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Godrej Properties Underweight
GODR.NS, GPL IN
1Q sharply below expectation. Retain UW
GPL net income of Rs 100MM (-83% Q/Q/ -55% Y/Y) came in sharply
below estimates. Y/Y comparisons have been affected by PE investments.
EBITDA margin at 15% (vs. 29% in 4QFY11) was far below expectation
given bookings done historically at low ASPs in Ahmedabad /Kolkata and
cost escalation seen in ongoing projects. Net debt at Rs 9.4B increased by
1.6B Q/Q taking over all net D/E to 1x now.
Operating performance has been sluggish- During the Q, company
booked sales of Rs 2.3B (0.56 msf), which though improved 70% Y/Y
was down sequentially (~-down 50% Q/Q). Total work completion at
0.3 msf on an incremental basis was slower than our expectation given
the company is already at presales level of 3 msf per annum
New project additions of Rs 11/share- During the last 3 months GPL
has added 3 new projects in Chembur (0.1 msf), Hyderabad (2 msf) and
Thane (0.16 msf ) .We estimate these projects can add about Rs 11 per
share to the overall valuation if plan approvals/execution come through
smoothly. We think GPL relative to its execution history has more than
adequate assets on its plate right now
BKC deal with Jet Airways likely soon?– News reports (source: TOI)
suggests an impending deal with Jet Airways for 2.5 acre of land parcel
in BKC. As per news reports, GPL will assume Jet’s debt obligation of
Rs5.5B in lieu of its 50% stake in the saleable area. Resultantly
company’s gross debt will increase to Rs14.4B post the transaction (net
gearing to >1.4x). Given the data on JV sharing as per news reports, we
estimate a net accretion of Rs 42/share. Recent rally (+25% from mid
June) more than adequately captures this value.
Getting more expensive on valuations. GPL now trades on 34x
FY12/5.4x FY12 P/E and P/B respectively. This is by far the most
expensive valuation in either India or regional property universe. While
we acknowledge the pedigree of the parent co and inherent value in off
balance sheet assets (Vikhroli land), we think the price is getting far
ahead of its fundamentals. Remain Underweight.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Godrej Properties Underweight
GODR.NS, GPL IN
1Q sharply below expectation. Retain UW
GPL net income of Rs 100MM (-83% Q/Q/ -55% Y/Y) came in sharply
below estimates. Y/Y comparisons have been affected by PE investments.
EBITDA margin at 15% (vs. 29% in 4QFY11) was far below expectation
given bookings done historically at low ASPs in Ahmedabad /Kolkata and
cost escalation seen in ongoing projects. Net debt at Rs 9.4B increased by
1.6B Q/Q taking over all net D/E to 1x now.
Operating performance has been sluggish- During the Q, company
booked sales of Rs 2.3B (0.56 msf), which though improved 70% Y/Y
was down sequentially (~-down 50% Q/Q). Total work completion at
0.3 msf on an incremental basis was slower than our expectation given
the company is already at presales level of 3 msf per annum
New project additions of Rs 11/share- During the last 3 months GPL
has added 3 new projects in Chembur (0.1 msf), Hyderabad (2 msf) and
Thane (0.16 msf ) .We estimate these projects can add about Rs 11 per
share to the overall valuation if plan approvals/execution come through
smoothly. We think GPL relative to its execution history has more than
adequate assets on its plate right now
BKC deal with Jet Airways likely soon?– News reports (source: TOI)
suggests an impending deal with Jet Airways for 2.5 acre of land parcel
in BKC. As per news reports, GPL will assume Jet’s debt obligation of
Rs5.5B in lieu of its 50% stake in the saleable area. Resultantly
company’s gross debt will increase to Rs14.4B post the transaction (net
gearing to >1.4x). Given the data on JV sharing as per news reports, we
estimate a net accretion of Rs 42/share. Recent rally (+25% from mid
June) more than adequately captures this value.
Getting more expensive on valuations. GPL now trades on 34x
FY12/5.4x FY12 P/E and P/B respectively. This is by far the most
expensive valuation in either India or regional property universe. While
we acknowledge the pedigree of the parent co and inherent value in off
balance sheet assets (Vikhroli land), we think the price is getting far
ahead of its fundamentals. Remain Underweight.
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