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Oberoi Realty Limited
Re-setting the Model for
Project Delays; Staying OW
What's Changed
Price Target Rs370.00 to Rs345.00
FY12e / FY13e EPS Down 12% / Down 15%
OBER remains our preferred play on the Indian
property market given its strong balance sheet
(Rs16bn net cash), preparedness to monetize its
land bank, and strong brand name. Stock weakness
due to ongoing slowdown in Mumbai market is an
opportunity to buy, we believe.
What's new: We hosted a meeting with Vikas Oberoi –
CMD, Oberoi Realty – and investors. The near-term
outlook for the Mumbai market was cautious, but
management remains confident about the longer-term
potential of the company. According to OBER, the
financial distress of leveraged developers could catalyze
the price cuts in Mumbai (as much as 30%). This is
possible sometime in the next six to 18 months.
Other highlights: 1) OBER believes that land
acquisition at the correct price and in the correct
locations are at the heart of value creation for the
company. It continues to explore opportunities (in
Mumbai and outside, especially Gurgaon) to deploy its
surplus cash in new projects. 2) Mid- to long term, OBER
targets to raise its current sales rate (one unit a day) to
two to three units a day, as and when the project location
is established. 3) It remains confident of leasing out new
commercial tower (Goregaon) by Feb-12.
We have re-set our NAV/earnings model to account
for project delays. In particular, we have delayed Oasis
(Worli), Exotica (Mulund), and commercial block
(Jogeshwari) by a year and preponed the revenue
recognition of Esquire by one year. In addition, we
included an estimated charge of Rs4bn to account for
potential changes in Mumbai FSI regulation. Our new
NAV – rolled forward to Mar-12 – is Rs314 per share vs.
a previous Rs337 per share for Mar-11.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Oberoi Realty Limited
Re-setting the Model for
Project Delays; Staying OW
What's Changed
Price Target Rs370.00 to Rs345.00
FY12e / FY13e EPS Down 12% / Down 15%
OBER remains our preferred play on the Indian
property market given its strong balance sheet
(Rs16bn net cash), preparedness to monetize its
land bank, and strong brand name. Stock weakness
due to ongoing slowdown in Mumbai market is an
opportunity to buy, we believe.
What's new: We hosted a meeting with Vikas Oberoi –
CMD, Oberoi Realty – and investors. The near-term
outlook for the Mumbai market was cautious, but
management remains confident about the longer-term
potential of the company. According to OBER, the
financial distress of leveraged developers could catalyze
the price cuts in Mumbai (as much as 30%). This is
possible sometime in the next six to 18 months.
Other highlights: 1) OBER believes that land
acquisition at the correct price and in the correct
locations are at the heart of value creation for the
company. It continues to explore opportunities (in
Mumbai and outside, especially Gurgaon) to deploy its
surplus cash in new projects. 2) Mid- to long term, OBER
targets to raise its current sales rate (one unit a day) to
two to three units a day, as and when the project location
is established. 3) It remains confident of leasing out new
commercial tower (Goregaon) by Feb-12.
We have re-set our NAV/earnings model to account
for project delays. In particular, we have delayed Oasis
(Worli), Exotica (Mulund), and commercial block
(Jogeshwari) by a year and preponed the revenue
recognition of Esquire by one year. In addition, we
included an estimated charge of Rs4bn to account for
potential changes in Mumbai FSI regulation. Our new
NAV – rolled forward to Mar-12 – is Rs314 per share vs.
a previous Rs337 per share for Mar-11.
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