DB Realty (Rs 73.3): Buy ::Business Line

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 We recommend a buy in the stock of DB Realty from a short-term perspective. It is evident from the charts of the stock that after registering a life-time low at Rs 47.5 on October 3, the stock changed its trend triggered by positive divergence in daily as well as weekly indicators and oscillators.

Ever since the stock has been on a short-term uptrend backed with good volumes in the advance sessions. Last week, the stock sky rocketed 26 per cent with good volumes breaching its immediate key resistance at around Rs 69 which has turned into a significant support currently. Holding above this support, the stock advanced 3.5 per cent on Wednesday, which has reinforced the short-term uptrend.

The stock is trading well above its 21- and 50-day moving averages. The daily RSI is featuring in the bullish zone and weekly RSI has entered into the neutral region from the bearish zone. Daily moving average convergence divergence indicator is hovering in the positive territory signalling upward momentum.

We are bullish on the stock from a short-term horizon. We expect its up move to prolong until it touches our price target of Rs 75.5 or Rs 78 in the ensuing trading sessions. Traders with short-term perspective can buy the stock with stop-loss at Rs 71.5.

Sizzling Stocks: SKS Microfinance , D B Realty :: Business Line

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 SKS Microfinance (Rs 493.2)

 

After hovering around key medium-term support level of Rs 330, the microfinance player stock skyrocketed 20 per cent on Thursday due to the release of the draft Micro Financial Sector Bill 2011 by the Finance Ministry. The stock rose on Friday as well to hit its upper circuit for the second consecutive session and finished the week with 44 per cent gains.

Since its all-time low of Rs 262 recorded in early May, it has been on a medium-term uptrend. The stock is currently facing resistance at around Rs 545. Inability to move above this resistance can pull the stock down to Rs 410 or even to Rs 330 in the medium term. Key support below Rs 330 is at Rs 270. Conclusive break out of Rs 545 will lift the stock higher to Rs 650 and then to Rs 750. However, to negate the stock's intermediate-term downtrend, which has been in place from its September 2010 peak of Rs 1,490, it has to move above Rs 900.

D B Realty (Rs 85.6)

The stock zoomed 22 per cent with good volumes last week, taking support in the band between Rs 60 and Rs 70. This surge has penetrated its 21- as well as 50-day moving averages and its immediate resistance level at Rs 82. However, its medium-term down trend that commenced from April peak of Rs 130 remains in place. It will be so as long as the stock trades below Rs 100. Moreover, its intermediate and long-term trends are down. The daily as well as weekly indicators are displaying positive divergence, thus signalling at the possibility of a trend reversal.

Strong move above Rs 100 will mar the medium-term down trend and take the stock higher to Rs 130 in the months ahead. Significant resistance after this level is at Rs 150. On the other hand, failure to advance beyond Rs 100 can pull the stock down to Rs 82 and then to Rs 70-60 range in the medium-term

UBS: DB Realty - Headwinds; but distressed valuations

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UBS Investment Research
DB Realty
Headwinds; but distressed valuations\
�� News flow could weigh on near-term stock performance
We believe news of: 1) the arrests of both co-founders in the ongoing 2G spectrum
investigation; 2) potential pre-sale cancellations at key projects and construction delays; and
3) previously awarded projects being re-investigated will weigh on near-term stock
performance; even though we believe the sharp correction of 80% in the past six months
seems to have priced in the worst-case scenario.

Macquarie Research :: DB Realty - Take me higher

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DB Realty
Take me higher
Event
 DB Realty focuses on high-value developments spread across the island city
and suburbs of Mumbai. The developer has a proven track record in the
redevelopment of old (typically dilapidated) buildings in Mumbai. The
promoter group has a history of more than 14m sqf of development. The
company has a strong project pipeline with more than 20m sqf of ongoing
projects and more than 40m sqf of planned projects.

UBS: Buy DB Realty -News flow the overhang; though valuations; Target Rs192

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UBS Investment Research
DB Realty
News flow the overhang; though valuations
compelling
􀂄 Negative news flow led to sharp correction
Ongoing investigations in the 2G licence allotment to DB Group’s associate
company Etisalat DB has resulted in negative press - 1) Mr. Shahid Balwa’s arrest
in connection with 2G investigations; 2) DB Realty’s indirect link to investing
Rs2.14bn for a likely stake in TV channel owned by a political party. Though the
company clarified on no stake in TV channel; such news flow will be an overhang.

Anand Rathi:: Buy DB Realty 3QFY11 – As expected

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DB Realty
3QFY11 – As expected; Buy
3QFY11 margin improved as sales realization increased more
than costs actually expended. We expect margin to slide,
however, as construction progresses, since costs have increased.
Management guided to a cautious 2-3 quarters. Sales collection
is 43% of the value sold. We maintain our Buy, with a Mar ’12e
price target of `299.

DB Realty A non-real-estate quarter; maintain Buy: Anand Rathi

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DB Realty
A non-real-estate quarter; maintain Buy
In light of impact of recent events on DBRL’s property business,
we see some short-term credit issues. Three projects were softlaunched
in Sep ’10; the major projects under construction are
debt free. We change estimates on removal/changes in some
projects, in view of payments and regulatory approvals. Our Mar
’12e NAV is `374 and we trim our price target to `299. Buy.

UBS: buy DB Realty - Q3 a sluggish quarter, but seems priced in

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UBS Investment Research
DB Realty
Q3 a sluggish quarter, but seems priced in
􀂄 Results below expectations; but still on track for UBS FY11E
Revenues & earnings declined 19% and 13% on QoQ basis respectively, and were
lower than UBSe due to slower execution sequentially. However with EBITDA
margins having improved to 44% in Q3 (vs. 41% in Q2) and execution likely to
pick-up in 4Q, we believe the company is on track to meet our FY11 estimates.

UBS: DB Realty- Worst seems priced in

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UBS Investment Research
DB Realty
Worst seems priced in

􀂄 Share price has fallen 51% over the past three months
DB Realty’s share price correction was due to concerns over: 1) the controversy on
2G licence allotments in 2008/likely penalties to DB Group’s associate company,
Etisalat DB; 2) a potential involvement in the loan syndication scam; and 3) likely
delays/cancellation of projects due to a change in Maharashtra’s chief minister.
The company has denied any adverse impact on its core real estate business. Our
discussion with management suggests the correction was an overreaction.

UBS: India Market Strategy - Contrarian calls

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UBS Investment Research
India Market Strategy
Contrarian calls


􀂄 Stocks for investors with risk appetite
In this note, we profile six contrarian stock ideas - companies whose stock price
has taken beating but UBS analysts are still bullish. While we believe that our six
stock ideas offer excellent risk reward at current levels, adverse news flow in the
near term may potentially result in further weakness in some of these names.

DB Realty: Diwali Mahurat Pick by Anand Rathi

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DB Realty
Biggest and most-valuable residential real estate stock in Mumbai owns saleable
residential space of 33.4m sq ft
Around 50% of total space is in South-Central Mumbai and Bandra East, which
is currently valued +15,000/sqft
Plans to launch 7 residential projects over the next 12 months
Has tie-ups not only with land owners but also with most Grade-A developers
which reduces cost-outgo and mitigate location & execution risks
Its NAV as on Sep '11 is Rs.564 per share and currently trading at 28% discount
to its NAV

JPMorgan: DB Realty; Neutral; Building up...steadily

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DBRL’s share price has underperformed the index over the last 3 months
(+1% vs. BSE Realty 16%). This is despite DBRL achieving decent progress
on its targets.Over 1H11,DBRL has already achieved 45% of its full year presales
guidance of Rs 36B.Recent soft launch of MIG Housing project in
Bandra east too has gone off well with the company selling off 10% of the
project quickly. Earnings surprise over 2Q/3Q (FY11 Guidance of Rs 8.3B
PAT vs. consensus PAT of Rs 5.1B), possibility of stake sale in Bandra East
project establishing a firm valuation basis, and formal notification of new
project acquisitions could provide near term re-rating triggers.
• DBRL on track to achieve sales guidance–DBRL has achieved pre-sales
of Rs16B (1.1 msf) in 1HFY11, ~45% of its Rs36B full year guidance. With
some scale up in 2H (seasonally strong period) and new project launches
(6.2 msf over FY11), we think the target should be met comfortably. DBRL
continues to see healthy traction in its South Mumbai portfolio (>70% of
bookings, 0.3msf sold in 2Q vs. 0.2msf in 1Q) despite 2Q being seasonally
weak. Additionally, response to soft launch of Bandra MIG colony has been
good (0.1msf sold at Rs16Kpsf). On its suburban portfolio, Q/Q volumes
have remained largely stable, though pricing has gone up.
• Debt levels should increase over FY11 on project acquisitions– While
company is currently net cash (Rs4.5B); premium payments for Bandra
government colony project/new acquisitions will increase net debt. Against
Rs 20B of operating cash flow guidance, the outflow on new projects is
expected to be Rs 30B. We expect the gearing (debt/equity) to increase to
0.9x by FY12-end from current net cash position. Management indicated it
is in discussions to raise Rs12B from PE players by diluting 20% stake in
the Bandra government colony project valuing it at almost Rs 60B (Rs 217/
Share to DB).
• Organizational build out is happening… with the company hiring a
number of expats to build out project management /execution capacity. We
believe that many of these professionals have had good experience in high
rise construction in middle-east. The company has also engaged Deloitte
/SAP for project implementation and monitoring purposes.
• Investment view- We have a Neutral rating on DB Realty with Mar-11 PT
of Rs 480 (12x Mar-11 normalized FCF). However, earnings surprise over
2Q/3Q, possible stake divestment of Bandra project and improvement in pre
sale levels of new projects (Island city/ Bandra) should translate into steadily
improving earnings/ROE profile. Key downside risks are any litigation/
reversal of awarded projects, or inability to meet pre sales targets for FY11.

Anand Rathi: Mumbai Property - The old order changeth, yielding place to new

Mumbai Property - The old order changeth, yielding place to new

Mumbai-based developers would continue witnessing high profits over the next 3-5 years given: i) low ready-inventory in the market, ii) high demand, iii) lower land cost vs high margins, iv) low execution due to regulations. Given the city’s unique geography and dense population (in slum areas, chawls), acquisitions via the rehabilitation/redevelopment mode will give access to prime land at low cost, with the older construction giving way to large areas for new projects (higher FSI). Although we expect slight correction in the next 3-4 months, we believe inflation-adjusted prices would remain stable in the long term(4-5 years). We have an Overweight stance on the sector.

n       Land limited, area unlimited. Due to its tight geography, Mumbai market has limited land; however, its old constructions viz. slums, chawls, cessed buildings are opening up for redevelopment (higher FSI) via slum rehab schemes (SRS) and urban renewal schemes (URS), thereby freeing up land for organised development. Such projects involve lower (and deferred) acquisition costs, leading to higher profits for developers.

n       Residential demand high. With an estimated 1.2% population CAGR over the next decade, demand would remain strong owing to Mumbai continuing to attract commercial activity and, hence, high immigration, for which +300m sqft of residential space will be required. Although we do not expect a major price correction, we believe prices will soften on account of affordability concerns in the near-term. Inflation-adjusted stable prices over the next few years are likely to lead to volumes, given healthy economic growth. We are positive on central suburbs and Bandra (E) and expect them to outperform vis-à-vis other micro-markets.

n       Stock ideas. We favour HDIL (on execution & location skills) and Ackruti City (on niche developments). We initiate coverage with Buy on DB Realty, Orbit Corp, Peninsula Land and Sunteck Realty.

n       Risks. i) Economic slowdown ii) Regulatory risks iii) De-coupling of MMR from Mumbai City.

Nomura research: Property India: HDIL, DB Realty

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Nomura research: Property India: HDIL, DB Realty