AnilanaHotelsandPropertiesLimited

InitialPublicOffering40MillionsharesatRS.12.00|June2013

Background

AnilanaHotelsandPropertiesLimited(AHAPL)incorporatedinMay2010isin the business of acquiring and developing, and managing high end properties in key tourist destinations. It aims to become the leading hotel company in new tourism zones within the island. AHAPL is also an investment holding companyandalreadymaintainapropertyportfolio. AHAPL has already acquired lands in Nilaveli, Trincomalee, Vakarai, Kalkuda, Panichchankerni, Dambulla and few more in the Eastern Coastal line of Sri Lanka.Itplanstoconstruct7resortstylehotelsunder2phases. Nilaweli, Pasikuda and Dambulla hotels would be constructed under PhaseI. Panichchankerni, Selladiv, Vakarai and Trincomalee would be developedunderPhaseII.

LONGTERMBUY
IssuePrice(Rs.) Noofsharestobeissued Maximumno.ofsharesto beissuedifoversubscribed NoofsharesaftertheIPO Iftheoptionisexercised Amounttoberaised(Rs.) 12.00 40,000,000 80,000,000 422,483,600 960,000,000

Openingdateoftheoffering 12June2013 Closingdateoftheoffering Minimumsubscription 1July2013 100Shares

ObjectivesoftheIssue 1.TofinancethedevelopmentofhotelsunderPhaseI. 3 Hotels are being constructed consisting approximately 165 hotel roomsand105Starvillas. The total gross development cost of Phase 1 is estimated to be RS. 3.3Bn. Value Rs.Mn 450 800 480 480 1,078 3,288

Phase1Financing PresaleofVillas SubscriptionreceivedbywayofPrivatePlacement* ProposedIPO i)Issueof40mnsharesatRs.12.00 ii)issueoffurther40mnsharesifoversubscribed** Debt Total

* Shares issued by way of private placement done at Rs.10.00, is locked in for periodof9monthsfromthedateoflisting. **In the event of the option being exercised, such funds would be used to reducethedebtcomponentofPhaseI.

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2. To enable broader scale of investor ownership and access to capital markets. AllotmentStructure Category RetailIndividualInvestors Additionalsharesiftheoptionisexercised UnitTrusts Additionalsharesiftheoptionisexercised NonRetail Additionalsharesiftheoptionisexercised ProposedDevelopmentPlan Phase Property DevelopmentType 70rooms 60rooms 35roomsand10villas Development Cost(Rs.Mn) 1,200 1,000 931 Commence Construction 15Aug2010 01Mar2011 01Apr2012 01Apr2013 01Mar2013 01Sep2013 01Jan2014 Commence Operation 01Mar2013 01Jul2013 01Sep2013 01Jul2014 01Sep2014 01Aug2014 01Jul2015 Noofshares 16,000,000 16,000,000 4,000,000 4,000,000 20,000,000 20,000,000 50% 10% %ofsharesoffered 40%

PhaseI Nilaveli Passikudah Dambulla

PhaseII Pannichankerni 60roomsand25villas SelladivIsland Vakarai PropertiestobeDevelopedUnderPhaseI Nilaveli AHAPL owns two beachfront properties in Nilaveli in extent of approximately 5 Acres valued at RS. 240,921,000.Further, three lands have been purchased by thecompanyatotalextentofthelandbeing2Acres,2Roodsand24.98Perch, valuedatRS.73,321,000. A unique site with a shape of an axe with a sea front of 44m will be developed tocaterhighendtourists. Facilitiesattheresortinclude: 62roomsinitiallywith8addingtothetotalaccommodation Adeckwithoutdoordinning BlueLagoon 15waterbungalows,10villas 100roomsand20villas 100roomsand10villas

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2swimmingpoolswithshallowends Poolsidebar 2restaurants Indoorbar,coffeeshop,shops

Pasikuddah Eastern Development Enterprises (Pvt) Ltd (EDEPL) the Companys fully owned subsidiary, acquired 6 acres beach front property with access to Pasikuddah Beach, on a 30 year lease, commenced on June 2009. Estimated leasehold market value of the property is stated as RS. 283,000,000. (Identified in the balancesheetunderleaseholdassetatcost) ThehotelhasstarteditscommercialoperationsinMarch2013. Facilitiesattheresortinclude: Dambulla The property is owned by Dambulla Hotel Resort and Country Club (Pvt) Ltd, (DHR), which a 51% is owned subsidiary of South Asia Asset Management (Pvt) Ltd, (which is a fully owned subsidiary of the Company). The balance 49% is directlyheldbytheCompany. The property in extent 39 Acres 2 Roods and 5.25 Perches is valued at RS. 960,000,000. Facilitiesattheresortinclude: FundamentalAnalysisDivision CapitalTRUST Research(Pvt)Ltd.
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60roomsincludingsingle,double,andduplexchalets Loungeandswimmingpools Restaurantandbars Openrestaurantonthedeck

35Rooms;numberofunitstobeextendedinthefuture Agriculturalzoneasbufferbetweencommercialandresort Resortand10Villas Horseridingschool

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OtherInvestmentProperties AHAPListobepositionedasaleadingpropertyholdingcompanyinSriLanka. Kalkuda: The property is owned by AHAPL and is located in the Batticalo District. Pasikuddah: Two properties are owned by AHAPL in Pasikuddah, one property in extent 1 Acre 1 Rood and 6 Perches (valued at RS. 9,270,000) and other property being the adjoining land in extent of 1 Rood, 2 Perch (valued at 1,470,000) AHAPLListofPropertiesatCostandRevaluedValue Property BlueLagoon Dambulla Vakarei MedwayEstate&Trincomalee Panichchankerni EastwindResort Karuncheri MedwayEstate&Trincomalee MedwayEstate&Trincomalee MedwayEstate&Trincomalee PasikuddahStaffquarters Source:AHAPLProspectus SpecialConcessionsforPhaseI A 15 year tax exemption period relating to the income tax for AHAPL and EDEPL and a 9 year tax exemption period relating to the income tax for DHR havebeenallowed. Capital employed shall not be liable to acquisition, expropriation and/ or nationalizationandcapitalinvestmentofnonresidentshareholdersandforeign companies as well as any proceeds upon liquidation shall be transferable in accordance with the prevailing exchange control restrictions for AHAPL, EDEPL andDHR. All imports of /local purchases of project related item as approved by the Boardshallbefreefromcustomsduty foraperiodof18monthsfromthedate hereofforEDEPL. DHR shall qualify for determent or an exemption from the payment of Ports andAirportsDevelopmentLevy(PAL)intermsofPALAmendmentActNo10of 2012. Cost Rs. 7,900,000 7,900,000 650,000 39,450,000 90,000,000 1,000,000 5,459,000 17,902,600 21,156,502 4,640,625 883,000 196,941,727 Revalued Rs. 420,000,000 960,000,000 312,800,000 240,921,000 136,000,000 76,700,000 9,270,000 23,550,000 43,396,000 6,375,000 1,470,000 2,230,482,000

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TargetMarketandBrandingStrategy Average room rate USD 160: Anilana Hotels will target the high end of the tourist segment and will be positioned as a 5 star hotel. The starting gross averageroomrate(ARR)willbeUSD160andwillincreasetoUSD330inthe5th yearofoperation. Set to attract high spending foreign tourists: The hotel will offer 4 types of accommodation, catering to 4 key sub segment of the target market. It aims high spending tourist from Europe, China and India. The management is attracting85%ofbookingsthroughforeignmarkets. Internationally recognized brand: The management is keen to bring in an internationally reputed hotel management company who would bring with themagloballyrecognizedhospitalitybrand. FinancialHighlightsandRatios FortheYE31stMarch Revenue Costofsales GrossProfit Otherincome Expenses AdminExp/StaffCost Dep&AmortizationCost Otheroperatingexpense BusinessPromExp RevaluationDeficit Netgain/(loss)onfinassetsat FV Profitbeforeinterestandtax FinanceCost Profit/Lossbeforetaxation Incometax Profit/Lossfortheyear Attributableto: Equityholdersoftheparent Noncontrollinginterest
AllfiguresareinRsMn.

2012 0.0 0.0 0.0 30.7 84.8 0.0 0.0 3.9 55.2

2013 1.5 0.0 1.5 5.4 121.4 0.0 0.0 1.8 0.0

2014E 879.0 206.2 672.9 92.7 114.5 83.3 309.8 17.6 0.0 0.0 240.5 154.4 86.1 0.0 86.1

2015E 1,466.6 351.0 1,115.5 9.0 156.3 101.2 480.9 29.3 0.0 0.0 356.7 166.3 190.4 0.0 190.4

2016E 2017E 2018E 2,064.3 2,477.2 2,972.6 494.1 593.0 711.5 1,570.2 1,884.2 2,261.1 9.9 10.8 11.9 171.9 101.2 657.3 41.3 0.0 0.0 608.3 135.7 472.6 0.0 472.6 189.1 101.2 782.3 49.5 0.0 0.0 772.8 105.2 667.7 0.0 667.7 208.0 101.2 931.7 59.5 0.0 0.0 972.5 74.6 897.9 0.0 897.9

0.0 2.8 (113.2) (119.1) 0.9 59.0 (114.1) (178.1) (2.4) 0.0 (116.4) (178.1)

(116.4) (0.0)

(178.1) 0.0

86.1 0.0

190.4 0.0

472.6 0.0

667.7 0.0

897.9 0.0

Note: The stated income statement forecast is as per Anilana Hotels and PropertiesLimitedbasedonbelowassumptions. IncludesforecastedfinancialsofNilaveli,PasikudaandDambulla. Totalnoofrooms:165

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Average room rate starts at Rs 19,608 for FY 2014 and increases up to Rs40,659byFY2018. Occupancy level is at 42% for FY 2014, 64% for FY 2015 and 75% for FY20162018 Roomcostofsales;15%ofRoomRevenue Foodcostofsales;40%ofFoodRevenue Beveragecostofsales:35%ofBeverageRevenue Payroll & staff related cost: RS. 3.6 Mn, RS. 3.7 Mn and RS. 2.2 Mn per monthforPasikuddah,NilaveliandDambullahotelsrespectively.

PowerandEnergy:12%oftotalrevenue Repairsandmaintenance:3%oftotalrevenue MarketingandPromotional:2%oftotalrevenue TourismIndustryOutlookinSriLanka Industry players and the Sri Lankan government works in tandem towards achievingthegoalofattracting2.5Mntouristsinyear2016. Major structural developments are being initiated by the government to cater to the identified hot spots in East and West Coast of Sri Lanka. Massive investments in projects such as highway constructions, air and sea port constructions and development, property development, city beautification and upgrading projects have contributed positively for the improvement of the sectoratasteadyphase. The industry trends such us Cultural Tourism, Nature Tourism and Eco Tourism are emerging; the industry players have the opportunity of making the most of rich bio diversity and cultural diversity to capture the international markets easily.

Sri Lanka has become the most popular tourist destination for the growing Indian middle class on the grounds of proximity, diversity and affordability. In addition, the Middle Eastern tourist arrivals are also blooming as a result of new diplomatic relationships between the countries. Amid such reviving market, Anilanas strategically located and aesthetically concept hotel chain can definitely upbeat the expectations of its selected tourist segment blending international standards with Sri Lankanhospitality. AHAPLIPO
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KeyRatios ForYE31stMarch Noofsharesinissue(Rs.Mn) EPS(Rs.) NAV(Rs.) IssuePrice(Rs.) PE(x) PBV(x)

2012 2013 422.48 422.48 (0.28) 7.0 12 (43.5) 1.7 (0.42) 6.9 12 (28.5) 1.8

2014E 2015E 2016E 2017E 2018E 422.48 422.48 422.48 422.48 422.48 0.20 9.3 12 58.9 1.3 0.45 12.1 12 26.6 1.0 1.12 15.4 12 10.7 0.8 1.58 19.3 12 7.6 0.6 2.13 23.7 12 5.6 0.5

Pleasenote:CalculationsaredoneusingthenumberofsharessubsequenttotheIPOfor comparisonpurposes.

Valuationbasedonforecastedearnings(aspertheprospectusAHAPL) ForwardPEof58.9xforFY2014andPEof26.6xinFY2015comparedto asectorPEis37.7x ForwardPBVof1.3xforFY2014andPBVof1.0xinFY2015 comparedtoasectorPBVof2.1x Considering the revival in the tourism industry the share can generate sizable returnsinthelongterm.

The information and the opinions contained herein were complied by Capital Trust Research (Pvt) Ltd, and are based on information obtained from reliable sources in good faith. However, such information has not been independently verified and no guarantee, representation or warranty expressed or implied is made by Capital Trust Research (Pvt) Ltd as to its accuracy or completeness. This report isnot and should not be construed as an offer to sell ora solicitation of an offer to buy any security. Neither Capital Trust Research (Pvt) Ltd, nor its group companies, directors or employees can be held liable whatsoever for any directorconsequentiallossarisingfromanyuseofthisreportortheinformationcontainedherein.

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