Bright Horizons: Navigating Tourism's Growth Revival
DOLPHIN HOTELS PLC
STAF.N0000
Current Price: LKR 35.40
Fair Value: LKR 55.00 (FY25E)
BUY
FY19
FY20
FY21
FY22
FY23
FY24E
FY25E
FY25E
Estimates (LKR 'Mn)
953
729
350
283
576
908
1,201
1,650
172
47
-62
-82
-117
91
264
462
147
44
-33
-25
-103
149
292
437
Adjusted EPS (LKR)
2.3
0.7
(0.5)
(0.4)
(1.6)
2.4
4.6
6.9
-70%
-175%
25%
316%
244%
96%
50%
15.2x
50.3x
N/A
N/A
N/A
15.0x
7.7x
5.1x
1.1x
1.1x
1.1x
0.8x
0.7x
0.7x
0.7x
0.6x
0.7
1.8.
2.8
DY (%)
0.0%
0.0%
0.0%
0.0%
0.0%
2.0%
5.2%
7.8%
Dividend Payout
0.0%
0.0%
0.0%
0.0%
0.0%
30.0%
40.0%
40.0%
ROE
7.2%
2.1%
-1.6%
-0.9%
-3.3%
4.7%
8.7%
12.0%
4-star inn surrounding the shores of Negombo
Club hotel dolphin located in waikkal, Negombo surrounds the Negombo coastal line and is in
close proximity to the Katunayake international airport which makes the hotel an ideal location
for tourists on a short vacation. STAF is a subsidiary of SHOT which owns 65.18% stake of the
hotel. The hotel consists of 154 rooms in the range of superior poolside terrace, sea view room,
superior room, seaside villa, sea view villa and junior suite.
Pressure on GP margin and high OPEX stir earnings negatively
STAF recorded a significant growth in earnings during 1QFY24 registering a 3596.0% YoY to LKR
31.9Mn owing to the progressive tourists arrivals targeting the coastal areas of the country.
Adding a favourable spark, the top line too contributed positively as it gained 49.5% YoY to LKR
187.6Mn. Furthermore, Gross profit margin displayed a downturn as it was recorded at 58.7% in
1QFY24 compared to 68.0% in 1QFY23 resulted by the uptick in cost of sale which recorded a
92.4% YoY owing to the inflationary pressure. On a positive note, net finance income recorded a
growth of 3359.0% YoY largely contributing to the ascended bottom-line.
Positive outlook as industry sees growth
With the steady recovery in global tourism as the pandemic has subsided, we expect occupancy
levels of STAF to climb up while domestic tourism is also expected to improve with fuel
availability and peek seasons coming up leading to a positive outlook for STAF. Furthermore, the
hotel's location being in close proximity to the international airport makes the hotel an apt stay
for the last days of vacations indicating fast filling up of rooms. Thus, we estimate occupancy to
improve to 45% and 52% in FY24E and FY25E, respectively. Therefore, earnings is expected to
surge by 244.0% in FY24E, reversing the loss from FY23 and record at LKR 149.0Mn while it is
expected to further improve in FY25E to LKR 292.0Mn (+96.0% YoY). Despite relatively low ARR as
a result of heavy competition from hotels in the same location we expect rooms to fill up fast
with the benefit of the parent company SHOT. BUY
P/E 31 March
Revenue
EBIT
Net Profit
YoY Growth (%)
Valuations
PER (x)
PBV (x)
DPS
PER based Valuation
Earnings (LKR 'Mn)
No. of Shares ('Mn)
EPS
FY24E
FY25E
149
292
63
63
2.4
4.6
Expected Average PER
Target Price
18.0x
12.0x
42
55
First Capital
A Janashakthi Group Company
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