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Preferred developer in Mumbai, offers comfort in a sluggish market: Oberoi
Realty (OBER) is one of the most preferred brands in Mumbai's RE market due to
its strong focus on destination development. The company enjoys a pricing premium
and product preference over its peers due to its (1) quality products, (2) integrated
offerings, (3) pricing strategy and (4) strong management goodwill for timely
execution. OBER's fully paid quality land-bank, suitable for large-format integrated
development, ensures steady sales momentum.
High cash-flow visibility, no debt obligation: We expect OBER to monetize
its land bank over 6-7 years given its (a) healthy financial position, (b) no leverage
concern and (c) hassle-free land, which provide certainty of execution. Pre-sales
of INR29.5b, offers a receivable flow of ~INR9b over FY12-14. Steady annuity
income, which is expected to grow from INR1.8b in FY11 to INR2.8b in FY13
insulates it from vagaries of the RE cycle.
Near-term triggers: These include: (a) strong cash surplus of ~INR16b, which
offers a huge opportunity to acquire value-augmenting projects at competitive
prices in the backdrop of low competition from cash-strapped competitors and
rationalizing land prices, and (b) the launch of super-luxury Worli projects.
Key risks: Regulatory headwinds such as potential change in FSI norms (could
impact 10-12% of saleable area) and delay in MoEF approval in Mulund projects.
Valuation and view: OBER enjoys superior RoE (five year average of 22%) over
its peers. We estimate OBER's NAV at INR325. The stock trades at 8.5x FY13E
EPS of INR26.2, 1.6x FY13E BV and ~32% discount to NAV. Maintain Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Preferred developer in Mumbai, offers comfort in a sluggish market: Oberoi
Realty (OBER) is one of the most preferred brands in Mumbai's RE market due to
its strong focus on destination development. The company enjoys a pricing premium
and product preference over its peers due to its (1) quality products, (2) integrated
offerings, (3) pricing strategy and (4) strong management goodwill for timely
execution. OBER's fully paid quality land-bank, suitable for large-format integrated
development, ensures steady sales momentum.
High cash-flow visibility, no debt obligation: We expect OBER to monetize
its land bank over 6-7 years given its (a) healthy financial position, (b) no leverage
concern and (c) hassle-free land, which provide certainty of execution. Pre-sales
of INR29.5b, offers a receivable flow of ~INR9b over FY12-14. Steady annuity
income, which is expected to grow from INR1.8b in FY11 to INR2.8b in FY13
insulates it from vagaries of the RE cycle.
Near-term triggers: These include: (a) strong cash surplus of ~INR16b, which
offers a huge opportunity to acquire value-augmenting projects at competitive
prices in the backdrop of low competition from cash-strapped competitors and
rationalizing land prices, and (b) the launch of super-luxury Worli projects.
Key risks: Regulatory headwinds such as potential change in FSI norms (could
impact 10-12% of saleable area) and delay in MoEF approval in Mulund projects.
Valuation and view: OBER enjoys superior RoE (five year average of 22%) over
its peers. We estimate OBER's NAV at INR325. The stock trades at 8.5x FY13E
EPS of INR26.2, 1.6x FY13E BV and ~32% discount to NAV. Maintain Buy.
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