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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
● In our new report Dark Clouds: Prefer cashflows over leverage,
we initiate coverage of Oberoi Realty with an OUTPERFORM
rating and a target price of Rs309.
● With five land parcels located in Mumbai, Oberoi Realty offers an
attractive play on the Mumbai real estate. Unlike other developers,
we perceive its landbank of 22.2 mn sq ft to be well-defined and
with good chances of being monetised over the next 7-8 years.
● Oberoi holds a successful track record of maintaining high ROEs
and generating positive cashflows from operations. Even during
the downturn, Oberoi’s ROE stood at 20% in FY09 and we expect
healthy ROEs of 23-25% to be maintained in FY11-13.
● Our March 2012 NAV for Oberoi Realty stands at Rs338 per
share, which includes Rs157 from development assets and Rs138
from rental assets. We have valued Oberoi Realty at 10%
discount to forward GAV and expect further upside to come from
deployment of net cash on hand in value-accretive opportunities.
Clear visibility of land bank monetisation
Oberoi Realty and its subsidiaries have five land parcels located in
Mumbai and one in Pune, resulting in Mumbai constituting 94% of its
total landbank of 22.2 mn sq ft sellable area. Unlike other developers,
we perceive Oberoi Realty’s landbank to be well-defined and one that
has good chances of getting monetised over the next 7-8 years.
Missed land buying opportunities but well-placed
The company missed on the opportunity of buying land during the
downturn but as a result of its healthy balance sheet and Rs14 bn of
net cash on hand, it is well-positioned to make value-accretive land
acquisitions over the next 3-4 years leading to sustained NAV growth.
We expect Oberoi Realty to sell 1.1 mn sq ft and 1.5 mn sq ft in FY12
and FY13, respectively, and expect the existing 1.3 mn sq ft lease
portfolio to grow to 3.5 mn sq ft by FY13. Rental income is expected to
form 17% of total income by FY13, which should provide stability to its
earnings and cashflows. Revenues and net income are expected to
record 29% and 23% CAGR, respectively, over the next three years.
ROEs to remain strong, strong cash flows ahead
Oberoi Realty holds a successful track record of maintaining high
ROEs and generating positive cashflows from operations in recent
years. Even during the downturn, Oberoi’s ROE stood at 20% in FY09
and we expect healthy ROEs of 23-25% to be maintained in FY11-13.
We expect strong post-tax-and-interest operating cashflows of Rs3.9
bn and Rs5.9 bn for FY12 and FY13, respectively
Initiate with OUTPERFORM, target price of Rs309
We initiate coverage of Oberoi Realty with an OUTPERFORM rating and
target price of Rs309, placing it at a 10% discount to our March 2012
GAV. Our forward NAV of Rs338 includes Rs157 from development
assets and Rs138 from rental assets. We believe that unlike other
developers, Oberoi Realty’s entire NAV in our valuation comes from the
next 7-8 years and incremental value could come from deployment of
cash in growth opportunities, offering further upside.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
● In our new report Dark Clouds: Prefer cashflows over leverage,
we initiate coverage of Oberoi Realty with an OUTPERFORM
rating and a target price of Rs309.
● With five land parcels located in Mumbai, Oberoi Realty offers an
attractive play on the Mumbai real estate. Unlike other developers,
we perceive its landbank of 22.2 mn sq ft to be well-defined and
with good chances of being monetised over the next 7-8 years.
● Oberoi holds a successful track record of maintaining high ROEs
and generating positive cashflows from operations. Even during
the downturn, Oberoi’s ROE stood at 20% in FY09 and we expect
healthy ROEs of 23-25% to be maintained in FY11-13.
● Our March 2012 NAV for Oberoi Realty stands at Rs338 per
share, which includes Rs157 from development assets and Rs138
from rental assets. We have valued Oberoi Realty at 10%
discount to forward GAV and expect further upside to come from
deployment of net cash on hand in value-accretive opportunities.
Clear visibility of land bank monetisation
Oberoi Realty and its subsidiaries have five land parcels located in
Mumbai and one in Pune, resulting in Mumbai constituting 94% of its
total landbank of 22.2 mn sq ft sellable area. Unlike other developers,
we perceive Oberoi Realty’s landbank to be well-defined and one that
has good chances of getting monetised over the next 7-8 years.
Missed land buying opportunities but well-placed
The company missed on the opportunity of buying land during the
downturn but as a result of its healthy balance sheet and Rs14 bn of
net cash on hand, it is well-positioned to make value-accretive land
acquisitions over the next 3-4 years leading to sustained NAV growth.
We expect Oberoi Realty to sell 1.1 mn sq ft and 1.5 mn sq ft in FY12
and FY13, respectively, and expect the existing 1.3 mn sq ft lease
portfolio to grow to 3.5 mn sq ft by FY13. Rental income is expected to
form 17% of total income by FY13, which should provide stability to its
earnings and cashflows. Revenues and net income are expected to
record 29% and 23% CAGR, respectively, over the next three years.
ROEs to remain strong, strong cash flows ahead
Oberoi Realty holds a successful track record of maintaining high
ROEs and generating positive cashflows from operations in recent
years. Even during the downturn, Oberoi’s ROE stood at 20% in FY09
and we expect healthy ROEs of 23-25% to be maintained in FY11-13.
We expect strong post-tax-and-interest operating cashflows of Rs3.9
bn and Rs5.9 bn for FY12 and FY13, respectively
Initiate with OUTPERFORM, target price of Rs309
We initiate coverage of Oberoi Realty with an OUTPERFORM rating and
target price of Rs309, placing it at a 10% discount to our March 2012
GAV. Our forward NAV of Rs338 includes Rs157 from development
assets and Rs138 from rental assets. We believe that unlike other
developers, Oberoi Realty’s entire NAV in our valuation comes from the
next 7-8 years and incremental value could come from deployment of
cash in growth opportunities, offering further upside.
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