Cox and Kings Q1 FY17 Results Update, In-Line with Our Expectations

India focused Portfolio Advisory - Exp of 40+years, Das Capital Management and Advisors

Arun Thirumalai

India focused Portfolio Advisory - Exp of 40+years

Das Capital Management and Advisors

Das Capital is a research boutique with an aim to continuously map and plan the investment needs of investors focused on India. We have a six member research team with a combined experience of over 40 years as a part of our investment wing. Our team assisted in the setup of Premji Investments, which was one of India’s first family offices focused to managing Mr.Azim Premji personal wealth. We also serve as a research team to two Indian private equity energy funds “Small is Beautiful” and “KSK Emerging India Energy Fund”.

Equity Bottom-Up

<div>Cox and Kings is one of the top two players in the organized market for travel and tourism. It would be key beneficiary of Indian consumption theme, catering to the fast growing inbound and outbound travel related to India.The potential for this sector is immense and is likely to grow at fast pace going forward. As of FY14 tourist statistics for India are 18mn ppl outbound (Indians going abroad) and 8mn inbound (foreign arrivals) when compared to China’s statistic of 100mn (outbound) and 50mn (inbound).The company has four main business segment i.e.<ul><li>Leisure India- Tours and travel business in India having Outbound and domestic Indian tourists as end consumers.</li><li>Leisure International- The business segment responsible for handling foreign tourists-mainly Europe, US and Dubai.</li><li>Education- the segment provides experiential learning to kids with its business in UK, Europe and Australia.</li><li>Meininger- A business model providing budget hotels..</li></ul>Out if the four segments, Leisure India and Meininger would be the major growth drivers in the future.The company may face near term pressure in its international travels and Education business due to Brexit as revenues from Europe and Britain dominates these segments. Although we believe that this may be offset by a higher volume growth from the Indian business as currency depreciation may result in UK and Europe region an attractive destination for Indian travelers.The company is undergoing a consolidation phase , as it  has exited unprofitable and unrelated businesses over the last years, thereby reducing the gearing ratio which is expected to come down to 0.5x equity in FY17e. It may also lead to improving blended operating margins as historical operating margin of its international business was near 50% sans these unprofitable acquisitions.The company trades at P/E of 9x FY17e consolidated EPS and 6.75x FY18e consolidated EPS. We believe that the stock is undervalued.</div>

 Cox and Kings is one of the top two players in the organized market for travel and tourism. It would be key beneficiary of Indian consumption theme, catering to the fast growing inbound and outbound travel related to India.The potential for this sector is immense and is likely to grow at fast pace going forward. As of FY14 tourist statistics for India are 18mn ppl outbound (Indians going abroad) and 8mn inbound (foreign arrivals) when compared to China’s statistic of 100mn (outbound) and 50mn (inbound).The company has four main business segment i.e.Leisure India- Tours and travel business in India having Outbound and domestic Indian tourists as end consumers.Leisure International- The business segment responsible for handling foreign tourists-mainly Europe, US and Dubai.Education- the segment provides experiential learning to kids with its business in UK, Europe and Australia.Meininger- A business model providing budget hotels..Out if the four segments, Leisure India and Meininger would be the major growth drivers in the future.The company may face near term pressure in its international travels and Education business due to Brexit as revenues from Europe and Britain dominates these segments. Although we believe that this may be offset by a higher volume growth from the Indian business as currency depreciation may result in UK and Europe region an attractive destination for Indian travelers.The company is undergoing a consolidation phase , as it  has exited unprofitable and unrelated businesses over the last years, thereby reducing the gearing ratio which is expected to come down to 0.5x equity in FY17e. It may also lead to improving blended operating margins as historical operating margin of its international business was near 50% sans these unprofitable acquisitions.The company trades at P/E of 9x FY17e consolidated EPS and 6.75x FY18e consolidated EPS. We believe that the stock is undervalued.

Cox and Kings-Value Emerging Post Restructuring

Cox And Kings

Cox and Kings-Value Emerging Post Restructuring