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GVK Power & Infrastructure Overweight
GVKP.BO, GVKP IN
Foray into Indonesian airports: continuous capex
pursuits may further damage sentiment
• GVK is exploring a potential investment in 2 greenfield airports in
Indonesia – one at North Bali and the other at Yogyakarta, Java. The
company has signed an MoU with the Indonesian government at the
time of the President’s recent India visit.
• Management's rationale, takeaway from our chat: 1) South Bali
airport has reached peak capacity of 8m pax. 2) Expertise in constructing
/ managing airports in India (Eg: Mumbai, Bangalore). Management
clarified that investment figures have not been frozen yet, denying a
Bloomberg report of US$4B investment. They said it is just a MoU and
any capex commitment will be preceded by a detailed feasibility study.
• Indonesia fundamentals for airport investment fairly supportive:
Based on inputs from Aditya Srinath and team, North Bali is endowed
with land resources, and could support an airport. The local government
is tourism friendly, which might expedite clearances. International
tourist arrival at Bali has risen at c.10% last year.
• Our views on GVK’s strategy and cash flows: In our view, the stock
has a better chance to perform if markets see better cash flows from
existing airport assets, rather than new forays. We currently estimate that
the company will generate FCF in FY13. If GVK decides to pursue these
projects, investment time-frame would be 7-8 years in our view. Going
by thumbrules, our capex estimate would be roughly US$0.8-1B per
airport with terminal capacity of 10M pax and one runway.
• Any clarity on monetization of Mumbai real estate is the key stock
catalyst, while continued suspense on the same is a risk to our PT. Our
SOP-based Mar12 PT of Rs53 includes 21% each from Mumbai airport
and real estate, 15% from Bangalore airport and 39% from power. We
maintain that GVK is a deep value buy, but believe sustained capex
pursuits would continue to hamper near-term stock performance.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
GVK Power & Infrastructure Overweight
GVKP.BO, GVKP IN
Foray into Indonesian airports: continuous capex
pursuits may further damage sentiment
• GVK is exploring a potential investment in 2 greenfield airports in
Indonesia – one at North Bali and the other at Yogyakarta, Java. The
company has signed an MoU with the Indonesian government at the
time of the President’s recent India visit.
• Management's rationale, takeaway from our chat: 1) South Bali
airport has reached peak capacity of 8m pax. 2) Expertise in constructing
/ managing airports in India (Eg: Mumbai, Bangalore). Management
clarified that investment figures have not been frozen yet, denying a
Bloomberg report of US$4B investment. They said it is just a MoU and
any capex commitment will be preceded by a detailed feasibility study.
• Indonesia fundamentals for airport investment fairly supportive:
Based on inputs from Aditya Srinath and team, North Bali is endowed
with land resources, and could support an airport. The local government
is tourism friendly, which might expedite clearances. International
tourist arrival at Bali has risen at c.10% last year.
• Our views on GVK’s strategy and cash flows: In our view, the stock
has a better chance to perform if markets see better cash flows from
existing airport assets, rather than new forays. We currently estimate that
the company will generate FCF in FY13. If GVK decides to pursue these
projects, investment time-frame would be 7-8 years in our view. Going
by thumbrules, our capex estimate would be roughly US$0.8-1B per
airport with terminal capacity of 10M pax and one runway.
• Any clarity on monetization of Mumbai real estate is the key stock
catalyst, while continued suspense on the same is a risk to our PT. Our
SOP-based Mar12 PT of Rs53 includes 21% each from Mumbai airport
and real estate, 15% from Bangalore airport and 39% from power. We
maintain that GVK is a deep value buy, but believe sustained capex
pursuits would continue to hamper near-term stock performance.
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