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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 cash flows over leverage,
we initiate coverage of Prestige Estates with an OUTPERFORM
and a target price of Rs180.
● Prestige’s well-diversified portfolio provides quality exposure to
the Bangalore property market. The company has development
rights over 57.3 mn sq ft of area, of which 64% is intended for sale
purposes and 36% for rental purposes.
● We like Prestige for its high RoEs, which are expected to remain
high in the 19-21% range, low gearing of 0.2x as of FY11E, and
strong operating cash flow generation prospects. Rental assets
provide good diversification to its revenue and net earnings. We
expect revenue and PAT to clock 44% and 63% CAGR over the
next three years.
● We value Prestige Estates at a 30% discount to March 2012 GAV,
owing to its Bangalore market concentration risk and any
slowdown in the commercial real estate segment. Our forward
NAV for Prestige stands at Rs261/share.
Diversified, quality exposure to Bangalore real estate
Prestige Estates, with its well-diversified portfolio provides quality
exposure to south Indian market, especially Bangalore. The company
has development rights over 57.3 mn sq ft of area, which includes
28.4 mn sq ft of saleable area (Prestige’s share) and 11.0 mn sq ft of
leasable area (Prestige’s share). Bangalore and Chennai constitute
73% and 14% of the developable area, respectively. By type of
development, 64% of developable area is intended for sale purposes
while 36% of developable area is intended for rental purposes.
Strong execution track record and brand name
Prestige has more than 24 years of experience in real estate
development and has completed 150 projects spanning 34.2 mn sq ft
till date. Prestige has also entered into strategic partnerships with
reputed and experienced players such as CRIDF, Oakwood
Management Services, Marriott Hotels India and Hilton International to
develop and manage their retail and hospitality projects
Strong cash flows and high RoEs expected ahead
We expect Prestige’s RoEs to remain high in the 19-21% range over
FY11-13E. Return on capital employed (RoCE) is also expected to be
healthy at 16-17% for FY12 and FY13, respectively. Prestige’s net
debt-to-equity stood at 1.7x as of March 2010 (net debt of Rs12.7 bn),
but gearing is expected to fall to 0.2x as of March 2011 (net debt of
Rs3.7 bn), as the company did fund raising (IPO) in October 2010. We
expect Prestige to generate operating cash flows after interest and
taxes of Rs2.4 bn and Rs3.5 bn in FY12 and FY13, respectively.
Initiate with OUTPERFORM, target price of Rs180
We initiate coverage of Prestige Estates with an OUTPERFORM and
a target price of Rs180, valuing it at a 30% discount to March 2012
GAV. Our forward NAV of Rs261/share includes Rs148 from
development assets and Rs118 from rental assets.
Key investment risks for Prestige
Any slowdown in the Bangalore or south India real estate market
should have negative impact on Prestige. Inability to lease out its
commercial assets in future, any slowdown in the IT services sector
and interest rate hikes continue to be key risks for Prestige.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
● In our new report, Dark Clouds: Prefer cash flows over leverage,
we initiate coverage of Prestige Estates with an OUTPERFORM
and a target price of Rs180.
● Prestige’s well-diversified portfolio provides quality exposure to
the Bangalore property market. The company has development
rights over 57.3 mn sq ft of area, of which 64% is intended for sale
purposes and 36% for rental purposes.
● We like Prestige for its high RoEs, which are expected to remain
high in the 19-21% range, low gearing of 0.2x as of FY11E, and
strong operating cash flow generation prospects. Rental assets
provide good diversification to its revenue and net earnings. We
expect revenue and PAT to clock 44% and 63% CAGR over the
next three years.
● We value Prestige Estates at a 30% discount to March 2012 GAV,
owing to its Bangalore market concentration risk and any
slowdown in the commercial real estate segment. Our forward
NAV for Prestige stands at Rs261/share.
Diversified, quality exposure to Bangalore real estate
Prestige Estates, with its well-diversified portfolio provides quality
exposure to south Indian market, especially Bangalore. The company
has development rights over 57.3 mn sq ft of area, which includes
28.4 mn sq ft of saleable area (Prestige’s share) and 11.0 mn sq ft of
leasable area (Prestige’s share). Bangalore and Chennai constitute
73% and 14% of the developable area, respectively. By type of
development, 64% of developable area is intended for sale purposes
while 36% of developable area is intended for rental purposes.
Strong execution track record and brand name
Prestige has more than 24 years of experience in real estate
development and has completed 150 projects spanning 34.2 mn sq ft
till date. Prestige has also entered into strategic partnerships with
reputed and experienced players such as CRIDF, Oakwood
Management Services, Marriott Hotels India and Hilton International to
develop and manage their retail and hospitality projects
Strong cash flows and high RoEs expected ahead
We expect Prestige’s RoEs to remain high in the 19-21% range over
FY11-13E. Return on capital employed (RoCE) is also expected to be
healthy at 16-17% for FY12 and FY13, respectively. Prestige’s net
debt-to-equity stood at 1.7x as of March 2010 (net debt of Rs12.7 bn),
but gearing is expected to fall to 0.2x as of March 2011 (net debt of
Rs3.7 bn), as the company did fund raising (IPO) in October 2010. We
expect Prestige to generate operating cash flows after interest and
taxes of Rs2.4 bn and Rs3.5 bn in FY12 and FY13, respectively.
Initiate with OUTPERFORM, target price of Rs180
We initiate coverage of Prestige Estates with an OUTPERFORM and
a target price of Rs180, valuing it at a 30% discount to March 2012
GAV. Our forward NAV of Rs261/share includes Rs148 from
development assets and Rs118 from rental assets.
Key investment risks for Prestige
Any slowdown in the Bangalore or south India real estate market
should have negative impact on Prestige. Inability to lease out its
commercial assets in future, any slowdown in the IT services sector
and interest rate hikes continue to be key risks for Prestige.
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