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Oberoi Realty Overweight
OEBO.BO, OBER IN
1Q below expectations on low revenue recognition
estimates on account of a large project (Esquire, Goregaon) not reaching
revenue recognition threshold. Reported earnings of Rs1.06B were aided by
sale of a land parcel (profit of Rs200M) during the quarter. On operating
basis, new bookings were lower Q/Q due to delay in new launches. Going
ahead, progress on new launches (esp. Worli) and deployment of surplus cash
(Rs15.6B) remain the key catalyst for the stock. Management indicated that
they have not yet seen any “accretive” transactions in the market. However,
given the tight funding and weak demand environment, company is optimistic
that there would be land buying opportunity sooner than later.
Financial Highlights- 1] Development revenues of Rs1B were down 20%
Y/Y/50% Q/Q and sharply below estimates; 2] EBITDA margins stood at
56% in 1Q (vs. 54% in 4Q); 3] Other income at Rs542M (vs. Rs286M in
4Q) was aided by profit of Rs200M on sale of a land parcel in Goa; 4]
Rental income (at Rs317M) was large stable Q/Q.
Operational Highlights- 1] New bookings at Rs2.6B (down ~25% Q/Q)
with no new launch during the Q; 2] Occupancy for rental assets in
Goregaon project (mall at 94%; Commerz I at 76%) remains large stable
Q/Q. Company guided to occupancy improving to ~95% levels in
Commerz-I by Sep-Q (on the back of a recent LoI); 3] Westin hotel
occupancy (~67%) and ARRs (Rs7.1K) were lower Q/Q given seasonally
weak quarter; 4] Handovers have begun in Splendor project starting July; 5]
O/s sales order book of Rs12.8B yet to be recognized as revenues.
Analyst Call Highlights – 1] Management remains optimistic on office
space take up (~2msf under construction), however completed office space
at similar rentals in Central Mumbai could pose an oversupply risk, in our
view; 2] Proposed FSI regulation changes in Mumbai are likely to be
beneficial for the company as it does away with the discretionary powers
(ensuring a level playing field) & should smoothen approval process; 3]
Worli project expected to be launched in next 2Qs with contractor now in
place (Samsung) and negotiations underway for international operator.
Mulund launch however still awaits MOEF approval.
PT and Estimate changes– Our FY12/13 estimates are revised down by
11%/19% as we defer sales of office space in Andheri project (Prisma).
Correspondingly our Mar-12 PT (based on 2xFY13 P/B) is revised to Rs270
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Oberoi Realty Overweight
OEBO.BO, OBER IN
1Q below expectations on low revenue recognition
estimates on account of a large project (Esquire, Goregaon) not reaching
revenue recognition threshold. Reported earnings of Rs1.06B were aided by
sale of a land parcel (profit of Rs200M) during the quarter. On operating
basis, new bookings were lower Q/Q due to delay in new launches. Going
ahead, progress on new launches (esp. Worli) and deployment of surplus cash
(Rs15.6B) remain the key catalyst for the stock. Management indicated that
they have not yet seen any “accretive” transactions in the market. However,
given the tight funding and weak demand environment, company is optimistic
that there would be land buying opportunity sooner than later.
Financial Highlights- 1] Development revenues of Rs1B were down 20%
Y/Y/50% Q/Q and sharply below estimates; 2] EBITDA margins stood at
56% in 1Q (vs. 54% in 4Q); 3] Other income at Rs542M (vs. Rs286M in
4Q) was aided by profit of Rs200M on sale of a land parcel in Goa; 4]
Rental income (at Rs317M) was large stable Q/Q.
Operational Highlights- 1] New bookings at Rs2.6B (down ~25% Q/Q)
with no new launch during the Q; 2] Occupancy for rental assets in
Goregaon project (mall at 94%; Commerz I at 76%) remains large stable
Q/Q. Company guided to occupancy improving to ~95% levels in
Commerz-I by Sep-Q (on the back of a recent LoI); 3] Westin hotel
occupancy (~67%) and ARRs (Rs7.1K) were lower Q/Q given seasonally
weak quarter; 4] Handovers have begun in Splendor project starting July; 5]
O/s sales order book of Rs12.8B yet to be recognized as revenues.
Analyst Call Highlights – 1] Management remains optimistic on office
space take up (~2msf under construction), however completed office space
at similar rentals in Central Mumbai could pose an oversupply risk, in our
view; 2] Proposed FSI regulation changes in Mumbai are likely to be
beneficial for the company as it does away with the discretionary powers
(ensuring a level playing field) & should smoothen approval process; 3]
Worli project expected to be launched in next 2Qs with contractor now in
place (Samsung) and negotiations underway for international operator.
Mulund launch however still awaits MOEF approval.
PT and Estimate changes– Our FY12/13 estimates are revised down by
11%/19% as we defer sales of office space in Andheri project (Prisma).
Correspondingly our Mar-12 PT (based on 2xFY13 P/B) is revised to Rs270
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