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Strong brand, diversified product mix: Prestige Estates (PEPL) has a diversified
portfolio in established locations or growth corridors of key South India cities,
especially Bangalore. It enjoys strong trust and customer preference due to (1)
its diversified and well-balanced product positioning across verticals and customer
segments, (2) a superior execution track record (almost 44msf over the past 25
years) with identifiable landmarks and (3) its strong relationships with a growing
corporate client base.
Promising markets, quality assets render meaningful cash-flow visibility:
We believe PEPL will enjoy steady monetization due to a stable outlook for the
real estate (RE) sector in most southern cities due to (a) steady hiring outlook of
the IT/ITES sector, driving housing demand and commercial leasing and (b)
affordability for buyers, led by the rational movement of property prices. However,
its heavy inclination towards annuity projects and strong near-term capex plans
are likely to dent free cash flow over the next couple of years.
Steady revival of the commercial vertical to boost annuity income:
Bangalore has been in the forefront of commercial recovery, driven by renewed
momentum in corporate expansion in the IT/ITES sector. PEPL is well placed to
benefit from the commercial uptrend with (1) 2.5msf of rent-yielding and ~3.4msf
of upcoming projects and (2) a strong and growing MNC/domestic client base.
Prestige's JV with CRIDF, an associate of Capital Malls Asia, will help it to expand
in the retail vertical, which comprises 19% of PEPL's GAV. We estimate annuity
income from commercial and retail segments will show an uptrend from INR1.5b
in FY11 to INR2.5b in FY13.
Key triggers: These include (a) de-risking of the IT growth outlook, (b) faster
execution of luxury projects like Kingfisher Tower, Golfshire and White Meadows
and (c) acquisition of new turnkey projects through the JDA route.
Key risks: These include: (a) over-dependence on the Bangalore market (it
accounts for ~80% of PEPL's GAV), whose outlook is linked to growth prospects
of the IT sector (which in turn is dependent on the US and EU market) and
(b) delayed launches of the guided pipeline.
Valuation and view: PEPL trades at 1.1x FY13E BV, 8.5x FY13E EPS of
INR10.6 and a 50% discount to NAV. Maintain Buy
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strong brand, diversified product mix: Prestige Estates (PEPL) has a diversified
portfolio in established locations or growth corridors of key South India cities,
especially Bangalore. It enjoys strong trust and customer preference due to (1)
its diversified and well-balanced product positioning across verticals and customer
segments, (2) a superior execution track record (almost 44msf over the past 25
years) with identifiable landmarks and (3) its strong relationships with a growing
corporate client base.
Promising markets, quality assets render meaningful cash-flow visibility:
We believe PEPL will enjoy steady monetization due to a stable outlook for the
real estate (RE) sector in most southern cities due to (a) steady hiring outlook of
the IT/ITES sector, driving housing demand and commercial leasing and (b)
affordability for buyers, led by the rational movement of property prices. However,
its heavy inclination towards annuity projects and strong near-term capex plans
are likely to dent free cash flow over the next couple of years.
Steady revival of the commercial vertical to boost annuity income:
Bangalore has been in the forefront of commercial recovery, driven by renewed
momentum in corporate expansion in the IT/ITES sector. PEPL is well placed to
benefit from the commercial uptrend with (1) 2.5msf of rent-yielding and ~3.4msf
of upcoming projects and (2) a strong and growing MNC/domestic client base.
Prestige's JV with CRIDF, an associate of Capital Malls Asia, will help it to expand
in the retail vertical, which comprises 19% of PEPL's GAV. We estimate annuity
income from commercial and retail segments will show an uptrend from INR1.5b
in FY11 to INR2.5b in FY13.
Key triggers: These include (a) de-risking of the IT growth outlook, (b) faster
execution of luxury projects like Kingfisher Tower, Golfshire and White Meadows
and (c) acquisition of new turnkey projects through the JDA route.
Key risks: These include: (a) over-dependence on the Bangalore market (it
accounts for ~80% of PEPL's GAV), whose outlook is linked to growth prospects
of the IT sector (which in turn is dependent on the US and EU market) and
(b) delayed launches of the guided pipeline.
Valuation and view: PEPL trades at 1.1x FY13E BV, 8.5x FY13E EPS of
INR10.6 and a 50% discount to NAV. Maintain Buy
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