Current Market Price-: 77 Rs
From a quite long time we wanted to cover something which belonged to hospitality and tourism sector, however we were not able to find any satisfactory idea as majority of the companies involved in hotel were heavily debt laden and due to the pandemic their business models were also affected significantly. Finally at last we found this idea and again this being highly risky we decided it to put it in penny stock category so that investors would be well aware of the risks they might be taking while investing in this company.
Sinclair hotels is a 100% debt free company which owns and operates hotels and resorts in India. Sinclairs Hotels has 4-star properties in eight locations in India. Sinclair Hotels has properties – 5 in West Bengal and one each at Ooty in Tamil Nadu, Port Blair in the Andamans and Gangtok in Sikkim. The company owns and operates hotels/resorts at prime locations in Burdwan, Darjeeling, Dooars, Kalimpong, Ooty, Port Blair Siliguri and Gangtok.
Sinclairs Hotels is a growing hotel chain maintaining stable performance not considering the disruptions on account of pandemic and having a strong balance sheet. It enjoys a leadership position in the areas of operations and operates luxury properties. It has generated decent returns over the years maintaining strong margins with consistent expansions.
Sinclair Hotels has strong online presence as well as regular business relationship with important Travel Agents such as Thomas Cook, Sita, Le Passage, Travel Corporation of India, Trail Blazer Tours India, FCM Travel etc.
As of FY2020, it has a total of 396 rooms, 24 suites, 2 villas and several restaurants & banquets across all its hotels.
The company was founded in 1971 as a private limited company by a local entrepreneur from Kolkata. In 1990, Dr Niren Suchanti and Navin Suchanti acquired majority control of the company. Dr Niren Suchanti is the chairman and Navin Suchanti is the CEO and managing director of the company.
In December 2007, three established private equity firms Xander Advisors of USA, Morgan Creek of USA and Meridia Capital of Spain invested around Rs 490 million in the company’s equity to fuel its growth plans.
Acquisition of Hotels
- The first hotel was set up in Siliguri in the year 1976.
- The next hotel was started in Darjeeling in 1981.
- The company made a public issue in the year 1986 and its shares were listed in Bombay Stock Exchange and Calcutta Stock Exchange.
- Thereafter, the company acquired a hotel in Port Blair in 1991 and another one in Ooty in 1995.
- In 1999, it commissioned a resort property Sinclairs Retreat Dooars in Chalsa in the Dooars region of West Bengal, India.
- In 2011, it acquired a majority stake in Savannah Hotels Pvt Ltd, which owns a 104-room upscale business hotel in Whitefield, Bengaluru.
- In 2013, the company divested its investment in Savannah Hotels.
- In 2014, Sinclairs commissioned its luxury resort Sinclairs Retreat Kalimpong (46 rooms and 2 suites), in Kalimpong spread over an area of 5 acres.
- In 2015, Sinclairs commissioned it upscale tourist resort in Burdwan, Sinclairs Tourist Resort Burdwan. Sinclairs Tourist Resort Burdwan is situated at High Street 1 in Renaissance Township and spread over nearly four acres of land. It offers the finest accommodation, club and banquet facilities in Burdwan, one of the richest districts in West Bengal.
- In 2020, Sinclairs launched its 8th property at Gangtok Sikkim (60 rooms and suites) with an area of 45,000 sq. ft.
RETREAT DOOARS PROPERTY
BAYVIEW PORT BLAIR PROPERTY
The company has planned one more property – a 112-room business hotel in Rajarhat, the upcoming IT hub in Kolkata.
Launch of a New Hotel in Gangtok, Sikkim
Company had planned to open a new 60 room hotel in Gangtok, Sikkim in April 2020 but, it has been delayed due to Covid-19 lockdown which was finally launched on 27 Nov 2020.
New property located at the posh Zero Point, minutes away from the bustling MG Market, affording wonderful views of Kanchenjunga range with a built up area of 45,000 sq.ft.
Further It signed a MoU with a reputed organisation of Sikkim to take this hotel on lease. Company now has 8 hotels spread across India-Siliguri, Darjeeling, Port Blair, Ooty, Dooars, Kalimpong, Burdwan & Gangtok
Financial results of the company has been impacted significantly over the past two years on account of nation wide lock down. Company has not just survived this lock down but company has able to maintain profitability which in itself is an huge achievement besides it being completely debt free as well as coupled with huge cash balance. Most of the other peers have not just achieved profit but some of the companies are struggling with declaring even fourth quarter results.
- Net Sales at Rs 9.97 crore in March 2021 up 5.42% from Rs. 9.45 crore in March 2020.
- Quarterly Net Profit at Rs. 2.11 crore in March 2021 up 365.03% from Rs. 0.80 crore in March 2020.
- EBITDA stands at Rs. 4.40 crore in March 2021 up 973.17% from Rs. 0.41 crore in March 2020.
- Cash Flow from operations stood at Rs 3.31 crs for the year ended March 21.
Some of the company’s peer group companies such as Indian Hotels, EIH, Chalet Hotels , Mahindra Holiday , Lemon Tree hotels , ITDC etc all of them have incurred huge losses.
Capturing the uncaptured locations
Sinclair Hotels has properties in locations which are the hottest tourist spots yet they lack presence of major hotel chains. This gives the company an edge and pricing power in the regions.
The company is always looking for opportunities by engaging in discussions for investments, strategic partnerships and joint ventures. Thus any investment by a major hotel chain might bring in significant upside to the stock.
The present cash surplus exceeding ₹ 60 crore together with cash generated every year will ensure that the company has adequate cash flow for acquisitions without any borrowings. The strategy will be to acquire or take on lease properties located around the present ones to take advantage of the cluster approach. As company funds most of the expansions through the internal cash generations leaving huge scope for both organic as well as inorganic expansions..
Company plans to expand its chain by acquiring properties on outright purchase/lease. Strategy is to acquire or lease properties located around company’s existing properties to take advantage of the cluster approach.
The Company owns one acre of prime freehold land in Rajarhat, New Town, Kolkata. The market value of land has appreciated and it is proposed to unlock this value at a suitable time.
Proposed Preferential Issue of up to 10% of share capital to promoters
It has been planned to augment the cash resources of the company. As it is expected that the current year may present attractive acquisition opportunities and the enabling resolution will help infuse funds at a short notice.
As the economy is now coming out of pandemic induced pain, hotel sector is set to boom in the coming period. Although improvement is getting visible in tourist destinations, a recovery in corporate travel may take at least five to six months due to ongoing work from home policy.
One must also take into consideration that there still looms the risk of 3 rd Wave of the Pandemic which could significantly hinder the further growth of this sector and thereby affecting the company deeply.
Currently Sinclair Hotels is Under ASM Stage I as per Bombay Stock Exchange. The stock is up significantly in past several sessions which do pose a huge risk on short term basis for the price of the company.
Among all the peer companies in this sector struggling with the losses this company has managed to remain profitable. Also not to mention company is equipped with huge cash balance which if there presents the opportunity company could easily grab it. However given there still exists risk of 3rd wave and hotel business is highly cyclical which over the past have failed to deliver any meaning full returns it would not be advisable to invest significantly into this stock. Users can explore this stock for long term however we strong would recommend to do their own research as no further guidance or queries would be answered from our end for this company.
As always Penny stock ideas are extremely risky and could lead to complete loss of capital . Users are requested to do their due research before investing in this stock. No member of darkhorsestocks would be responsible for any loss. Any users who sends queries relating to this stock would be blocked from all future pennystock updates.