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Sobha Developers Ltd. (SOBH.BO)
Research Tactical Idea
We believe the share price will rise in absolute terms over the next 60 days.
This is because the stock has traded off recently, making short term valuation much more compelling. Sobha has
corrected a 28% YTD and 10% this week. We believe that the recent news of the company forming a JV with Purvankara
to buy an eight-seater aircraft (US$15mn) for top management is not all that negative and will require only US$2mn
outflow from Sobha. The company does not plan to enter manufacturing outsourcing in the aerospace business. We
consider the valuation cheap - 48% discount to forward NAV, 11x EPS (15x assuming no interest cost capitalization) and
1.2x P/B on F2012e. New product launches (and good pre-sales) including DJ Farms (Bangalore) and Gurgaon in the
near term could be stock catalysts.
We estimate that there is about an 80%+ or "highly likely" probability for the scenario.
Estimated probabilities are illustrative and assigned subjectively based on our assessment of the likelihood of the
scenario.
Stock Rating: Overweight
Industry View: In-Line
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sobha Developers Ltd. (SOBH.BO)
Research Tactical Idea
We believe the share price will rise in absolute terms over the next 60 days.
This is because the stock has traded off recently, making short term valuation much more compelling. Sobha has
corrected a 28% YTD and 10% this week. We believe that the recent news of the company forming a JV with Purvankara
to buy an eight-seater aircraft (US$15mn) for top management is not all that negative and will require only US$2mn
outflow from Sobha. The company does not plan to enter manufacturing outsourcing in the aerospace business. We
consider the valuation cheap - 48% discount to forward NAV, 11x EPS (15x assuming no interest cost capitalization) and
1.2x P/B on F2012e. New product launches (and good pre-sales) including DJ Farms (Bangalore) and Gurgaon in the
near term could be stock catalysts.
We estimate that there is about an 80%+ or "highly likely" probability for the scenario.
Estimated probabilities are illustrative and assigned subjectively based on our assessment of the likelihood of the
scenario.
Stock Rating: Overweight
Industry View: In-Line
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