Thomas Cook India Ltd is one of India’s top three travel service providers and the country’s largest non-banking foreign exchange dealer, with an Authorized Dealer Category II license from the RBI. The forex and travel services businesses complement each other by creating marketing and distribution synergies as well as cross-selling opportunities and scale benefits. The company has a strong backing of the promoter group the FairFax group promoted by Prem Wastsas and he has experience of over 25 years & has demonstrated a strong financial track record to achieve an annual appreciation in Book Value per Share of 24.7 % annually. He is also known as Warren Buffet of Canada. Tours & Travels industry is a major contributor to the world’s major economy’s including India. In Asia Pacific region specifically, the direct contribution of Travel and Tourism to the region’s GDP in 2012 was USD 614 billion which is 2.7 % of GDP and is estimated to be at USD 646 billion in 2014. India and China are expected to emerge as two of the leading tourism markets in next 10 years. The industry is showing signs of recovery following the last economic recession, which saw falling demand for tourism activity as consumers postponed trips to concentrate their household budgets & on more essential areas. As disposable incomes rise and a social trend towards travelling and exploring new destinations grows, the global tourism industry is attracting greater number of consumers who are eager to travel and experience life in other countries or just optimize time off work to unwind by taking holidays. Industry analysts believe that an increase in vacation ownership will also depend upon the prevailing economic climate. Membership growth has been sluggish in past quarters due to the current financial climate, as a person will only invest a few lakh rupees in time-share holidays and vacation ownership if he has surplus cash. Indian economy is witnessing auto sales falling and the property market not moving. These factors have an impact on the resort business. Sterling Holiday was passing through trying times with high debt till Bay Capital took it over in 2009. Since then, the company has been making a return of sorts by refurbishing its resorts. It has increased occupancy levels to 52 % from a lowest of 16 % a few years back. And with the two rounds of equity infusion helped the company repay debt and renovate existing properties. Post general election results, India has been a talking point across the globe and this has helped India in huge surge in foreign tourists coming to India both for business and leisure holidays. In recent past India has been a laggard to attract foreign tourism when compared to countries like Singapore or Thailand. Foreign tourism is likely to pick up in India on all counts be its rich cultural heritage, exotic locations, medical tourism or business related tourism. Government’s renewed focus on travel and tourism and Swach Bharat Abhiyan is likely to boost Thomas Cook’s travel and travel related financial services arm which contributed around 25.50 % of consolidated revenue in FY’14. Though it is a high margin business but it suffers from wide fluctuations on account of foreign exchange movements. Thomas Cook India Ltd’s acquisition of IKYA Human Capital Solutions Limited is yielding rich dividends. IKYA has recently signed an agreement to acquire Hofincons Infotech and Industrial Services Ltd. which is headquartered in Chennai. The company employs more than 6000 people providing a full spectrum of asset management services under operation and maintenance, technology and consulting and facility management. It had reported Revenue of Rs. 131.30 crores and PAT of Rs. 8.23 crores in FY’13. Thomas Cook is expected to deliver strong set of numbers in FY’15 & FY’16 across its business verticals as it leverages on its strong synergies across businesses given the fact that sentiments have turned positive and economy looks poised to return back on growth path. It can be expected from the company to rationalize and get rid of overlapping expenses while achieving better operating efficiency. Thomas Cook is a quality play on the huge growth opportunity in the Indian leisure industry along with an exposure to the fast growing HR and office management business. With an expectation of a 30 % plus growth over the next three to four years and free cash flows exceeding Rs. 1,000 crore cumulatively in the next three years, chances of Thomas Cook India getting re-rated. Any value unlocking in the Quess Corp would also act as a key trigger for Thomas Cook India Ltd’s stock price. This leaves scope for a 40 % upside in the next 9-12 months from the current levels factoring on fully diluted equity capital of Rs. 36.45 crore. It is expected that the company’s surplus scenario is likely to continue for the next three years & will keep its growth story intact for the coming quarters also.
|SALES (₹ Crs)||1,702.40||3,130.80||3,558.30||4,387.00|
|NET PROFIT (₹ Cr)||65.03||166.70||229.50||368.90|
*As the author of this blog I disclose that I do not hold THOMAS COOK (I) ltd in my investment portfolio.