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India Equity Research Reports, IPO and Stock News
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Oberoi reported 2Q earnings of Rs1.1B, up 17% Y/Y & above our estimate of
Rs802M driven by higher than expected revenue recognition. EBITDA
margins at 52% were although lower by 400bps Q/Q, due to high contribution
from Splendor project which got handed over during Sep-Q. On operating
basis, bookings run rate remained largely stable given no new launches;
however incremental office leasing has been muted. Sep-Q marked the
beginning of cash deployment with stake buyout of Glaxo project; however we
do not expect a meaningful value accretion from the project (JPMe-
Rs4/share) unless co. is able to achieve higher FSI (>2). OBER’s valuations
(1.7x FY13 P/B) are at a premium to the sector even as Mumbai RE market is
slowing down & there are limited company specific catalysts in the near term.
We do not see meaningful stock outperformance in the near term.
Financial Highlights- 1] 2Q Development revenues of Rs1.6B were up
33% Y/Y and 61% Q/Q; 2] EBITDA margins stood at 52%, down 400bps
Q/Q due to high contribution from Splendor project; 3] Rental income at
Rs322M remained largely stable Q/Q; 4] Hospitality EBITDA at Rs28M
was down 39% Q/Q due to low occupancy levels (at 56.5% vs. 67% in 1Q)
given seasonally weak period.
Operational Highlights – 1] 2Q new bookings of Rs2.3B, up 80% Y/Y &
down 10% Q/Q, were driven by Goregaon project. This takes overall 1H pre
sales to Rs4.9B. While the current sales run rate is tracking below our full
year estimate (Rs11.2B), a pick up in 2H would hinge on progress of new
launches; 2] Incremental leasing at Commerz I (office) has been at standstill
over last one year (~75% levels). This is concerning given co. has additional
2msf of office space under construction, which faces competition from
Central Mumbai projects (similar rentals), in our view; 3] O/S order book of
Rs13.5B & expectation of a large project (Esquire) reaching recognition
threshold in 2H provides high revenue visibility near term.
Recent stake buyout in Glaxo Worli project (4 acre) has largely been
done at current market valuations. At implied land cost of Rs10-11K psf
(assuming an FSI of 2x), we do not expect a meaningful value accretion
from the project (~Rs4/share on our estimate) unless co. is able to achieve
higher FSI. The transaction however would be earnings accretive over the
next 2-3 years as it starts flowing through P/L from FY13/14 onwards.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Oberoi reported 2Q earnings of Rs1.1B, up 17% Y/Y & above our estimate of
Rs802M driven by higher than expected revenue recognition. EBITDA
margins at 52% were although lower by 400bps Q/Q, due to high contribution
from Splendor project which got handed over during Sep-Q. On operating
basis, bookings run rate remained largely stable given no new launches;
however incremental office leasing has been muted. Sep-Q marked the
beginning of cash deployment with stake buyout of Glaxo project; however we
do not expect a meaningful value accretion from the project (JPMe-
Rs4/share) unless co. is able to achieve higher FSI (>2). OBER’s valuations
(1.7x FY13 P/B) are at a premium to the sector even as Mumbai RE market is
slowing down & there are limited company specific catalysts in the near term.
We do not see meaningful stock outperformance in the near term.
Financial Highlights- 1] 2Q Development revenues of Rs1.6B were up
33% Y/Y and 61% Q/Q; 2] EBITDA margins stood at 52%, down 400bps
Q/Q due to high contribution from Splendor project; 3] Rental income at
Rs322M remained largely stable Q/Q; 4] Hospitality EBITDA at Rs28M
was down 39% Q/Q due to low occupancy levels (at 56.5% vs. 67% in 1Q)
given seasonally weak period.
Operational Highlights – 1] 2Q new bookings of Rs2.3B, up 80% Y/Y &
down 10% Q/Q, were driven by Goregaon project. This takes overall 1H pre
sales to Rs4.9B. While the current sales run rate is tracking below our full
year estimate (Rs11.2B), a pick up in 2H would hinge on progress of new
launches; 2] Incremental leasing at Commerz I (office) has been at standstill
over last one year (~75% levels). This is concerning given co. has additional
2msf of office space under construction, which faces competition from
Central Mumbai projects (similar rentals), in our view; 3] O/S order book of
Rs13.5B & expectation of a large project (Esquire) reaching recognition
threshold in 2H provides high revenue visibility near term.
Recent stake buyout in Glaxo Worli project (4 acre) has largely been
done at current market valuations. At implied land cost of Rs10-11K psf
(assuming an FSI of 2x), we do not expect a meaningful value accretion
from the project (~Rs4/share on our estimate) unless co. is able to achieve
higher FSI. The transaction however would be earnings accretive over the
next 2-3 years as it starts flowing through P/L from FY13/14 onwards.
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