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UBS Investment Research
Prestige Estates Projects
G ood Q1; best proxy to Bangalore growth
Event: 1Q earnings beat UBS estimates, Operationally a good qtr
Q1 earnings of Rs364mn grew 46% YoY and 9% QoQ primarily driven by 1)
better than expected EBITDA margin of 27.7% (vs. our 24%) 2) lower interest
costs and 3) higher other income. Revenues however declined 8% QoQ more due
to revenue recognition mismatch. Consol net debt at 11.98bn (vs. 11.5bn in
4QFY11) with D/E at 0.5x. Operationally, pre-sales grew 11% QoQ to 0.46msf;
leasing was steady at 0.48msf (portfolio at 4.28msf); and launched residential
projects of 5.4msf and a mall in Mysore of 0.54msf.
Impact: Maintain our 39% CAGR growth through FY12-14E
We expect strong revenue growth in 2H on higher recognition of high-value
projects and thus maintain our 39% earnings CAGR for FY11-FY14E. We expect
growing rental annuity, healthy pre-sales and execution pickup to drive earnings.
Action: Reiterate Buy rating; good pre-sales & execution the catalyst
We see 1) strong response to its mid-income housing launches (10-12msf) over
next 9 mts; 2) 30%-plus growth in rentals in FY12E and 3) encouraging execution
for ongoing projects (47% of NAV). Key risks are 1) relatively high exposure to
luxury housing 2) oversupply in pockets of Bangalore e.g Whitefield.
Valuation: Attractive at 52% discount to NAV
With stock trading at 1) 52% disc to base NAV of Rs 275 and 2) 31% disc to bear
case NAV of Rs 194, we see deep value here. We believe Prestige provides the
best exposure to Bangalore’s growth (84% of NAV), amongst the most promising
real estate market in India from demand perspective, in our view. Our price target
of Rs205 is based on a 25% discount to our FY11E NAV/share of Rs275.
Prestige Estates Projects
Prestige Estates Projects (Prestige) is a South India-focused real estate developer
with a diversified real estate portfolio in residential, commercial, retail, and
hospitality. Most of its developable area is in Bangalore (84%) and it is now
expanding to other South Indian cities. Prestige also provides allied services,
such as interior design, property management services, and sub-letting services.
Established 24 years ago, Prestige has developed a number of landmark
properties in Bangalore, including UB City, Prestige Shantiniketan, and the
Forum Mall.
Statement of Risk
Risks to Prestige are a high exposure to high-end/luxury projects, high exposure
to Bangalore and a decline in commercial leasing and activity and regulatory
policy risks
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Prestige Estates Projects
G ood Q1; best proxy to Bangalore growth
Event: 1Q earnings beat UBS estimates, Operationally a good qtr
Q1 earnings of Rs364mn grew 46% YoY and 9% QoQ primarily driven by 1)
better than expected EBITDA margin of 27.7% (vs. our 24%) 2) lower interest
costs and 3) higher other income. Revenues however declined 8% QoQ more due
to revenue recognition mismatch. Consol net debt at 11.98bn (vs. 11.5bn in
4QFY11) with D/E at 0.5x. Operationally, pre-sales grew 11% QoQ to 0.46msf;
leasing was steady at 0.48msf (portfolio at 4.28msf); and launched residential
projects of 5.4msf and a mall in Mysore of 0.54msf.
Impact: Maintain our 39% CAGR growth through FY12-14E
We expect strong revenue growth in 2H on higher recognition of high-value
projects and thus maintain our 39% earnings CAGR for FY11-FY14E. We expect
growing rental annuity, healthy pre-sales and execution pickup to drive earnings.
Action: Reiterate Buy rating; good pre-sales & execution the catalyst
We see 1) strong response to its mid-income housing launches (10-12msf) over
next 9 mts; 2) 30%-plus growth in rentals in FY12E and 3) encouraging execution
for ongoing projects (47% of NAV). Key risks are 1) relatively high exposure to
luxury housing 2) oversupply in pockets of Bangalore e.g Whitefield.
Valuation: Attractive at 52% discount to NAV
With stock trading at 1) 52% disc to base NAV of Rs 275 and 2) 31% disc to bear
case NAV of Rs 194, we see deep value here. We believe Prestige provides the
best exposure to Bangalore’s growth (84% of NAV), amongst the most promising
real estate market in India from demand perspective, in our view. Our price target
of Rs205 is based on a 25% discount to our FY11E NAV/share of Rs275.
Prestige Estates Projects
Prestige Estates Projects (Prestige) is a South India-focused real estate developer
with a diversified real estate portfolio in residential, commercial, retail, and
hospitality. Most of its developable area is in Bangalore (84%) and it is now
expanding to other South Indian cities. Prestige also provides allied services,
such as interior design, property management services, and sub-letting services.
Established 24 years ago, Prestige has developed a number of landmark
properties in Bangalore, including UB City, Prestige Shantiniketan, and the
Forum Mall.
Statement of Risk
Risks to Prestige are a high exposure to high-end/luxury projects, high exposure
to Bangalore and a decline in commercial leasing and activity and regulatory
policy risks
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