Please Share:: 
India Equity Research Reports, IPO and Stock News
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
O beroi Realty Ltd
Hedge against Mumbai
correction; reinstate with Buy
Well placed to gain from slowdown; Reinstate with Buy
We reinstate with a Buy rating with PO of Rs282 based on our NAV of Rs282.
Oberoi Realty remains our top pick in the Indian real estate sector even though
we are expect sharp correction in residential prices in Mumbai. Three key reasons
for our Buy rating on Oberoi – 1) Its strong cash balance offers a good opportunity
for investment in new projects should land prices correct in Mumbai. 2) Its NAV is
least sensitive to a correction in residential prices – a 1% reduction in residential
prices would affect NAV by 0.5%. 3) Expect strong demand for its commercial
projects with high visibility of NAV.
Residential - Gaining market share in time of crisis
We have already factored in 15-20% correction in residential prices as per our
outlook for Mumbai. While we expect subdued volume over the next couple of
quarters for Oberoi, we do believe the correction in residential prices by 3Q will
lead to improved volume in 4Q FY12. The launch of Worli (premium) and Mulund
projects in FY12 will also boost volume and earnings visibility for FY13.
Commercial – good rental visibility
We expect robust leasing momentum build-up in Oberoi’s upcoming commercial
project Commerz II as it approaches completion in 1H FY13 since it has no
competition in the non-IT space in the micro market. This would further strengthen
its already strong balance sheet.
Proposed regulatory changes are longer term positive
Oberoi’s projects have the least risk of delays or lower floor space index (FSI) due
given all the major projects already have the approvals in place. Rather it will
improve its ability to strike land deals as the proposed new rules will create levelplaying
field.
Risks
Downside Risks
Mumbai residential volume and prices – All assets of Oberoi Realty are
located in Mumbai. Therefore, property demand and prices in Mumbai will drive
the stock’s performance. We expect the volumes to remain soft in Mumbai over
the next six months, with correction in prices of 15-25%.
Investment of surplus cash – Oberoi is currently sitting on Rs15bn of cash.
Therefore, successful deployment of cash is very important to sustain future
growth.
Execution delays – It plans to execute over 10mn sq ft over the next five years
and utilize the expertise of external companies like L&T to execute the project.
Therefore any delays in obtaining approvals or execution by third parties will
impact cash flows.
Low free float – Oberoi currently has free float of just 12% with 78.5% stake
held by promoters and 9.5% with the private equity investor. The shareholding of
both the promoters and the private equity investor is locked in till October 2011
and therefore unlikely to depress the stock performance, though post October
2011, there is a risk for supply of new equity. Due to low float the stock
performance could be volatile
For complete sector report and details on other companies click link below
No comments:
Post a Comment