Will Dreamfolks Services become a Multibagger?

 

The most affected sector during Covid-19 was the Travel Sector. This sector was the most undervalued during the time. But it was known that it will revive once Covid is over. The problem is when it will revive. The patience to let the sector revive was the key. So keeping this sector in focus, I saw that a company called Dreamfolks Services is coming out with an IPO in August, 2022. The price for the IPO was Rs. 308-326 per share.

DreamFolks Services Ltd is India's largest airport service aggregator platform facilitating an enhanced airport experience to passengers leveraging a technology-driven platform. Dreamfolks facilitates customers of Clients’ access to the following airport-related services (i) lounges, (ii) food and beverage (iii) spa, (iv) meet and assist, (v), airport transfer (vi) transit hotels /nap room access, and (vii) baggage transfer. They facilitate access to 100% of the 54 lounges currently operational in India. The business is an asset light model.

The one issue that I could see in the company was their revenue concentration during that time. They are heavily reliant on a few clients and derives a significant part of its revenue from lounge access-related services from select Clients.

The Q1FY24 results were not as good as the Q4FY23 results as shown below.

The reasons stated for such a bad result was that revenue in Q4FY23 included the impact of a one-off project up fees received during the quarter. One-off abnormal increase in Common Area Maintenance charges has led to increase in lounge cost. The escalation used to be 7-8% but this time it was 15%. Time lag between contract renewals on both supply and demand side has impacted the Gross margins. EBITDA decline in Q1FY24 is partly associated with ESOP charges.

Q2FY24 & Q3FY24 results were quite well as shown below.

Fundamentally, they have started diversifying their business into the following services.

They are also strengthening its global presence through partnership with Grey Wall – one of Russia’s leading lounge operator. They have also entered in to the Malaysian Market. They have on-boarded one of the key players in the airport lounge space in Malaysia, by offering thier technology w.r.t. card-based lounge benefit management. This is a different model where the lounge operator, in addition to being a service provider, also acts as a client for us to provide such lounge benefit management platform. They have also collaborated with Plaza Premium Group.

In order to increase their client base, they have on boarded new age fintech companies like FI Money and also added an e-commerce company to their roster of clients. They are also expanding their presence in railway lounges by partnering with new railway lounges in Chennai and Old Delhi. They continue to maintain 100% coverage in railway lounges across India as well. They are also adding new services like Pathology testing across India, through a strategic partnership with Healthians & Gifting services, through collaboration with My Flower Tree, allowing customers to send flowers, cakes, planters and more to friends and family. They have also partnered with Eco-Mobility, a car rental service provider. They will now extend its fleet of luxury chauffeur-driven vehicles to DreamFolks customers under the newly launched DreamFolks Club memberships. They have also collaborated with a premium Salon chain named Looks Salon which shows their diversification efforts beyond travel. They have also diversified by providing E-Sim Solutions for International Travellers & have already on boarded one of the largest network providers to offer the solution.

These fundamental changes should definitely help them achieve diversified revenue streams but again patience is key in these cases.

Until recently, the stock was not covered by any big brokerages. In February, 2024, Motilal Oswal initiated coverage on the stock and sees an upside of 34% in the stock.

The company listed at a price of 550 and then corrected back to Rs. 350 in Dec, 2022. When the company declared Q4FY23 results, they had seen a very huge YOY growth in FY23 vs FY22 results which took the price to make a high of almost Rs. 850 in July, 2023. The price then corrected and made a low of Rs. 450 in Sept, 2023 after the Q1FY24 results were declared. The price has also been very range bound between Rs. 450 & Rs. 600 during Q2 & Q3 results. I have accumulated this stock with an average price of Rs. 515 hoping that the companies changing fundamentals will discount in the price and it will go back to the levels of Rs. 850.

Seeing the fundamental changes in the company, I think this stock should become a Multibagger in the coming future but need to wait for the story to pan out. Patience in holding this stock is key to generating returns.

Let me know what you think in the comments section!

Happy Investing!!!!!