as compared to same period in previous financial year. The company's EBITDA increased by 13 per cent to Rs 318 crore in Q2FY16 on yearly basis. It's PAT stood at Rs 118 crore against net loss of Rs 55.69 crore in Q2FY14 excluding exceptional gain of Rs 300 crore from divestment.

On segmental revenue front, CKL earned 32.99 per cent from Education segment, 28.74 per cent from Leisure-International segment, 16.57 per cent from Leisure-India segment and remaining 17.45 per cent from Meininger segment in September 2015 quarter. On valuation front, CKL's share price is available at 13.64x trailing twelve month (TTM) PE multiple which is quite lower as compared to Thomos Cook (India) has 106.5x. The travel services industry PE multiple is at 23.56x. CKL has good amount of traction to move upwards in the future prospect. So travel happy with CKL while investing safe with them, too!