Sterling Holiday Resorts, a Loss Making Company, but Attracts Jhunjhujwala

Sterling Holiday Resorts, a Loss Making Company, but Attracts Jhunjhujwala

Sterling Holiday Resorts - Latest Results

(in Cr.)
Sep-11
Jun-11
FY10-11
Revenue
10.95
16.08
39.46
Net Profit
-11.71
-4.85
-16.95
EPS
-2.34
-0.99
-0.89
Cash EPS
-1.82
-0.78
-2.7
OPM %
-77.63
-15.48
-27.82
NPM %
-106.91
-30.17
-42.94
 
 
 
 
Sterling Holiday Resorts - Latest Results

Sterling Resorts - Share Price Movement

 
 
 
Weekly H/L
86.3
80
Monthly H/L
88
73
52 Weeks H/L
129.2
55.1
 
( 20 Jul 11 )
( 1 Jul 11 )
Delivery / Var+ELM %
75.67
32.39
 
 
 
Sterling Resorts - Share Price Movement

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Sterling Holiday Resorts, a Loss Making Company, but Attracts Jhunjhujwala


Loss making company quotes a high price in stock markets

Sterling Holiday Resorts has produced poor results for the second quarter ended 30.09.11. While its revenue has come down appreciably, its net loss has increased – in fact more than doubled. But still, the shares of the company are being traded in the Indian stock markets at a relatively high price of Rs.81.05 (BSE 06.01.12). Sterling Holiday plans to add 300 rooms and to refurbish its existing rooms. It also wants to increase its timeshare subscribers. The concept of timeshare has taken a deep root in India and Mahindra Resorts is the market leader in this segment. According to this timeshare concept, a subscriber can buy a particular property or room for a fixed amount and can avail holidays for the fixed number of days in the property he has purchased or in another property with the permission of the company. The company is confident of making operating profit next year. But when the company will start making a net profit is not known. It is not the operating profit that interests an investor, but the net profit that attracts prospective customers and investors.

Expansion and modernisation

Siddharth Mehta is the Chairman of Sterling Holiday. The company will be refurbishing its properties at an investment cost of around Rs.50 crore. To bridge the gap between timeshare holders and room-day, the company is planning to acquire new properties on long term lease in two to three years time. The company possesses around 56000 active members in its register. The company is losing Rs.100 crore every year because of the inactive members. Sterling Holiday acquired 53-rooms property at Thekkadi on long term lease some time back.

Geographic spread

At present Sterling Holiday has more than 1300 room-and-cottage in 13 locations. These include Gangtok, Darjeeling, Kodaikanal, Goa, Manali, Lonovala, Mussoorie, Munnar, Yercaud and Ooty. Sterling Holiday secured over Rs.120 crore funds recently by issue of new warrants and equities to high net worth individuals like Gopikishan Damani, Radhakishan Damani and Jhunjhunwala and also from reputed institutions like India Horizon Fund, Bay Capital Investment and India Discovery Fund. Damanis and Jhunjhunwala invested more than Rs.80 crore for a 14% stake in the company. This shows the reputation the company is enjoying among the high net worth individuals and institutional investors inspite of it being a loss making company. Now one can understand why its shares are quoting at a relatively high price in the stock markets. Ramesh Ramanathan is the Managing Director of the company.

Thekkady facility in Kerala

Sterling Holiday’s addition of a new property at Thekkady in Kerala styled as Woods n Spice has come after several years. This is the company’s 14th resort. The resort has 53 rooms including tree houses, mud houses, standard rooms, suites and tribal cottages. The resort has a wellness spa and a temperature controlled swimming pool.

I leave the decision to the investors

Now coming to the conclusion and final moment of this article, I get confusion. I could have easily dismissed this loss making company and advised the investors to avoid investing and the existing investors to switch over to State Bank of India. After all who will like to invest in a loss making company at a high price? But one factor is holding me to advice like that. That factor is JhujJhujwala’s entry into the company. Wall Street always looks at the investments Warren Buffet makes. So also Indian stock markets are constantly seeking to find out in which companies Jhunjhunwala is making investments. If Jhunjhunwala is investing in Sterling Holiday, there is something in it to be probed. Perhaps some invisible factor may be there that might have prompted Jhunjhunwala to take a decision like this. I do not know what this invisible factor is. Therefore I leave it to the investors to decide for them whether to enter into this company at this price. I have presented all the facts about the company – both plus and minus. It is left to the individual investors to take an investment decision. Good luck.

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