Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
India Real Estate
Fundamentals aren’t bad as stocks suggest
Physical property market much better than past crisis
1) Resi pre-sales vols across 7-key cities Q3CY10 were healthy at 94msf up 2x vs.
past crisis, 2) Commercial staged a strong recovery with 8.1msf leased compared
to 3.2msf leased in crisis period; 3) Resi inventory are also well below crisis levels
of 380msf; which ensures better markets and 4) Though Q3FY11 was below
expectations, the sector performed better than similar qtr in the crisis period
Funding environment tight, but far better than crisis days…
…with rising interest rates and banks raising provision/risk weights. However, we
aren’t worried, with 1) most developers’ D/E less than 1x and cost at 12-16% (vs.
D/E of 1-2x and cost of 16-20% in last crisis); 2) low probability of debt
maturity/interest/land payment defaults; and 3) better cash flow visibility from presales
under construction, rentals annuities and asset monetization (vs. past crisis).
News flow may remain a near-term overhang but limited downside
Rising rates, low macro visibility amidst rising oil, developers missing launch/sales
targets, 2G issues and fluid political situation may be a near-term overhang.
However with stocks down ~30% over 3-mths, absolute downside appears limited
Valuations at trough levels; stocks offer attractive risk-reward
With sector trading at peak disc of 60% to base NAV (similar to credit crisis
levels), 45% disc to bear-case NAVs and P/B of 1.5x – valuations seem to be at
trough levels. Further with fundamentals much better than last crisis - we see
stocks offering attractive risk-reward over 6-9mth. Our top picks - DLF in large
caps, Phoenix & Prestige in mid-caps; and IBREL in the high risk-reward basket.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
India Real Estate
Fundamentals aren’t bad as stocks suggest
Physical property market much better than past crisis
1) Resi pre-sales vols across 7-key cities Q3CY10 were healthy at 94msf up 2x vs.
past crisis, 2) Commercial staged a strong recovery with 8.1msf leased compared
to 3.2msf leased in crisis period; 3) Resi inventory are also well below crisis levels
of 380msf; which ensures better markets and 4) Though Q3FY11 was below
expectations, the sector performed better than similar qtr in the crisis period
Funding environment tight, but far better than crisis days…
…with rising interest rates and banks raising provision/risk weights. However, we
aren’t worried, with 1) most developers’ D/E less than 1x and cost at 12-16% (vs.
D/E of 1-2x and cost of 16-20% in last crisis); 2) low probability of debt
maturity/interest/land payment defaults; and 3) better cash flow visibility from presales
under construction, rentals annuities and asset monetization (vs. past crisis).
News flow may remain a near-term overhang but limited downside
Rising rates, low macro visibility amidst rising oil, developers missing launch/sales
targets, 2G issues and fluid political situation may be a near-term overhang.
However with stocks down ~30% over 3-mths, absolute downside appears limited
Valuations at trough levels; stocks offer attractive risk-reward
With sector trading at peak disc of 60% to base NAV (similar to credit crisis
levels), 45% disc to bear-case NAVs and P/B of 1.5x – valuations seem to be at
trough levels. Further with fundamentals much better than last crisis - we see
stocks offering attractive risk-reward over 6-9mth. Our top picks - DLF in large
caps, Phoenix & Prestige in mid-caps; and IBREL in the high risk-reward basket.
No comments:
Post a Comment