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Anant Raj 2QFY12 results are in line with estimates. Revenue de-grew 31% YoY to INR913m (v/s est INR956m).
EBITDA declined 19% YoY to INR509m (v/s est INR526m); EBITDA margin stood at 56% (v/s 59% in 1QFY12). PAT
declined 28% YoY to INR347m (v/s est INR321m).
The company witnessed steady momentum in affordable housing projects (at Sector 91, Gurgaon and Neemrana,
Rajasthan) with ~0.6msf (INR1.6b) of sales in 2QFY12 as against 0.3msf (INR1b) in 1QFY12.
ARCP witnessed ~INR20m increase in quarterly rental income on the back of commencement of operation in Kirti
Nagar mall. However incremental leasing in its ongoing commercial projects such as Manesar and Rai remained
subdued.
The recently acquired Golf Course Road (Sector 63A) integrated township project is yet to receive LOI, although it
has received the notification for R-zone. The company expects to receive LOI over next 1 month.
Net debt increased to ~INR9.5b as against INR8.2b in 4QFY11, implying a net DER of 0.25x.
The stock trades at 6.4x FY13E EPS of INR8, 0.4x FY13E BV and at ~61% discount to our NAV of INR131. Maintain
Buy.
Sector-91 project continues to be key revenue contributor: The key revenue
contributors in 2QFY12 were: (1) New Gurgaon Sector-91 project (INR590m) (2)
Manesar Phase I and II (~INR70m), (2) Kapasera project (~INR20m), and (4) Rental
income from commercial / hotel projects (~INR218m). Lower revenue booking from
pre-sold projects like Manesar and Kapasera indicate slower construction progress.
In contrast, recognition has been robust in its new Gurgaon project due to strong
incremental sales over past couple of quarters. ARCP's recently launched low-cost
housing project at Neemrana, Rajasthan is yet to commence revenue recognition and
expected to contribute in 4QFY12.
Rental run-rate improved by rental commencement of Kirti Nagar Mall: During
2QFY12, ARCP witnessed ~INR20m increase in quarterly rental income on the back
of commencement of operation in Kirti Nagar mall. The mall has been leased ~60%
with minimum guarantee of INR100/sf/month and revenue sharing of 4-15% across
retailers. Almost 7 tenants have commenced operation over last 3-6 months and the
company expects ~60% occupancy over next couple of quarters, leading to further
rise in rental income. In addition to this, Hotel Tricolor is likely to be operational by
4QFY12. We estimate ARCP's rental income at INR1.1b/INR1.6b in FY12/13.
Sales improve in mid-income projects: ARCP's ongoing projects in the affordable
housing segment continue to witness steady momentum with sales of a) ~0.38msf
(INR1.2b) in sector 91, Gurgaon and b) ~0.25msf (INR425m) at Neemrana. With
this, the company sold ~450 units out of 800 units at Sector 91 project and 500 units
out of total 2,800 units at Neemrana. The company has started marketing its
Bhagwandas Villa project during 2QFY12.
Golf Course project yet to receive LOI: The recently acquired Golf Course Road
(Sector 63A) integrated township project is yet to receive LOI, although it has received
the notification for R-zone. The company expects to receive LOI over next 1 month.
It plans to launch the plotted development portion of 105 acres in 4QFY12. We expect
Golf Course Road project could be a key growth driver over FY12-14 and successful
timely monetization of this project could offset the concern over constant delay of its
super luxury projects at Hauz Khas and Bhagwandas.
Raised INR1.25b during 2QFY12, net debt at INR9.5b: In 2QFY12, ARCP
raised INR1.25b of secured debt to address construction need (v/s ~INR2.5b in
1QFY12 to repay old loan). With this, its net debt stood at INR9.5b as against INR8.2b
in 4QFY11, implying net DER of 0.25x. The new loan has been availed at 13.9% as
against average cost of debt of 13.5%.
Valuation and view: Healthy assets offer value unlocking potential; approval
headwinds remain key concern
ARCP has a quality land bank and wide presence across asset classes enabling multiple
revenue streams and relatively healthy liquidity. With ~13msf (~INR8.4b) of land
acquisition during FY11 at an attractive cost, the company is strongly placed to unlock
significant value through monetization of these assets. Additionally, it has maintained a
sustained focus on mid-income segment and achieved relatively steady sales volume
over past 12 months.
Nonetheless, we believe the company continues to have major operational overhangs
including (a) prolonged delay in approval for its key premium projects including recently
acquired Golf Course Road project, and (b) subdued leasing momentum in its commercial
projects such as Manesar IT park.
The stock trades at 6.4x FY13E EPS of INR8, 0.4x FY13E BV and at ~61% discount
to our NAV of INR131. Maintain Buy.
Anant Raj Industries (ARIL) is a focused city-centric
developer and is one of the largest land owners in Delhi,
with a fully paid land bank of ~1,200 acres. Given its citycentric
focus and large holdings of prime land in and around
Delhi, we expect it to be a key beneficiary of the ongoing
revival in the RE sector. ARIL has ~4msf of completed
commercial/retail projects along with ~3msf under
construction, which it can lease to bolster its rental income.
Key investment arguments
ARIL has a robust business model with multiple revenue
streams and high monetization visibility. The company
is likely to be one of the key beneficiaries of the ongoing
recovery in the commercial vertical with its 4msf of
completed commercial projects along with ~3msf under
construction.
Re-rating triggers are a) launch of Bhagwandas projects
(guided for 2HFY12), b) successful response to Golf
course project and c) improvement in leasing in Manesar
IT Park and rental uptick from Kirti nagar mall.
Key investment risks
ARIL is facing challenges with regard to leasing of its
key commercial and retail projects, due to the low
demand in these segments.
ARIL is over-exposed to RE market of NCR. This could
be a key risk in case of market specific torpidity.
Delay in Golf course project is a major concern.
Recent developments
ARCP's ongoing projects in the affordable housing
segment continue to witness steady momentum with
sales of a) ~0.38msf (INR1.2b) in sector 91, Gurgaon
and b) ~0.25msf (INR425m) at Neemrana.
ARCP witnessed ~INR20m increase in quarterly rental
income on the back of commencement of operation in
Kirti Nagar mall.
Valuation and view
We believe successful monetization of Golf course
project is the near-term triggers for the stock.
The stock trades at 6.4x FY13E EPS of INR8, 0.4x
FY13E BV and at ~61% discount to our NAV of
INR131. Maintain Buy.
Sector view
RE sector has been a major underperformer over the
last 12 months with multiple operational and nonoperational
headwinds such as volume slowdown (due
to declining affordability), monetary tightening, pilling
liquidity pressure etc. However, with a buoyant macropicture,
increasing focus on execution and ongoing
revival in the commercial and retail segments, we
believe the outlook will improve going forward.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Anant Raj 2QFY12 results are in line with estimates. Revenue de-grew 31% YoY to INR913m (v/s est INR956m).
EBITDA declined 19% YoY to INR509m (v/s est INR526m); EBITDA margin stood at 56% (v/s 59% in 1QFY12). PAT
declined 28% YoY to INR347m (v/s est INR321m).
The company witnessed steady momentum in affordable housing projects (at Sector 91, Gurgaon and Neemrana,
Rajasthan) with ~0.6msf (INR1.6b) of sales in 2QFY12 as against 0.3msf (INR1b) in 1QFY12.
ARCP witnessed ~INR20m increase in quarterly rental income on the back of commencement of operation in Kirti
Nagar mall. However incremental leasing in its ongoing commercial projects such as Manesar and Rai remained
subdued.
The recently acquired Golf Course Road (Sector 63A) integrated township project is yet to receive LOI, although it
has received the notification for R-zone. The company expects to receive LOI over next 1 month.
Net debt increased to ~INR9.5b as against INR8.2b in 4QFY11, implying a net DER of 0.25x.
The stock trades at 6.4x FY13E EPS of INR8, 0.4x FY13E BV and at ~61% discount to our NAV of INR131. Maintain
Buy.
Sector-91 project continues to be key revenue contributor: The key revenue
contributors in 2QFY12 were: (1) New Gurgaon Sector-91 project (INR590m) (2)
Manesar Phase I and II (~INR70m), (2) Kapasera project (~INR20m), and (4) Rental
income from commercial / hotel projects (~INR218m). Lower revenue booking from
pre-sold projects like Manesar and Kapasera indicate slower construction progress.
In contrast, recognition has been robust in its new Gurgaon project due to strong
incremental sales over past couple of quarters. ARCP's recently launched low-cost
housing project at Neemrana, Rajasthan is yet to commence revenue recognition and
expected to contribute in 4QFY12.
Rental run-rate improved by rental commencement of Kirti Nagar Mall: During
2QFY12, ARCP witnessed ~INR20m increase in quarterly rental income on the back
of commencement of operation in Kirti Nagar mall. The mall has been leased ~60%
with minimum guarantee of INR100/sf/month and revenue sharing of 4-15% across
retailers. Almost 7 tenants have commenced operation over last 3-6 months and the
company expects ~60% occupancy over next couple of quarters, leading to further
rise in rental income. In addition to this, Hotel Tricolor is likely to be operational by
4QFY12. We estimate ARCP's rental income at INR1.1b/INR1.6b in FY12/13.
Sales improve in mid-income projects: ARCP's ongoing projects in the affordable
housing segment continue to witness steady momentum with sales of a) ~0.38msf
(INR1.2b) in sector 91, Gurgaon and b) ~0.25msf (INR425m) at Neemrana. With
this, the company sold ~450 units out of 800 units at Sector 91 project and 500 units
out of total 2,800 units at Neemrana. The company has started marketing its
Bhagwandas Villa project during 2QFY12.
Golf Course project yet to receive LOI: The recently acquired Golf Course Road
(Sector 63A) integrated township project is yet to receive LOI, although it has received
the notification for R-zone. The company expects to receive LOI over next 1 month.
It plans to launch the plotted development portion of 105 acres in 4QFY12. We expect
Golf Course Road project could be a key growth driver over FY12-14 and successful
timely monetization of this project could offset the concern over constant delay of its
super luxury projects at Hauz Khas and Bhagwandas.
Raised INR1.25b during 2QFY12, net debt at INR9.5b: In 2QFY12, ARCP
raised INR1.25b of secured debt to address construction need (v/s ~INR2.5b in
1QFY12 to repay old loan). With this, its net debt stood at INR9.5b as against INR8.2b
in 4QFY11, implying net DER of 0.25x. The new loan has been availed at 13.9% as
against average cost of debt of 13.5%.
Valuation and view: Healthy assets offer value unlocking potential; approval
headwinds remain key concern
ARCP has a quality land bank and wide presence across asset classes enabling multiple
revenue streams and relatively healthy liquidity. With ~13msf (~INR8.4b) of land
acquisition during FY11 at an attractive cost, the company is strongly placed to unlock
significant value through monetization of these assets. Additionally, it has maintained a
sustained focus on mid-income segment and achieved relatively steady sales volume
over past 12 months.
Nonetheless, we believe the company continues to have major operational overhangs
including (a) prolonged delay in approval for its key premium projects including recently
acquired Golf Course Road project, and (b) subdued leasing momentum in its commercial
projects such as Manesar IT park.
The stock trades at 6.4x FY13E EPS of INR8, 0.4x FY13E BV and at ~61% discount
to our NAV of INR131. Maintain Buy.
Anant Raj Industries (ARIL) is a focused city-centric
developer and is one of the largest land owners in Delhi,
with a fully paid land bank of ~1,200 acres. Given its citycentric
focus and large holdings of prime land in and around
Delhi, we expect it to be a key beneficiary of the ongoing
revival in the RE sector. ARIL has ~4msf of completed
commercial/retail projects along with ~3msf under
construction, which it can lease to bolster its rental income.
Key investment arguments
ARIL has a robust business model with multiple revenue
streams and high monetization visibility. The company
is likely to be one of the key beneficiaries of the ongoing
recovery in the commercial vertical with its 4msf of
completed commercial projects along with ~3msf under
construction.
Re-rating triggers are a) launch of Bhagwandas projects
(guided for 2HFY12), b) successful response to Golf
course project and c) improvement in leasing in Manesar
IT Park and rental uptick from Kirti nagar mall.
Key investment risks
ARIL is facing challenges with regard to leasing of its
key commercial and retail projects, due to the low
demand in these segments.
ARIL is over-exposed to RE market of NCR. This could
be a key risk in case of market specific torpidity.
Delay in Golf course project is a major concern.
Recent developments
ARCP's ongoing projects in the affordable housing
segment continue to witness steady momentum with
sales of a) ~0.38msf (INR1.2b) in sector 91, Gurgaon
and b) ~0.25msf (INR425m) at Neemrana.
ARCP witnessed ~INR20m increase in quarterly rental
income on the back of commencement of operation in
Kirti Nagar mall.
Valuation and view
We believe successful monetization of Golf course
project is the near-term triggers for the stock.
The stock trades at 6.4x FY13E EPS of INR8, 0.4x
FY13E BV and at ~61% discount to our NAV of
INR131. Maintain Buy.
Sector view
RE sector has been a major underperformer over the
last 12 months with multiple operational and nonoperational
headwinds such as volume slowdown (due
to declining affordability), monetary tightening, pilling
liquidity pressure etc. However, with a buoyant macropicture,
increasing focus on execution and ongoing
revival in the commercial and retail segments, we
believe the outlook will improve going forward.
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