No respite DLF’s 3QFY15 results :: HDFC Securities

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Buy DLF between Rs 156.70 & Rs.145 :: HDFC Securities

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DLF: Two new soft launches, some price rationalizations - more should come :: Kotak Sec, report link

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DLF (2QFY15) : Beware the dead cat bounce. Maintain SELL :: HDFC Sec, link

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DLF - Mounting Debt Amid Regulatory Concerns; Result Update Q2FY15:: Edelweiss

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Consider short strangle on DLF :: Business Line

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DLF Limited (DLFU IN) Reported strong office leasing in FY14; reaffirms our positive outlook on office market ::JPMorgan

DLF Limited (DLFU IN) Reported strong office leasing in FY14; reaffirms our positive outlook on office market		Overweight Price: Rs152.35 23 Apr 2014 Price Target: Rs210.00 PT End Date: 30 Mar 2015

DLF reported FY14 leasing of 3msf (source: BSE leasing update), significantly ahead of the company’s full year guidance and last year’s level. This follows a strong leasing achieved by Unitech as well last month for its UCP office portfolio. Strong leasing traction reported by key commercial developers over the recent past reaffirms our positive outlook on the office market. Further, on-the-ground checks suggest that office rents have also started to increase in key markets. We think a five-year down cycle for office segment is now behind us. An improved demand supply balance and expected pick-up in economic activity in 2H could set the stage for a strong revival ahead.

· DLF’s FY14 office leasing surprises positively. DLF, in its leasing update today, reported 3msf of leasing for FY14 (vs. 1.1msf in 9M). This is significantly higher than its full year guidance of 1-1.5msf and FY13 leasing of 1.1msf. Of the total 3msf leased in FY14, 1.7msf of leasing was achieved in Gurgaon. This follows a strong office leasing registered by Unitech’s UCP portfolio, especially for its Gurgaon project. Incremental rentals in new leases have been largely stable to marginally higher, as per the company.

· Annuity portfolio has strong growth levers ahead. In addition to improvement in office leasing, DLF’s annuity portfolio has two big growth levers over the next 3-4 years: a) renewal of large office portfolio (50% of rentals) in its Cyber City Gurgaon from F16/17. Locked-in rentals are 40-50% below current spot rents. These renewals will also coincide with the roll out of its key infrastructure initiatives (mono rail, road work WIP) which could further push up the spot rents in the market; b)completion of ongoing retail portfolio – Opening of Mall of Noida, coupled with the completion of other high-end malls (Chankyapuri and Gurgaon), can add Rs3-4B to annuity income over the next 2-3 years. Noida mall is a 1.8msf mall which is already pre-leased and is expected to open in Oct-14 (Rs100psf avg rent).

· Office market recovery now firmly in sight with leasing activity witnessing improvement across key markets and rents starting to inch up at the margin, especially in prime markets. More importantly, we think demand supply balance is now falling in place in the office market, after being oversupplied for the last 4-5 years. Given the weak demand trends and tight liquidity, most developers scaled back on their commercial capex plans over the last few years, which should keep the new supply levels in check over the next 2-3 years. Correspondingly, vacancy levels should start coming down over the next 2-3 years.

 

Investment Thesis

We think DLF’s cash flows are poised for a turnaround. Markets have been focused on underperformance of core residential business whilst ignoring progress made on debt reduction and steady growth in the annuity portfolio (50% of value). Luxury launch in Delhi (Rs 100b pre sales value), peaking of annuity capex, increased rentals post Mall completion in 2H15 and return to positive FCF are key re-rating triggers, in our view.

Valuation

Maintain Overweight with a Mar-15 Price Target of Rs 210. Our PT is derived from a stabilized cash flow model valuing the development business at 10x and Rent co at 13x cash flow.

Risks to Rating and Price Target

Key downside risks – (a) Delay in launch of luxury Gurgaon projects; b) Increase in debt levels; (c) Sharp increase in policy rates; and (d) Material de-rating of overall macro fundamentals in India.

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Stock Strategy: Short strangle on DLF may pay well :: Business Line

DLF Limited - JPM

According to our discussions with property agents/brokers, DLF has launched
and significantly pre-sold its initial inventory of the high-end golf course
residential project “The Camellias”. We believe around 32 units have been
sold with ticket prices of US$3MM+ and a base selling price of Rs25K/psf.
This follows the earlier successful launch of Crest (@ Rs15K/psf). We note
that as per the annual plan laid out by the company, the target was to sell 1.7
msf p.a over the next 3-4 years. These two launches, we estimate, have taken
the sales volume to approx 1.1 msf with selling prices higher than our
assumptions. Phase 5, in our view, will increasingly become a key driver of
the company’s operating cash flow from F15 onwards.

DLF -Stock correction provides a favorable risk reward. Crest/Aman overhang more than discounted : JPMorgan

Following a period of restriction, we are moving DLF from Not Rated
designation to an OW recommendation and Mar-14 PT of Rs300/share. Over
the last 3 months, we note that progress on two of the most sensitive business
parameters has been positive i.e. Debt reduction and successful sell out in
launch of luxury phase 5 project. Recent stay order on Crest construction in
our view whilst worrying has knocked off more than the entire cash flow of
the project and reduced valuation on Aman resorts to zero. This in our view
presents an upside and a favorable risk reward opportunity. Near term
stock catalyst will be progress on Aman closure, launch of Camellia (strong
soft sale demand) and any resolution on stay order of Crest.

Customer service improving? DLF:: Religare

Customer service improving?
DLF, in its recent attempt to resolve complaints raised by customers of its New Gurgaon-based project, seems to have adhered to its newly-forged strategy to enhance CRM practices. This development, we thus believe, is a step in the right direction. While the stock remains under pressure on concerns over delays in debt reduction, we remain positive on DLF over the mid-to-long term on potential improvement in operations. Maintain BUY

DLF Limited - Gauging the potential of a successful phase 5 launch :: JPMorgan

DLF’s operating plan of Rs83B pa cash EBITDA generation 3 years out is
primarily contingent on the successful launch of its luxury Gurgaon projects.
These developments are expected to contribute as much as Rs 25B, almost
45% of the Rs 55B planned cash generation from the development business.
Given the high value ticket size of these projects (US$600K-$3MM) and the
current macro environment, there is understandable skepticism on the
company’s ability to achieve its target sell-through rate. We believe market
response to this launch will be the key near term driver of stock price.
 Limited inventory, infrastructure improvement and proximity to South
Delhi imply a prime location – DLF’s phase V development (20 msf) has
over the last few years emerged as one of the most sought-after luxury
developments in Gurgaon, given the limited inventory in the market (last
launch was in 2007), proximity to South Delhi, presence of a large office
development and ongoing infrastructure projects (Monorail/6 laning of
roads). Secondary market rates in the location range from Rs 25-35K psf
(golf course) and Rs 15K psf levels (for Belair/ Park place projects) vs.
average rates of Rs 6-7K psf at launch 5 years back. Details on micro
market inventory and pricing trend on page 3 .
 Weak macro is an overhang, but recent experience from other luxury
launches in Gurgaon/Mumbai seems to be positive – With most macro
indicators weakening in the last 3 months, the ability of the company to
successfully push through a high value luxury launch is met with skepticism.
However, we note that other high value launches done by peers in Mumbai
(L&T, Lodha) and Gurgaon (Sobha) have met with good success. DLF’s
ability to replicate this will be an important catalyst, in our view.
 Asking rate in units is not high, although in value terms it could be big –
Phase V launch comprises a 6.1 msf launch with a potential turnover of
Rs100-130B and net pre-tax cash flow of Rs 70-90B over 4 years. This
launch comprises 2 sub projects with 3.6 msf of Camillia, which is approx
600 units (ticket price US$3MM+) and 2.5 msf Crest, approx 700 units
(ticket price ~US$1MM). Whilst not big in terms of absolute number of
units to be sold over 4 years, the ticket size in these developments is high.

Technicals: Indian Hotels, IOB, Zylog Systems, Lloyd Electric, Mangalam Cement, ING Vysya, DLF :: Business Line

DLF Debt reduction now a reality; Buy :: Anand Rathi

DLF
Debt reduction now a reality; initiating with a Buy
We believe that DLF, India’s largest real estate company has crossed
the critical junctures of interest rate overhang, adverse inflation and
delayed executions. On the positive side, it should benefit from 1)
Reduction in net debt (`190bn by Mar’13 from `235bn a year back) due
to sale of non-core assets with prospects of further reduction by FY14e;
2) Increased sales volumes and deliveries resulting in improved cash
flows; 3) higher annuity income from increase in leasing and lease
renewals; 4) stable margins at 40-45%. Accordingly, we initiate
coverage with a Buy rating and a price target of `290.

DLF - Asset sales coupled with new launches have the potential to turn around operating cash flow ::JPMorgan

DLF has entered into a binding agreement to sell Aman resorts for
US$300MM (source: BSE). Proceeds of the divestment are expected to be
used largely for debt reduction. This comes on the back of big-ticket
Mumbai asset sale in October. The company, in our view, is now closer to
achieving its net debt target of Rs185B by Mar-13 (JPME Rs200B). This
debt reduction, coupled with high-value NCR launches, has the
potential to significantly turn around cash flow for the company.
However, given past misses we expect the market to remain skeptical until
the company’s core operating cash flows turn decisively positive.

Buy DLF- Religare research

Potential improvement in operations not yet priced in
DLF has underperformed the sensex by 20% YoY, primarily led by concerns on high debt, low volumes and non-core issues. But the management now indicates potential improvement in operations led by: a) further reduction in debt on conclusion of Aman resorts/wind mills, b) improved volumes on fresh launches and c) delivery of ~25% of under-construction projects in the next year. These along with likely improvement in macro (including interest rate) starting Q4FY13 should help the stock near-to-mid-term. Maintain BUY.

DLF: Poised for re-rating on favorable macro impetus:: Motilal Oswal

DLF: Poised for re-rating on favorable macro impetus

Operating consolidation, large ticket divestments to pay off

-      DLF is a major beneficiary of recent policy reforms and favorable macro trends.

-      Expect meaningful improvement in operating cash deficit (break-even by FY14) on the back of (1) re-aligning core operations to premium business mix, (2) focus on margin protection, and (3) execution ramp-up.

-      Success in large divestments implies higher potential to de-leverage, making DLF a strong play on rate downcycle. Expect net DER at 0.8x/0.69x in FY13/14.

-      The stock trades at 1.4x FY14E BV and 18% discount to NAV. Buy with TP of INR286.

Stock Strategy - Build a bear-call spread on DLF; long on MTNL : Business Line

DLF - Building a revival; company update; Buy: Edelweiss

DLF (DLFU IN, INR 214, Buy)

Our annual report analysis of DLF reveals FY12 was a stressed year for DLF with its operating cash (ex-land sales) at INR15.3bn insufficient to service interest payments of INR30bn. DLF has since stepped up its asset monetization drive to cut debt and ease the interest burden. On the other hand, the company has stepped up launches which will strengthen cash flows. Further, revenues now stand significantly derisked with the devco contributing 63% (of revenues) as against 85% in FY09 and the rentco (along with service and maintenance income) now accounting for 25% of revenues as against 8% in FY09. The stock will continue to be driven by asset sales and expected launch of Magnolias – Phase II. We maintain ‘BUY/SP’ with NAV/TP of INR263.

DLF: Sell: Business Line,

 

Shareholders of DLF can exit the stock. A debt-laden balance sheet, slackening pace of property sales and compulsion to sell its own assets — some lucrative ones — to keep the business afloat, do not provide comfort to the company’s prospects for the next one-two years.

The real-estate sector’s prospects too have been dented by economic slowdown and high interest rates. While a few listed players have bucked the trend, most of them have fallen into a slowdown phase.

Any significant improvement in DLF’s earnings growth is unlikely in the next 12-15 months. The management too has acknowledged that it does not see much relief over this period.

As an investor, you may miss out on more lucrative opportunities in the market by holding on to the DLF stock. At the current market price of Rs 210, the stock trades at 31 times its trailing consolidated earnings. The valuation is too demanding, given that the company has not expanded earnings since FY-08.