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UBS Investment Research
India Real Estate
W eak but holding-up; Valuations at trough
Data-points suggest physical market holding up
Contrary to news flow and expectations data suggest – 1) Resi pre-sales in 1Q12
are holding-up vs. 1QFY10 (recovery post crisis); though weak YoY it’s better
than ’08-09 crisis led by Gurgaon, Bangalore, Chennai; 2) Commercial recovery
has been strong, 3) Inventory is up on new launches, but well below crisis levels.
Earnings weak, liquidity stays tight; but better than last crisis
Sector Q1 earnings are down 19% YoY and 16% QoQ, however 9% higher vs.
Q1FY10 (post-’08 recovery) and above last crisis. Funding stays tight, however we
believe with most developers’ D/E less than 1x, ongoing construction, rentals and
non-core asset sales will help address liquidity constraints. Though cost/interest
rate pressures will remain, we foresee stabilization in interest rates/property prices,
better macro environment along with pick up in execution/pre-sales drive growth.
FII ownership at 2-year lows, though risks for some stocks remain
Sector’s FII holding down from 23% in Sept’09 to 18% in Jun’11 and this is likely
to fall further given stocks are down 19% since Jun’11 – most investors seem to
have sold-out/underweight now, in our view. That said, risks still remain for few
stocks with high FII ownership like IBREL (49%), HDIL (42%), Unitech (30%).
News flow an overhang; but stock, valuations at/near recession lows
With stock prices and valuations at/near recession lows – we see compelling riskreward
opportunities with 12-mth horizon. We view Oberoi and Phoenix Mills as
relative defensive plays in weak markets; and expect DLF, Prestige trading at near
recession valuations to offer larger upsides once risk appetite improves
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
India Real Estate
W eak but holding-up; Valuations at trough
Data-points suggest physical market holding up
Contrary to news flow and expectations data suggest – 1) Resi pre-sales in 1Q12
are holding-up vs. 1QFY10 (recovery post crisis); though weak YoY it’s better
than ’08-09 crisis led by Gurgaon, Bangalore, Chennai; 2) Commercial recovery
has been strong, 3) Inventory is up on new launches, but well below crisis levels.
Earnings weak, liquidity stays tight; but better than last crisis
Sector Q1 earnings are down 19% YoY and 16% QoQ, however 9% higher vs.
Q1FY10 (post-’08 recovery) and above last crisis. Funding stays tight, however we
believe with most developers’ D/E less than 1x, ongoing construction, rentals and
non-core asset sales will help address liquidity constraints. Though cost/interest
rate pressures will remain, we foresee stabilization in interest rates/property prices,
better macro environment along with pick up in execution/pre-sales drive growth.
FII ownership at 2-year lows, though risks for some stocks remain
Sector’s FII holding down from 23% in Sept’09 to 18% in Jun’11 and this is likely
to fall further given stocks are down 19% since Jun’11 – most investors seem to
have sold-out/underweight now, in our view. That said, risks still remain for few
stocks with high FII ownership like IBREL (49%), HDIL (42%), Unitech (30%).
News flow an overhang; but stock, valuations at/near recession lows
With stock prices and valuations at/near recession lows – we see compelling riskreward
opportunities with 12-mth horizon. We view Oberoi and Phoenix Mills as
relative defensive plays in weak markets; and expect DLF, Prestige trading at near
recession valuations to offer larger upsides once risk appetite improves
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