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Oberoi Realty (OBER)
Property
Resilient in a tough environment. Oberoi reported sales of 0.2 mn sq. ft (down 26%
qoq) though with 80% of sales coming in at an early-stage project (Esquire at Garden
City) meant revenue recognition for these sales will be in 4QFY12E at the earliest.
Revenues were 11% lower than expected while PAT was in line due to a one-off land
sale. We maintain our BUY recommendation with a target price of Rs315/share, at par
with our March 2013E NAV.
Revenues miss on slower execution; PAT in line led by one-off land deal
Oberoi reported revenues of Rs1.6 bn (steady yoy, -40% qoq and 11% below expectation) and
EBITDA of Rs0.9 bn (+7% yoy, -38% qoq and 16% below expectation). Revenues were lower than
expected due to marginally slower execution across projects - (1) Exquisite revenue booking moved
to only 33% versus 29% as of end-4QFY11 and (2) Oberoi Splendor had an even slower 2%
revenue recognition while (3) hotel revenues were about Rs50 mn lower than our expectation due
to higher-than-expected seasonality impact. Other income was aided by sale of a land parcel in
Goa which helped PAT grow 33% and come in line with our estimates.
Market outlook soft at the margin; Oberoi remains relatively better-placed
Oberoi sold 0.2 mn sq. ft in 1QFY12 with Esquire contributing 79%. Esquire was launched in
February 2011 at Goregaon Garden City and is priced at Rs10,000/sq. ft versus a base price of
Rs11,500 for Exquisite I which had led to most of the demand getting diverted to the new project.
We expect volumes to remain flat in 2QFY12E due to lack of any new launches by Oberoi.
Revenue from investment properties declined qoq to Rs0.5 bn in 1QFY12 versus Rs0.6 bn in
4QFY11 due to Westin seeing a lower occupancy of 67% versus 77% in 4QFY11.
Retain BUY with a target price of Rs315/share
We find Oberoi relatively better-placed in this environment as (1) Oberoi is the only debt-free
developer company operating in the lucrative Mumbai region and could actually take advantage of
declining land prices by adding to its land bank, (2) NAV realization is relatively more front-loaded
than peers, and (3) RoE in the mid-20s is again higher than peers. Key risks are (1) risk of further
delays in the Mulund project as it awaits environmental approval, (2) risk of lower FSI and hence
potential developable area due to adverse car-park and FSI loading regulations, and (3) delay in
leasing at Commerz II as Commerz I has an occupancy rate of 76%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Oberoi Realty (OBER)
Property
Resilient in a tough environment. Oberoi reported sales of 0.2 mn sq. ft (down 26%
qoq) though with 80% of sales coming in at an early-stage project (Esquire at Garden
City) meant revenue recognition for these sales will be in 4QFY12E at the earliest.
Revenues were 11% lower than expected while PAT was in line due to a one-off land
sale. We maintain our BUY recommendation with a target price of Rs315/share, at par
with our March 2013E NAV.
Revenues miss on slower execution; PAT in line led by one-off land deal
Oberoi reported revenues of Rs1.6 bn (steady yoy, -40% qoq and 11% below expectation) and
EBITDA of Rs0.9 bn (+7% yoy, -38% qoq and 16% below expectation). Revenues were lower than
expected due to marginally slower execution across projects - (1) Exquisite revenue booking moved
to only 33% versus 29% as of end-4QFY11 and (2) Oberoi Splendor had an even slower 2%
revenue recognition while (3) hotel revenues were about Rs50 mn lower than our expectation due
to higher-than-expected seasonality impact. Other income was aided by sale of a land parcel in
Goa which helped PAT grow 33% and come in line with our estimates.
Market outlook soft at the margin; Oberoi remains relatively better-placed
Oberoi sold 0.2 mn sq. ft in 1QFY12 with Esquire contributing 79%. Esquire was launched in
February 2011 at Goregaon Garden City and is priced at Rs10,000/sq. ft versus a base price of
Rs11,500 for Exquisite I which had led to most of the demand getting diverted to the new project.
We expect volumes to remain flat in 2QFY12E due to lack of any new launches by Oberoi.
Revenue from investment properties declined qoq to Rs0.5 bn in 1QFY12 versus Rs0.6 bn in
4QFY11 due to Westin seeing a lower occupancy of 67% versus 77% in 4QFY11.
Retain BUY with a target price of Rs315/share
We find Oberoi relatively better-placed in this environment as (1) Oberoi is the only debt-free
developer company operating in the lucrative Mumbai region and could actually take advantage of
declining land prices by adding to its land bank, (2) NAV realization is relatively more front-loaded
than peers, and (3) RoE in the mid-20s is again higher than peers. Key risks are (1) risk of further
delays in the Mulund project as it awaits environmental approval, (2) risk of lower FSI and hence
potential developable area due to adverse car-park and FSI loading regulations, and (3) delay in
leasing at Commerz II as Commerz I has an occupancy rate of 76%.
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