Bright Horizons: Navigating Tourism's Growth Revival
JOHN KEELLS HOTELS PLC
KHL.N0000
Current Price: LKR 23.40
Fair Value: LKR 35.00 (FY25E)
BUY
P/E 31 March
Estimates (LKR 'Mn)
Revenue
FY19
FY20
FY21
FY22
FY23
FY24E
FY25E
FY26E
11,033
1,087
9,712
-764
3,661
-4,777
13,355 28,835
-190
1,742
34,921
3,667
42,647 61,599
6,056
9,240
817
-1,201
-5,096
-1,203
-321
1,693
3,395
5,700
0.6
(0.8)
(3.5)
(0.8)
(0.2)
1.2
2.3
3.9
-247%
-324%
76%
44%
427.6%
100.5%
67.9%
41.7x
N/A
N/A
N/A
N/A
20.1x
10.0x
6.0x
1.2x
1.2x
1.4x
1.1x
1.0x
1.0x
0.9x
0.8x
0.2
0.2
0.4
0.8
0.6%
0.0%
0.0%
0.0%
0.0%
0.7%
1.8%
3.3%
Dividend Payout
ROE
26.7%
0.0%
0.0%
0.0%
0.0%
15.0%
18.0%
20.0%
2.8%
-4.2%
-20.9%
-4.0%
-1.0%
5.0%
9.2%
13.8%
80.3% owned Subsidiary of Premiere John Keells Holdings
John Keells Hotels PLC is one of Sri Lanka's largest hotel operators, with a portfolio of 12 resorts
across Sri Lanka (1,022 rooms) and Maldives (454 rooms) holding 1,476 hotel rooms in total. All
of KHL hotels are under the brand of Cinnamon and the latest addition during FY21 was
Cinnamon Bentota Beach which was reconstructed targeting the luxury market. Group
reopened Hikka Tranz by Cinnamon in FY22 while construction of Cinnamon Red Kandy (216
rooms) was under under construction and was planned to be completed by FY25E. Under the
Maldives segment, 4 star hotels were reconstructed/refurbished in FY20 & FY21 with the total
of 454 rooms targeting the upper and luxury tourists.
Topline drop by 3.3% YoY in 1QFY24 hampers profitability
KHL increased its losses during 1QFY24 to LKR 960.4Mn cf. LKR 464.2Mn in 1QFY23 impacted by
escalation of costs. The poor bottom-line performance stemmed largely from drop in top-line,
which declined by 3.3% YoY to LKR 6.0Bn. Meanwhile, with the rise in costs, GP margins
hampered by 530bps to 57.7% largely due to incremental expenses at the Maldivian resort
business (primarily due to the delay in lowering fuel prices in-line with the global crude oil
prices). Despite the interest rate reduction, net finance cost remained elevated and recorded at
LKR 698.2Mn, which further hampered the profitability growth.
Tourist arrivals in Maldives surpassed pre-pandemic levels which benefits higher occupancy
Maldives segment contributed over 70% of the group's revenue and we expect the contribution
of this segment towards the profitability to grow over the coming years due to the speedy
recovery of tourism in Maldives which already surpassed the prepandemic levels. On a silver
lining, the prospects for the Sri Lankan Resorts segment remain positive as the recovery in the
segment grows faster than anticipated which translated to pick up in occupancies at Sri Lankan
Resorts segments (55.0% in 1QFY24 cf. 33.0% in 1QFY23). Considering the potential outlook, we
expect KHL to reverse losses and to record profit of LKR 3.4Bn in FY25E surpassing the
prepandemic earnings. BUY
EBIT
Net Profit
Adjusted EPS (LKR)
YoY Growth (%)
Valuations
PER (x)
PBV (x)
DPS
DY (%)
PER based Valuation
Earnings (LKR 'Mn)
No. of Shares ('Mn)
FY24E
FY25E
1,693
3,395
1,456
1,456
EPS
1.2
2.3
Expected Average PER
Target Price
22.0x
15.0x
26
35
First Capital
A Janashakthi Group Company
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