Cox & Kings

Cox and Kings (India) is entering the capital market on 18^th November, 2009 with a public issue of 1.85 crore equity shares of Rs.10 each, in the band of Rs.316 to Rs.330. Of this, fresh issue is of 1.55 crore shares while offer for sale is of 30.47 lakh shares.

The company is a leading global tour operator with a strong brand equity, which has evolved over a period of 250 years, and was ranked number 1, in the top brands in India, and ranked 152^nd amongst the top 1000 brands in Asia Pacific region. The company also has strong network of 255 points of presence, covering 164 locations, through a mix of 14 branch sales offices located in the top 14 cities of India. The company has its global presence in 19 countries, through its subsidiaries, branch offices and representative offices.

The business of the company is broadly categorized as Leisure, Travel, Corporate Travel, Forex and Visa Processing. In leisure travel it has three sub-segments, i.e., Outbound travel, Inbound Travel and Domestic Travel. The company has 26 subsidiaries across the globe to manage and control the business of the company.

The financial performance of the company is quite comforting, with total income being placed at Rs.294 crores for the year ending March 09, with PAT at Rs.62.81 crores, resulting in an EPS of Rs.22.50. For 3 months ending June 09, the total income of the company was placed at Rs.116 crores, with PAT at Rs.40.58 crores, resulting in an EPS of Rs.14.55 for the quarter. However, present equity of the company is placed at Rs.47.47 crores which will rise to Rs.62.92 crores, post this IPO.

The company has been showing a consistent growth in its topline and bottomline for over the last 5 years. Total income of Rs.66 crores in FY06, grew to Rs.294 crores in FY09, while PAT rose to Rs.62.81 crores in FY09 from Rs.17.38 crores in FY06. In the recent past, share of unorganized players are shifting to organized players like Cox and Kings, which is reflected in the growth of 23% achieved by the company, between FY04 to FY08 against CAGR of 15%, achieved by the industry, in the same period.

The only comparable listed peer for the company is Thomas Cook, now ruling at Rs.64, with face value of Re.1. This company has posted an EPS of Rs.2.40 for the year ending Dec.08 on a total income of Rs.310 crores. For 9 months ending, it had a total income of Rs.208 crores, with an EPS of Re.1.10 for 9 months. So, even if we assume an EPS of Rs.2 for the year ending Dec.09, share is presently ruling at a PE of 32 times.

As against this, the company should be able to post a PAT of Rs.120 crores on total income of Rs.390 crores for the year ending March 10, which looks conservative, as PAT for the first quarter ending June 09 has already been placed at Rs.40.58 crores. This will result in an EPS of Rs.19 on fully diluted equity of Rs.62.92 crores. So, even taking the upper band of Rs.330 per share it is issued at a PE of about 18 times, leaving ample margin of safety.

After a long time, we have come across a comforting IPO, which looks capable to give listing gain as well as much more, if held on with 12 months view. Issue is recommended even at the upper band of Rs.330 per share.