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Oberoi Realty Overweight
OEBO.BO, OBER IN
Strong 3Q FY11 results; pre-sales at ongoing projects provide healthy revenue visibility
•Strong 3Q FY11 results – Oberoi reported 3Q net income of Rs2.05B
(+115% Q/Q, 57% Y/Y), significantly ahead of our estimate of Rs1.56B.
The earnings beat was primarily on account of: a) higher-than-expected
revenues of Rs4B (vs. JPME of Rs3.2B) as recognition from Exquisite I
(at Goregaon project) starts to kick in; b) strong EBITDA margins of
62% (+300bp Q/Q) aided by higher realizations across all ongoing
projects. Interest income (Rs218MM) increased meaningfully during the
quarter given high liquid funds of Rs14.8B on the balance sheet post IPO.
•Key operational highlights -
o Sales update – Sales bookings over 9M FY11 stood at Rs6B
(0.4msf) which is running short of our full year target. Oberoi has
disclosed an overall sales order book of Rs24B across its ongoing
projects. Of the total Rs24B, company is yet to recognize Rs10B
as revenues and receive cash flows of Rs6.3B. This provides
healthy revenue/cash flow visibility in the near term.
o Launches to gain momentum in FY12 – While sales over the
past year have primarily been across its ongoing township
projects, the company is looking to progressively launch new
projects in Mulund and Worli over the next 2-3 quarters.
Management indicated that it did not see any significant delay
risk to the new launches going ahead as the approvals for these
projects are at fairly advanced stages. Construction work for the
Worli project has already begun and it is expected to be launched
as a branded residence once the operator (leading hospitality
chain) is tied up.
o Rental portfolio remains steady with Oberoi Mall & Commerz I
operating at 92% and 77% occupancy levels respectively. The
Westin hotel witnessed decent improvement over last quarter with
occupancy increasing to 62% (vs. 53% in 2Q) and ARRs at
Rs7,720 (+15% Q/Q) given Dec-Q is a seasonally strong quarter.
•Maintain OW with a Mar-12 PT of Rs320. Key risks – (a) Inability to buy
new land parcels at accretive pricing; (b) Delay in launching new projects.
Strong 3Q FY11 results
Oberoi reported 3Q net income of Rs2.05B (+115% Q/Q, 57% Y/Y), significantly
ahead of our estimate of Rs1.56B. Th earnings beat was primarily on account of: a)
higher-than-expected revenues of Rs4B (vs. JPME of Rs3.2B) as recognition from
Exquisite I (at Goregaon project) starts to kick in; b) strong EBITDA margins of
62% (+300bp Q/Q) aided by higher realizations across all on going projects. Interest
income (Rs218MM) increased meaningfully during the quarter given high liquid
funds of Rs14.7B on the balance sheet post IPO.
Maintain OW with Mar-12 price target of Rs320
Our Mar-12 PT of Rs320 is based on a 15% discount to forward NAV and implies
FY12E P/E of 13x and FY12E P/B of 2.5x. A lower-than-average sector discount in
our view is justified given the a) relatively short (5-to-6-year) land bank, and 2) the
strong net cash B/S which can be used to show accretion.
Key risks: (a) Pending regulatory approvals for some projects (Mulund/ Pune/
Worli), (b) inability to buy new land parcels at accretive pricing, and (c) sharperthan-
expected volume slowdown in Mumbai.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Oberoi Realty Overweight
OEBO.BO, OBER IN
Strong 3Q FY11 results; pre-sales at ongoing projects provide healthy revenue visibility
•Strong 3Q FY11 results – Oberoi reported 3Q net income of Rs2.05B
(+115% Q/Q, 57% Y/Y), significantly ahead of our estimate of Rs1.56B.
The earnings beat was primarily on account of: a) higher-than-expected
revenues of Rs4B (vs. JPME of Rs3.2B) as recognition from Exquisite I
(at Goregaon project) starts to kick in; b) strong EBITDA margins of
62% (+300bp Q/Q) aided by higher realizations across all ongoing
projects. Interest income (Rs218MM) increased meaningfully during the
quarter given high liquid funds of Rs14.8B on the balance sheet post IPO.
•Key operational highlights -
o Sales update – Sales bookings over 9M FY11 stood at Rs6B
(0.4msf) which is running short of our full year target. Oberoi has
disclosed an overall sales order book of Rs24B across its ongoing
projects. Of the total Rs24B, company is yet to recognize Rs10B
as revenues and receive cash flows of Rs6.3B. This provides
healthy revenue/cash flow visibility in the near term.
o Launches to gain momentum in FY12 – While sales over the
past year have primarily been across its ongoing township
projects, the company is looking to progressively launch new
projects in Mulund and Worli over the next 2-3 quarters.
Management indicated that it did not see any significant delay
risk to the new launches going ahead as the approvals for these
projects are at fairly advanced stages. Construction work for the
Worli project has already begun and it is expected to be launched
as a branded residence once the operator (leading hospitality
chain) is tied up.
o Rental portfolio remains steady with Oberoi Mall & Commerz I
operating at 92% and 77% occupancy levels respectively. The
Westin hotel witnessed decent improvement over last quarter with
occupancy increasing to 62% (vs. 53% in 2Q) and ARRs at
Rs7,720 (+15% Q/Q) given Dec-Q is a seasonally strong quarter.
•Maintain OW with a Mar-12 PT of Rs320. Key risks – (a) Inability to buy
new land parcels at accretive pricing; (b) Delay in launching new projects.
Strong 3Q FY11 results
Oberoi reported 3Q net income of Rs2.05B (+115% Q/Q, 57% Y/Y), significantly
ahead of our estimate of Rs1.56B. Th earnings beat was primarily on account of: a)
higher-than-expected revenues of Rs4B (vs. JPME of Rs3.2B) as recognition from
Exquisite I (at Goregaon project) starts to kick in; b) strong EBITDA margins of
62% (+300bp Q/Q) aided by higher realizations across all on going projects. Interest
income (Rs218MM) increased meaningfully during the quarter given high liquid
funds of Rs14.7B on the balance sheet post IPO.
Maintain OW with Mar-12 price target of Rs320
Our Mar-12 PT of Rs320 is based on a 15% discount to forward NAV and implies
FY12E P/E of 13x and FY12E P/B of 2.5x. A lower-than-average sector discount in
our view is justified given the a) relatively short (5-to-6-year) land bank, and 2) the
strong net cash B/S which can be used to show accretion.
Key risks: (a) Pending regulatory approvals for some projects (Mulund/ Pune/
Worli), (b) inability to buy new land parcels at accretive pricing, and (c) sharperthan-
expected volume slowdown in Mumbai.
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