Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Property stocks have rebounded 44% on average from trough valuations
Guidance miss may hurt sentiment in the near term; bull case intact
In our view, pockets of value still left (Unitech, IBREL)
Our favourite picks are Unitech, Anant Raj, Sobha and IBREL
Sector re-rating and beyond
Property stocks up 44% from trough valuations
Property stocks have rebounded about 44% on average from the trough
valuations seen over the past three months. The sector P/B has now re-rated to
about 1.5x one-year forward P/B, from 0.7x P/B seen during the recent trough.
The biggest gainers have been Sobha, HDIL and Unitech, while the
underperformers have been DLF and Anant Raj.
Volume guidance miss may hurt sentiment in the near term
From a near-term tactical view, we believe property stocks may begin to shed
some recent gains as we enter the annual results season. Our channel checks
with industry participants suggest that many property companies (DLF, Unitech,
Sobha) are likely to miss their FY11 volume guidance and debt levels are likely to
increase, raising dilution concerns for companies like DLF.
Bull case holds: Office recovery, wage inflation, stronger BS
Longer term, we continue to believe that valuations of property stocks are still
accommodative as inflation has peaked, the office sector is on the recovery path,
and developer balance sheets are strong. The growth in the services sector
remains strong, which is positively impacting office space offtake and wage
inflation. While intuitively rising rates should increase cap rates, it is important to
bear in mind that local property market cycle has higher relevance than rate cycle.
Developers also have much stronger balance sheets (0.4x net debt/equity versus
1.4x in the previous trough period), which gives them better holding power.
Pockets of value still left
We believe key catalysts that could restore faith in developer stocks in FY12 are
better transparency, divestment of non-core assets (including land) as this can
improve cash flows, recovery in the office sector, and residential price cuts aimed
at volume revival in very expensive markets like Mumbai. In our view, stocks that
continue to offer attractive risk-reward despite the recent run-up in their share
prices are Unitech, IBREL and Anant Raj. Key catalysts for Unitech and Anant Raj
will be more clarity on their involvement in the 2G license scandal and project
launches. Improving execution in real estate and power demerger should restore
investor faith in IBREL. Favourable valuations and good 4QFY11 results could rerate
these stocks higher. We cut our target forward P/BV for Anant Raj to 1x (from
1.25x), which is at the lower end of global peers (using BNPP and Bloomberg
estimates), and TP to INR139 (from INR173), to reflect the delay in launches.
Risks: delays in residential project launches in New Delhi and slower-thananticipated
recovery in office and retail sectors in NCR. We trim our SoTP-based
TP for Sobha to INR375 (from INR409), mainly to our lower forward EV/EBITDA
(from 8x to 6x) for its contractual business, all else is largely unchanged. Risks:
slower-than-anticipated execution, weak sales and delays in project launches.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Property stocks have rebounded 44% on average from trough valuations
Guidance miss may hurt sentiment in the near term; bull case intact
In our view, pockets of value still left (Unitech, IBREL)
Our favourite picks are Unitech, Anant Raj, Sobha and IBREL
Sector re-rating and beyond
Property stocks up 44% from trough valuations
Property stocks have rebounded about 44% on average from the trough
valuations seen over the past three months. The sector P/B has now re-rated to
about 1.5x one-year forward P/B, from 0.7x P/B seen during the recent trough.
The biggest gainers have been Sobha, HDIL and Unitech, while the
underperformers have been DLF and Anant Raj.
Volume guidance miss may hurt sentiment in the near term
From a near-term tactical view, we believe property stocks may begin to shed
some recent gains as we enter the annual results season. Our channel checks
with industry participants suggest that many property companies (DLF, Unitech,
Sobha) are likely to miss their FY11 volume guidance and debt levels are likely to
increase, raising dilution concerns for companies like DLF.
Bull case holds: Office recovery, wage inflation, stronger BS
Longer term, we continue to believe that valuations of property stocks are still
accommodative as inflation has peaked, the office sector is on the recovery path,
and developer balance sheets are strong. The growth in the services sector
remains strong, which is positively impacting office space offtake and wage
inflation. While intuitively rising rates should increase cap rates, it is important to
bear in mind that local property market cycle has higher relevance than rate cycle.
Developers also have much stronger balance sheets (0.4x net debt/equity versus
1.4x in the previous trough period), which gives them better holding power.
Pockets of value still left
We believe key catalysts that could restore faith in developer stocks in FY12 are
better transparency, divestment of non-core assets (including land) as this can
improve cash flows, recovery in the office sector, and residential price cuts aimed
at volume revival in very expensive markets like Mumbai. In our view, stocks that
continue to offer attractive risk-reward despite the recent run-up in their share
prices are Unitech, IBREL and Anant Raj. Key catalysts for Unitech and Anant Raj
will be more clarity on their involvement in the 2G license scandal and project
launches. Improving execution in real estate and power demerger should restore
investor faith in IBREL. Favourable valuations and good 4QFY11 results could rerate
these stocks higher. We cut our target forward P/BV for Anant Raj to 1x (from
1.25x), which is at the lower end of global peers (using BNPP and Bloomberg
estimates), and TP to INR139 (from INR173), to reflect the delay in launches.
Risks: delays in residential project launches in New Delhi and slower-thananticipated
recovery in office and retail sectors in NCR. We trim our SoTP-based
TP for Sobha to INR375 (from INR409), mainly to our lower forward EV/EBITDA
(from 8x to 6x) for its contractual business, all else is largely unchanged. Risks:
slower-than-anticipated execution, weak sales and delays in project launches.
No comments:
Post a Comment