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Oberoi Realty (OEBO.BO)
Buy Equity Research
Reiterate Buy on favorable risk-reward profile from high visibility
What's changed
We met with management recently and re-assessed the key risks to our
assumptions. Takeaways include: 1) Oberoi Exquisite II launch. Launched at
Rs10,000/sqft vs. ongoing Phase-I pricing of Rs11,500/sqft. We believe lower
pricing will help accelerate sales. 2) Commerz-II. Construction has reached 26th
floor of about 30 floors, with completion due around April 2012. We assume
rentals to start in 4QFY13E. 3) Splendor Commercial. Management indicated
that they are looking for large anchor clients for this building. 4) New launches.
Two key launches in Worli and Mulund scheduled for 1HFY12. We forecast
these projects to contribute meaningfully only in FY13E. 5) Land acquisition.
Management stated they will be selective given the regulatory and interest rate
environment and will look to deploy cash balances over the next 12 months.
Implications
Given the rising interest rate environment, we analyze risks to our PAT/RNAV
estimates. We split the projects into three categories: (I) Ongoing and sold real
estate, leased properties and cash balances, (II) Unsold/non-leased portion of
ongoing projects, and (III) other properties. Our analysis suggests category I to
be 36% of our FY12E RNAV or Rs118 vs. the stock’s last closing price of Rs228.
Category I projects account for 63% of our FY12E PAT. Given the high visibility
to our RNAV/PAT estimates, we believe the stock’s risk-reward is favorable.
Valuation
We keep our FY11-13 EPS estimates largely unchanged at Rs17.11,
Rs22.54, and Rs30.44. We think Oberoi Realty’s current valuations are
attractive given the company’s sector-leading ROEs: (1) Currently trading
at 30% discount to our FY12E RNAV of Rs327, (2) 1.9X FY2012E BV vs. ROE
of 19%, and (3) FY2012E P/E of 10.1X vs. sector average of 10.7X. Our 12-m
target price of Rs327 is unchanged (set at par to FY12E RNAV).
Key risks
Lower than expected volumes, delayed project launches, policy changes in
Mumbai.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Attractive
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Oberoi Realty (OEBO.BO)
Buy Equity Research
Reiterate Buy on favorable risk-reward profile from high visibility
What's changed
We met with management recently and re-assessed the key risks to our
assumptions. Takeaways include: 1) Oberoi Exquisite II launch. Launched at
Rs10,000/sqft vs. ongoing Phase-I pricing of Rs11,500/sqft. We believe lower
pricing will help accelerate sales. 2) Commerz-II. Construction has reached 26th
floor of about 30 floors, with completion due around April 2012. We assume
rentals to start in 4QFY13E. 3) Splendor Commercial. Management indicated
that they are looking for large anchor clients for this building. 4) New launches.
Two key launches in Worli and Mulund scheduled for 1HFY12. We forecast
these projects to contribute meaningfully only in FY13E. 5) Land acquisition.
Management stated they will be selective given the regulatory and interest rate
environment and will look to deploy cash balances over the next 12 months.
Implications
Given the rising interest rate environment, we analyze risks to our PAT/RNAV
estimates. We split the projects into three categories: (I) Ongoing and sold real
estate, leased properties and cash balances, (II) Unsold/non-leased portion of
ongoing projects, and (III) other properties. Our analysis suggests category I to
be 36% of our FY12E RNAV or Rs118 vs. the stock’s last closing price of Rs228.
Category I projects account for 63% of our FY12E PAT. Given the high visibility
to our RNAV/PAT estimates, we believe the stock’s risk-reward is favorable.
Valuation
We keep our FY11-13 EPS estimates largely unchanged at Rs17.11,
Rs22.54, and Rs30.44. We think Oberoi Realty’s current valuations are
attractive given the company’s sector-leading ROEs: (1) Currently trading
at 30% discount to our FY12E RNAV of Rs327, (2) 1.9X FY2012E BV vs. ROE
of 19%, and (3) FY2012E P/E of 10.1X vs. sector average of 10.7X. Our 12-m
target price of Rs327 is unchanged (set at par to FY12E RNAV).
Key risks
Lower than expected volumes, delayed project launches, policy changes in
Mumbai.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Attractive
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