According to a report in ET, Apollo Sindoori Hotels can be a potential multibagger stock.
Apollo Sindoori Hotels is just a Rs 200 crore enterprise value entity with a massive addressable market size and tailwinds following it. At current market price of Rs 760, it has all the ingredients to be a massive multibagger stock in the coming years. The stock is very illiquid owing to its tiny equity structure.
It has already grown a few times in last three years, yet there is no analyst coverage.
Apollo Sindoori Hotels does not own or operates any hotel. It is a hospital support services provider for the Apollo Hospital group, and is owned by the privately-held PCR Investments along with other family members.
Apollo Sindoori Hotels provides food and beverages and housekeeping services to many major hospital chains across India. The group used to derive 90 per cent of its revenues from the Apollo Hospital business and is now targeting 40 per cent from non-Apollo clients.
Food care for hospital patients is an important part of the recovery process for patients. At the same time it’s a non-core business for the doctor fraternity. This is where the company steps in. A patient recovering from a setback needs up to 12 small doses of food at certain intervals from sunrise to midnight, which is taken care by this company. Apart from hospital business, the company is also into corporate catering, managing kitchens in factories of Hindustan Aeronautics and Vedanta group.
Apollo Sindoori Hotels is one of the few companies with zero fixed assets on its balance sheet. Cash and cash equivalents are around Rs 15 crore with zero borrowings.
In 2007, the company set up a joint venture with Malaysia-based Faber group, called Faber Sindoori. Being a 49:51 JV, only the profits of the said entity is consolidated in the company’s books. Faber is into maintenance of biomedical equipment and has an annual maintenance contract for more than 1 lakh equipment across India.
Apollo Sindoori Hotels made a tidy Rs 23 crore pat on a Rs 175 crore revenue, which is not consolidated because of its joint venture status. Faber is owned by the Malaysian sovereign wealth fund Khazanah, which recently bought over Fortis through its investment vehicle IHH.
Going ahead, there is a possibility that the Fortis Hospital’s ancillary support business would also come to Faber Sindoori because of common promoters.
Apollo Sindoori Hotels is available at a single-digit PE with a 40 per cent RoE and we believe can be a very good proxy to play the healthcare theme in India.
According to the recent annual report of Apollo Sindoori Hotels, “Our biggest priority during financial year 2018-19 was to add newer non-Apollo clients like BM Birla, HAL, MFL, SVP Ahmedabad, Kamatchi Hospital and bring back profitability and show significant improvement in market performance.
“As a result of dedicated performance of our team we were able to achieve 22 per cent revenue growth. Having achieved our short-term goal of bringing profitability, our goal for FY2019-20 is to show sustainability and increase in business and market performance.
Though we had a difficult environment of increasing statutory wages, which plays a pivotal role in the hospitality industry, we are targeting Rs 200 crore revenue and Rs 20 crore profit,” it said