Mahindra Holidays is one of the stock which has all components of a great investment stock – Value, Growth, Stability, and Management.
I invested in the stock at 2200 Market cap and think its still worth investing.
Value: It has assets of 1200cr, hard cash 1170cr, deferred revenue of 5000+cr (of which 75% is profit as major expenses are already booked in first year). ~200cr+ free cashflow/year and growing.
Stability: It has 270K+ members out of which 70% have already paid entire membership amount, rest of them are paying in instalments. Good visibility for their membership tenures as most of them are members for 25years. This results in better prediction of future business and in worst case of covid the occupancy was very very high. Only for the lockdown periods it could not earn resort income.
Members in instalments will pay all instalments in 4 years and the money is safe as unlike other loans here the asset (rooms) are with MHRIL only so no credit loss.
Growth: As the membership grows the company is building room inventory. I think the pace is less but they can easily add 10% inventory per year leading to more members and thus resort income.
Big sum (VO) is taken in advance to build the inventory, and then money is taken annually for maintenance. So, company is practically paying nothing to build the hotels (biggest cost in hospitality business) and pay staff… everything is paid in advance by the members themselves. As there is no investment… consider the ROIC? On top of that ROCE is high, and when the membership ends the same membership is sold to another high paying members which results into much much higher ROCE as property life is 5-10x the membership life.
Management: Mahindras, thats it.
In my opinion, the stock ticks all the right boxes as explained above (Value, growth, stability, mgmt) and all that comes with risk free (or read less risk) environment and longevity of the business. I consider it as a compounding machine where practically no investment is done by company themselves.
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