Strong brand in the most resilient Mumbai real estate market: Oberoi Realty
(ORL) has a proven track record having been involved in the business of real
estate development in Mumbai since 1983. The company develops projects, with
an emphasis on contemporary architecture, strong project execution and quality
construction. ORL has been able to achieve bookings of an average 455 units
annually since the last five years except in FY2009 when the market conditions
were dismal. A strong brand name also allows ORL to charge premium prices for
its projects, besides obtaining development rights, pursuant to which it develops
land owned by a third party on a revenue-share basis.
Well-capitalised balance sheet with healthy leasing portfolio: ORL had net cash of
Rs331cr as on June 2010. ORL recorded rental income of Rs83cr from Oberoi
Mall and Commerz in FY2010. We expect ORL to report rental income of Rs177cr
in FY2012 with Westin Hotel and Oberoi International School getting operational.
Replenishing land bank on sustainable basis will be a key challenge: ORL has
land bank of ~20mn sq ft (94% is in Mumbai), which will be developed over the
next 6-7 years. This is lower than its other listed peers and the company proposes
to increase its land bank to ensure longer term growth. Currently, SRA, block
redevelopment and sale of mill land are primary sources of supply of land in
Mumbai where competition is intense. We believe that it would be a challenging
task for ORL to reinvest cash flow from its existing projects and replenish its land
bank on sustainable basis over longer term.
Outlook and Valuation: We remain bullish on the Mumbai realty market and
developers listed in that space. Most of the developers are trading at a discount to
our one-year forward NAV. However, ORL differentiates itself from its peers on
account of having a strong brand, timely execution of projects and quality
infrastructure coupled with well capitalised balance sheet. Hence, we expect the
company to trade at its one-year forward NAV of Rs295/share. At the higher
band of the issue price, the company is trading at 12% discount to our one-year
forward NAV. We recommend Subscribe to the IPO with a long-term perspective.
Key Financials
Y/E March (Rs cr) FY2008 FY2009 FY2010 FY2011E FY2012E
Net Sales 511 425 784 894 1,226
% chg 117.4 (16.8) 84.2 14.1 37.1
Net Profit 295.4 252.1 458.2 516.7 639.2
% chg 277.5 (14.6) 81.7 12.8 23.7
EBITDA (%) 50.4 58.2 59.6 58.0 57.8
EPS (Rs) 9.0 7.7 14.0 15.7 19.5
P/E (x) 28.9 33.8 18.6 16.5 13.4
P/BV (x) 7.5 6.2 4.7 2.5 2.2
RoE (%) 29.7 19.9 28.5 20.0 17.5
RoCE (%) 19.6 17.0 27.6 19.3 18.7
EV/Sales (x) 17.0 19.8 10.5 8.0 6.4
EV/EBITDA (x) 33.8 34.1 17.6 13.8 11.1
Source: Company, Angel Research
SUBSCRIBE
Issue Open: October 06, 2010
Issue Close: October 08, 2010
Note:*at Lower and Upper price band respectively
QIBs At least 60%
Non-Institutional At least 10%
Retail At least 30%
Post Issue Shareholding Pattern
Promoters Group 78.1
MF/Banks/Indian
FIs/FIIs/Public & Others 21.9
Promoters holding Pre-Issue: 89.3%
Promoters holding Post-Issue: 78.1%
Issue Details
Book Building
Face Value: Rs10
Present Eq. Paid up Capital: Rs288.7cr
Offer Size: 3.96cr shares
Post Eq. Paid up Capital: Rs329.7cr
Issue size (amount)*: Rs1,000-1,028cr
Price Band: Rs253-260
(ORL) has a proven track record having been involved in the business of real
estate development in Mumbai since 1983. The company develops projects, with
an emphasis on contemporary architecture, strong project execution and quality
construction. ORL has been able to achieve bookings of an average 455 units
annually since the last five years except in FY2009 when the market conditions
were dismal. A strong brand name also allows ORL to charge premium prices for
its projects, besides obtaining development rights, pursuant to which it develops
land owned by a third party on a revenue-share basis.
Well-capitalised balance sheet with healthy leasing portfolio: ORL had net cash of
Rs331cr as on June 2010. ORL recorded rental income of Rs83cr from Oberoi
Mall and Commerz in FY2010. We expect ORL to report rental income of Rs177cr
in FY2012 with Westin Hotel and Oberoi International School getting operational.
Replenishing land bank on sustainable basis will be a key challenge: ORL has
land bank of ~20mn sq ft (94% is in Mumbai), which will be developed over the
next 6-7 years. This is lower than its other listed peers and the company proposes
to increase its land bank to ensure longer term growth. Currently, SRA, block
redevelopment and sale of mill land are primary sources of supply of land in
Mumbai where competition is intense. We believe that it would be a challenging
task for ORL to reinvest cash flow from its existing projects and replenish its land
bank on sustainable basis over longer term.
Outlook and Valuation: We remain bullish on the Mumbai realty market and
developers listed in that space. Most of the developers are trading at a discount to
our one-year forward NAV. However, ORL differentiates itself from its peers on
account of having a strong brand, timely execution of projects and quality
infrastructure coupled with well capitalised balance sheet. Hence, we expect the
company to trade at its one-year forward NAV of Rs295/share. At the higher
band of the issue price, the company is trading at 12% discount to our one-year
forward NAV. We recommend Subscribe to the IPO with a long-term perspective.
Key Financials
Y/E March (Rs cr) FY2008 FY2009 FY2010 FY2011E FY2012E
Net Sales 511 425 784 894 1,226
% chg 117.4 (16.8) 84.2 14.1 37.1
Net Profit 295.4 252.1 458.2 516.7 639.2
% chg 277.5 (14.6) 81.7 12.8 23.7
EBITDA (%) 50.4 58.2 59.6 58.0 57.8
EPS (Rs) 9.0 7.7 14.0 15.7 19.5
P/E (x) 28.9 33.8 18.6 16.5 13.4
P/BV (x) 7.5 6.2 4.7 2.5 2.2
RoE (%) 29.7 19.9 28.5 20.0 17.5
RoCE (%) 19.6 17.0 27.6 19.3 18.7
EV/Sales (x) 17.0 19.8 10.5 8.0 6.4
EV/EBITDA (x) 33.8 34.1 17.6 13.8 11.1
Source: Company, Angel Research
SUBSCRIBE
Issue Open: October 06, 2010
Issue Close: October 08, 2010
Note:*at Lower and Upper price band respectively
QIBs At least 60%
Non-Institutional At least 10%
Retail At least 30%
Post Issue Shareholding Pattern
Promoters Group 78.1
MF/Banks/Indian
FIs/FIIs/Public & Others 21.9
Promoters holding Pre-Issue: 89.3%
Promoters holding Post-Issue: 78.1%
Issue Details
Book Building
Face Value: Rs10
Present Eq. Paid up Capital: Rs288.7cr
Offer Size: 3.96cr shares
Post Eq. Paid up Capital: Rs329.7cr
Issue size (amount)*: Rs1,000-1,028cr
Price Band: Rs253-260