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Oberoi Realty
Pristine balance sheet …
Established brand name in Mumbai, a key market
• Oberoi Realty (Oberoi) is an established brand name in the
Mumbai real estate market with almost entire land bank (~92% of
land bank) of 20.25 million sq ft in Mumbai, a key property market
• Oberoi is one of the very few companies in the sector that has
excellent corporate governance, transparency and disclosures,
lending us the comfort in one of key aspect for the investment.
• We also like Oberoi’s strong financial position, a key differentiator
compared to its peers. As on FY11, Oberoi has a debt-free
balance sheet with cash balance of ~| 1400 crore. Furthermore,
Oberoi is one of the very few companies in the sector, which
enjoys positive operating cash flow (| 200 crore in FY11).
• Oberoi has accumulated the land bank historically at a lower rate
in the key Mumbai property market. This is evident from the fact
that the majority of the land bank was bought till 2005 and only
one project at Worli has been added in 2009. The low cost land
bank coupled with higher realisation enables it to enjoy significant
margin & return ratio.
Going Ahead
• Oberoi is expected to launch Oberoi Exquisite III (1.8 mn sq feet),
Mulund Phase I (1.6 mn sq feet), Worli (1.5 mn sq feet) and
Mulund Phase II (1.6 mn sq feet) over the next two years. With all
requisite approvals in place and a debt-free balance sheet, we
should not see any problem in execution or delays in projects for
Oberoi (a key differentiator from its peers) enabling it to grow
faster than its peers.
• Additionally, the rental income will receive boost with long term
stable cash flow with leasing out of Commerz I and II and Oberoi
Mall price escalation. Oberoi currently has rental income based
portfolio of ~1.6 million sq feet, which is expected to increase to
~6 million sq feet over the next couple of years. Moreover, key
development such as REIT listing would enable it to enjoy better
capital value in future.
Valuation
At the CMP, the stock is trading at 2.3x FY11 P/BV. Oberoi with a strong
launch pipeline, excellent corporate governance and comfortable debt
free balance sheet position and strong return ratios is set to command a
premium over its peers.
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