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Housing Development & Infrastructure
Buy Equity Research
Clarity on airport slum rehabilitation project to improve valuations
What's changed
According to management, the MMRDA has commenced shifting of
eligible slum dwellers from MIAL slums to the Kurla Premier compound
and allotment letters for flats has been issued to eligible slum dwellers by
MMRDA. HDIL is in the process of constructing more than 20,000 units at
the site. We highlight there had been limited clarity on the same since the
change in political leadership in Maharashtra in November 2010.
Implications
In our view, commencement of the shifting will likely result in multiple benefits
as clarity emerges on: (1) TDR (transfer of development rights) generation
beyond FY12E. HDIL management has stated that they can generate TDRs to
maintain a quarterly run-rate of around 1 mn sqft/quarter in FY12E; (2) approvals
for further phases of the project; and (3) approval process in Mumbai, which has
been slow over the past six months. We estimate FY12E-based NAV from this
project at Rs97/share. As clarity improves and we observe continued progress,
we would expect a 50% discount to NAV (which we have modeled for this
project) against a 30% discount for other projects of HDIL.
Valuation
We maintain our 12-month RNAV-based target price of Rs216, which reflects
30% discount to FY2012E for projects other than MIAL, which we value at a 50%
discount. We maintain our Buy rating on HDIL. The stock looks attractively
valued, trading at FY2013E P/B of 0.6X vs. the sector average of 1.2X. Total
visible value of cash flows is Rs125 bn, or post tax around Rs105 bn, against
present EV + net customer advances of Rs110 bn. Total accrued value broken
into various buckets is: 1) Launched properties (Rs38 bn or Rs86/share), (2)
Forthcoming projects (Rs57 bn or Rs128/share), and (3) commercial properties
(Rs31 bn or Rs70/share).
Key risks
Execution delays inherent in slum rehabilitation projects, sharp correction
in prices 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 �� ��
Housing Development & Infrastructure
Buy Equity Research
Clarity on airport slum rehabilitation project to improve valuations
What's changed
According to management, the MMRDA has commenced shifting of
eligible slum dwellers from MIAL slums to the Kurla Premier compound
and allotment letters for flats has been issued to eligible slum dwellers by
MMRDA. HDIL is in the process of constructing more than 20,000 units at
the site. We highlight there had been limited clarity on the same since the
change in political leadership in Maharashtra in November 2010.
Implications
In our view, commencement of the shifting will likely result in multiple benefits
as clarity emerges on: (1) TDR (transfer of development rights) generation
beyond FY12E. HDIL management has stated that they can generate TDRs to
maintain a quarterly run-rate of around 1 mn sqft/quarter in FY12E; (2) approvals
for further phases of the project; and (3) approval process in Mumbai, which has
been slow over the past six months. We estimate FY12E-based NAV from this
project at Rs97/share. As clarity improves and we observe continued progress,
we would expect a 50% discount to NAV (which we have modeled for this
project) against a 30% discount for other projects of HDIL.
Valuation
We maintain our 12-month RNAV-based target price of Rs216, which reflects
30% discount to FY2012E for projects other than MIAL, which we value at a 50%
discount. We maintain our Buy rating on HDIL. The stock looks attractively
valued, trading at FY2013E P/B of 0.6X vs. the sector average of 1.2X. Total
visible value of cash flows is Rs125 bn, or post tax around Rs105 bn, against
present EV + net customer advances of Rs110 bn. Total accrued value broken
into various buckets is: 1) Launched properties (Rs38 bn or Rs86/share), (2)
Forthcoming projects (Rs57 bn or Rs128/share), and (3) commercial properties
(Rs31 bn or Rs70/share).
Key risks
Execution delays inherent in slum rehabilitation projects, sharp correction
in prices in Mumbai.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Attractive
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