India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Prestige Estate Projects Limited Overweight
PREG.BO, PEPL IN
Annual Report Review: Growth at attractive levels
Key highlights of Prestige’s annual report are 1. Outlook on demand
environment optimistic on the back of hiring trends in IT Sector and
corresponding flow through for Bangalore RE market 2. Company hopes to
sustain the substantial increase in pre sales level seen in FY11 (Rs 14B) in
FY12 as well and plans to launch 15 msf across projects (highest in
Bangalore) 3. Margin should incrementally improve as a large low margin
project is now delivered 4. Annuity stream to grow to Rs2.1B in FY12 (Rs1.5B
in FY11) on the back of leasing concluded in FY11. Prefer PEPL over Sobha
at current levels given relative underperformance (-30% YTD), largely similar
debt levels, marquee assets on balance sheet and & growing asset base
driving annuity stream. . Remain OW- PT Rs 165, 35% upside from the
current levels. Our PT is based on 10x residential business cash earnings and
value of ongoing office/retail projects at 11% cap rate. Key risk is an adverse
macro outlook for Bangalore RE.
On balance sheet debt is largely secured against cash flows - Almost
70% of the gross outstanding debt is securitized against rent/ receivables.
Adjusting for this and cash on book, net debt in the business is almost none.
Cash flows were negative last year on account of balance delivery work
on large low margin project- Last year company was negative FCF given
slow collections in Shantiniketan project (delivered now) and high
construction capex (Rs9.3B) for ongoing residential and annuity projects.
ROE analysis- Detailed Du pont analysis of the company shows that ROE
is muted at the moment due to 1. Heavy capex in rent business (37% of the
assets) which is still in build out mode (3-4 years to stabilization) and
currently seeing accounting loss though is cash positive 2. Development
ROE low (12%) due to contribution from low margin (5%) mid income
residential projects which have now been delivered. A margin improvement
hereon (expected in FY12) can push dev. ROE to respectable 17-18% levels.
Operating basis company has shown growth on most parameters –1]
FY11 bookings of Rs 14B was +166% Y/Y. Company is targeting Rs 15-
18B pre sales this year.; 2] FY11 rentals stood at Rs 1.5B which should
grow by 40% Y/Y in FY12 on account of handovers done in FY11; 3] FY11
deliveries highest ever at 16msf; 4] Launch plan of 15msf in FY12 in
Bangalore /Chennai. Initial response to these has been encouraging
No comments:
Post a Comment