India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Indiabulls Real Estate
Compelling risk-reward opportunity
Significant correction—most concerns priced in
Indiabulls Real Estate (IBREL) has corrected 33% over the past three months due
to negative news such as: 1) the reversal/approval delays for higher FSI under the
public parking scheme in Mumbai due to a change in Maharashtra’s chief minister;
and 2) higher mortgage rates for loans over Rs7.5m dampening presales in south
Mumbai. With the stock trading at a 58% discount to our sum-of-parts derived
NAV of Rs315.00, we believe most of the concerns have been priced in.
Operational momentum building
1) Q2 was strong with presales of 1.84m sqft generating potential cash flow of
Rs30.9bn and construction up by 2.9m sqft to around 15m sqft; 2) leasing picked
up with 0.11m sqft in Q210 (around 1.16m sqft to date) at IPIT’s Mumbai assets
(approximately 2m sqft of ready inventory); and 4) greater progress of its 58.6%
power subsidiary (setting up 5,400MW), with plans to unlock value through
ownership re-structuring, which we think will act as a catalyst.
Valuations offer margin of safety
We believe the share price is primarily valuing only: 1) a 45% share in IPIT assets
(Rs65); 2) the National Textile (NTC) mill land acquisition (Rs36); and 3) a 58.6%
stake in its power subsidiary, ascribing a significant holding company discount.
Furthermore, its deleveraged balance sheet and other paid land reserves of around
200m sqft make it cheap (in a rising asset price environment).
Valuation: lower price target from Rs235.00 to Rs205.00
With discounts at peak levels on our base case NAV of Rs315.00 and at 28% to
our bear case NAV of Rs181.00, we think valuations are attractive. However, we
lower our price target as we ascribe a higher 35% discount (25% earlier) to est.
NAV, factoring in FSI policy risks in Mumbai and transparency issues.
No comments:
Post a Comment