We maintain our ?buy? rating on Cox & Kings as valuations appear attractive. We believe debt reduction is the single-most important parameter for the stock?s re-rating. Management has guided to repay R400-500 crore in FY15 ? execution of same is key. We value the company at 8x FY15e EPS and revise our target price to R209 per share (earlier R180). Valuation multiple is likely to expand post debt reduction.
Cox & Kings? Q3FY14 PAT at R309 million rose 9.3x y-o-y due to forex gain and impact of incorporation of Meininger earnings into segment earnings Q1FY14 onwards. India leisure revenue at R954 million grew 13% y-o-y. Ebitda margin (adjusted for forex gain) improved marginally from 44.2% in Q2FY13 to 45.2% in Q3FY14. Margin surged as employee expenses plummeted 300 bps y-o-y, offset by 240 bps y-o-y jump in other expenses.
Camping, CNK?s cash cow, revenue was almost nil due to seasonality in the business. Education revenue at R1.17 billion surged 50% y-o-y. Adjusted for Meininger revenue of R310 million, education revenue rose 10% y-o-y despite overall weak demand. Going forward, management remains positive on this business as it has already sold 60% slots for FY15. Overall education ebitda margin was at 26.5%.
Edelweiss