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Mahindra Life Space Developer(MLIFE)
Property
Upgrade to BUY. MLIFE reported a strong quarter with revenues at Rs1,558 mn
(+43% yoy, +75% qoq) and PAT of Rs334 mn (+20% yoy, +36% qoq). Stock is down
32% in 3M and we find a 37% upside to our new target price of Rs435/share (versus
Rs546 earlier) despite (1) increasing our WACC to 16% from 14% earlier, (2) delaying
residential build-out at Chennai MWC and (3) reducing Jaipur MWC valuation from 2X
FY2012E BV to 1X FY2012E BV given lower ramp-up visibility.
3QFY11 results exceed expectations
MLIFE reported revenues of Rs1,558 mn (+43% yoy, +75% qoq, 66% above expectation), EBITDA
of Rs428 mn (+40% yoy, +83% qoq, 69% above expectations) and PAT of Rs334 mn (+20 yoy,
+36% qoq, 28% above expectations). EBITA margins at 27.5% expanded 121 bps over 2QFY11
margins and declined 55 bps from 3QFY10 margins. Higher revenue recognition in Splendour
Phase II, Mumbai and Mahindra Cloris at NCR led to the significant outperformance.
MLIFE sold 1.2 mn sq. ft of residential in 9MFY11 (value of Rs5.8 bn) vs 0.9 mn sq. ft in 9MFY10
(value of Rs3.9 bn) which implies that average realizations have gone up by 12%. Residential sales
in 3QFY11 were Rs2.3 bn in line with sales in 3QFY10 and marginally below 2QFY11 which was
Rs2.6 bn.
Modest progress in the World Cities at Chennai and Jaipur
Mahindra World City, Chennai: MLIFE signed up five more industrial customers bringing the tally
to 55 of which 35 are operational (34 as of end-2QFY11). The company has also signed an
agreement with Duet Hotels, a UK-based hotel fund, to set up a business hotel. During the quarter,
the company also launched Iris Court, a residential project within MWC Chennai.
Mahindra World City, Jaipur: During the quarter, all the three SEZs (IT, light engineering,
handicrafts) and the Domestic Tariff Area were activated and the customers have initiated
construction/operations. Out of the total 28 customers, three are operational and nine have
started construction (six as of end-2QFY11) and additionally, ten companies have entered into
MoUs with MWC Jaipur.
Two MoUs signed with the Gujarat Government; not factored in our valuation model
MLIFE has entered into two MoUs with the Government of Gujarat during the recently held
Vibrant Gujarat Summit for the setting up of an Integrated Business City at Dholera Special
Investment Region (in the Delhi-Mumbai industrial corridor) and for the setting up of an Industrial
Park near Ahmedabad. Given these projects are in fairly nascent stage, we have not factored in
any value (positive or negative) for either of these projects.
The Integrated Business City will be spread across 3,000 acres and need investment of Rs20 bn.
Once functional, the facility will have the potential to employ 100,000 people and attract
investments of greater than Rs100 bn.
The Industrial Park will be spread across 500 acres and will be close to an existing
commercial center near Ahmedabad. Once fully developed, the industrial park is expected to
create 25,000 jobs and attract investments of over Rs10 bn.
We reduce NAV to Rs435/share
We reduce Chennai MWC value by factoring in delays in residential unit sales to
Rs135/share from Rs181/share.
We reduce Jaipur MWC value from Rs64/share to Rs32/share by valuing it at 1X FY2012E
BV from 2X earlier.
We increase our WACC estimate to 16% from 14% earlier.
We also make the following changes to our earnings estimates
We change our revenues estimates for FY11E and FY12E by +6% and -4%, respectively,
EBITDA estimates for FY11E and FY12E by +10% and -6%, respectively and net income
estimates for FY11E and FY12E by +8% and -5%, respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra Life Space Developer(MLIFE)
Property
Upgrade to BUY. MLIFE reported a strong quarter with revenues at Rs1,558 mn
(+43% yoy, +75% qoq) and PAT of Rs334 mn (+20% yoy, +36% qoq). Stock is down
32% in 3M and we find a 37% upside to our new target price of Rs435/share (versus
Rs546 earlier) despite (1) increasing our WACC to 16% from 14% earlier, (2) delaying
residential build-out at Chennai MWC and (3) reducing Jaipur MWC valuation from 2X
FY2012E BV to 1X FY2012E BV given lower ramp-up visibility.
3QFY11 results exceed expectations
MLIFE reported revenues of Rs1,558 mn (+43% yoy, +75% qoq, 66% above expectation), EBITDA
of Rs428 mn (+40% yoy, +83% qoq, 69% above expectations) and PAT of Rs334 mn (+20 yoy,
+36% qoq, 28% above expectations). EBITA margins at 27.5% expanded 121 bps over 2QFY11
margins and declined 55 bps from 3QFY10 margins. Higher revenue recognition in Splendour
Phase II, Mumbai and Mahindra Cloris at NCR led to the significant outperformance.
MLIFE sold 1.2 mn sq. ft of residential in 9MFY11 (value of Rs5.8 bn) vs 0.9 mn sq. ft in 9MFY10
(value of Rs3.9 bn) which implies that average realizations have gone up by 12%. Residential sales
in 3QFY11 were Rs2.3 bn in line with sales in 3QFY10 and marginally below 2QFY11 which was
Rs2.6 bn.
Modest progress in the World Cities at Chennai and Jaipur
Mahindra World City, Chennai: MLIFE signed up five more industrial customers bringing the tally
to 55 of which 35 are operational (34 as of end-2QFY11). The company has also signed an
agreement with Duet Hotels, a UK-based hotel fund, to set up a business hotel. During the quarter,
the company also launched Iris Court, a residential project within MWC Chennai.
Mahindra World City, Jaipur: During the quarter, all the three SEZs (IT, light engineering,
handicrafts) and the Domestic Tariff Area were activated and the customers have initiated
construction/operations. Out of the total 28 customers, three are operational and nine have
started construction (six as of end-2QFY11) and additionally, ten companies have entered into
MoUs with MWC Jaipur.
Two MoUs signed with the Gujarat Government; not factored in our valuation model
MLIFE has entered into two MoUs with the Government of Gujarat during the recently held
Vibrant Gujarat Summit for the setting up of an Integrated Business City at Dholera Special
Investment Region (in the Delhi-Mumbai industrial corridor) and for the setting up of an Industrial
Park near Ahmedabad. Given these projects are in fairly nascent stage, we have not factored in
any value (positive or negative) for either of these projects.
The Integrated Business City will be spread across 3,000 acres and need investment of Rs20 bn.
Once functional, the facility will have the potential to employ 100,000 people and attract
investments of greater than Rs100 bn.
The Industrial Park will be spread across 500 acres and will be close to an existing
commercial center near Ahmedabad. Once fully developed, the industrial park is expected to
create 25,000 jobs and attract investments of over Rs10 bn.
We reduce NAV to Rs435/share
We reduce Chennai MWC value by factoring in delays in residential unit sales to
Rs135/share from Rs181/share.
We reduce Jaipur MWC value from Rs64/share to Rs32/share by valuing it at 1X FY2012E
BV from 2X earlier.
We increase our WACC estimate to 16% from 14% earlier.
We also make the following changes to our earnings estimates
We change our revenues estimates for FY11E and FY12E by +6% and -4%, respectively,
EBITDA estimates for FY11E and FY12E by +10% and -6%, respectively and net income
estimates for FY11E and FY12E by +8% and -5%, respectively.
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