Stock Pick
Thomas Cook
Why Buy?
x CMP: 275.25 x PE: 87.10
n Spinning off India’s largest staffing
company into a separate entity
n Profit after tax margins have trippled
from 1.5 per cent to five per cent in FY18
*As on 26 June 18
Shares Rejig To Boost
Investor Value
Watch Out For
The tourism sector looks to restructure business
for better yields says Yagnesh Kansara
169.49
200
n Threat of competition from online
travel portals and unorganised travel
agents
n Concerns relating to safety of foreign
tourists visiting India
Financials
Net sales (` crore)
11,648
FY18
150
FY17
100
129.02
FY16
8,746
4,284
BSE Sensex
Thomas Cook
0
FY17
FY16
1 Jan 2015
T
Source : BSE India
homas Cook (India) Ltd
(TCIL) is the leading
integrated travel and travel
related financial services
company in the country.
It has presence in four different
verticals namely travels and corporate
services, human resource services,
financial services (foreign exchange)
and vacation ownership (Sterling
Holiday). The company derives 53
per cent revenues from HR services,
43 per cent from travels and related
services, three per cent from Holiday
Resorts and two per cent from
financial services.
It holds majority stake in Quess
Corp, a leading staffing firm in
India having presence across the
four verticals. Over FY16-9M FY18,
its travels business has posted 51
per cent revenue compounded
annual growth rate (CAGR) led by
acquisition of Kuoni Travels (SOTC).
38
26 Jun 2018
Quess Corp has posted 44
per cent revenue and 50 per cent
EBITDA (earnings before interest,
tax, depreciation and amortisation)
CAGR over FY13-18. TCIL is likely to
spin off shareholding of Quess Corp
in Thomas Cook. As a result Thomas
Cook shareholders would receive one
equity share of Quess for every 5.3
TCIL shares held. Thus, this would
waive off holding company discount
and the shareholders would get full
value in Quess.
However, there are concerns like
increase in organised low-cost travel
agents or slow- down in the economy.
For 9M FY18, company has posted
32 per cent revenue growth led by 29
per cent increase in human resource
(Quess) and 39 per cent growth from
travels segment. EBITDA increased
35 per cent year on year to `440 crore.
EBITDA margin marginally increased
to 5.1 per cent.
Outlook Money July 2018 www.outlookmoney.com
420
128
88
FY16
303
88
16.6
EPS (`)
614
FY18
FY18
FY17
OP (` crore)
50
PAT (` crore)
7.9
FY18
FY17
FY16
2.4
1.3
OP: Operating profit; PAT: Profit after tax;
EPS: Earnings per share; Source: Ace Equity
For financial year 2017, EBITDA
margin was at 3.7 per cent PAT surged
1.5x to `216 crore on the back of tax
write back of `32 crore versus `85
crore tax paid for 9M FY17. Other
income increased by 25 per cent to `74
crore. According to HDFC Securities,
TCIL’s revenue may see an upturn of
20 per cent CAGR over FY17-20E,
led by strong performance from HR
services and robust growth momentum
from the travels segment. It expects
EBITDA to post 28 per cent CAGR led
by turnaround in Sterling’s business
and strong show from travels. EBITDA
margin may expand 140 basis points
over FY17-20E. Strong revenues and
robust operating performance would
drive 75 per cent PAT CAGR over the
same period. It has recommended
to buy TCIL at current market price
(CMP) of `277. Investors can add on
declines to `260 with a target price of
`340.