Clearly, Samhi Hotels is facing significant challenges in their business.
Let’s see some key points that we found out through some due diligence while analysing the standalone data of the company:
Profitability Challenges – Samhi Hotels has struggled to generate profits over the past 5 years. This reflects management’s inability to efficiently grow the business. Consistent profitability is important in the hospitality industry.
(Source: Finology Ticker)
Questionable Accounting Practices – The mention of capitalizing maintenance capex in the latest concall raises suspicion. Maintenance expenses should typically be expensed and treated as operating expenses. This distorts the financial statements and misleads the investor.
(Source: Latest Concall)
Du Pont Analysis(insight into drivers of ROE) –
- Asset turnover: Poor asset turnover suggests that the company is not efficiently utilizing its assets to generate revenue.
- Net Margins: Weak net margins suggest challenges in managing costs and pricing.
- Leverage: The debt burden is evident from the leverage component.
(Source: Finology Ticker)
Debt to Equity Ratio and Interest Coverage Ratio- The Low statistics are a red flag for financial risk. It warrants attention as it suggests that the company is accumulating losses and indicates that the company’s earnings are insufficient to cover its interest and debt.
(Source: Finology Ticker)
What do you think about the future of the company?
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