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Manish Bhatt
(Prabhudas Lilladher) |
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Emaar MGF is a good issue. It is a diversified player, into all businesses like residential, hospitality, retail etc. A 78% land bank has reserved for residential projects, 8% for commercial, 2% for retail and 15% for hospitality. The company is going to enter into education and infrastructure projects as well. Till now, it has developed nearly 50 million sqft of area since 2005. Its land bank in North is at 76%, 14% in South, 9% in West and hardly 1% in East.
EPS for the year March 2007 was in the negative of Rs 4.1 and that turned into positive of Rs 1.5 in September 2007. Major revenues will generate from retail projects in 2008, commercial in 2009, residential and hospitality in 2009-10. Its NAV for next 10 years is at around Rs 649 per share.
People should apply for the issue at cut off price. The stock will start trading higher by 10-15% on listing day. |
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SP Tulsian
(Investment Advisor) |
Don’t Apply |
Emaar MGF Land is diluting about 10.40% through this issue and the expanded equity of Rs 985.93 crore would translate into a market capitalization of Rs 62,114 crore, at the upper band of Rs 630 per share. This is without considering any gain being accrued to the prospective investors and purely on primary market valuations.
The company seems to be only mobilizing land and had 13,024 acres of land as at 31-12-07, which would give 566 million sq. ft. of saleable area to the company. Of total land bank, 80% is agricultural land and not a single sq. ft. is in Mumbai, which is the remunerative real estate market, and dream of every realty company to own and develop property in this city. Of this, only 17.80 million sq. ft. is under development.
If we take a further break up of proposed development, residential plot is for 136.5 million sq. ft. while 318.80 million sq. ft. is for residence. This constitutes 80% of the total saleable area. Residential always have the lower realization for sale on ownership basis as well as for rental or lease.
While acquiring this land stock, debt of the company rose to Rs 5,288 crore as on 12-01-08, with net worth of Rs 4,839 crore, which includes preference share capital of Rs 923 crore.
FY 07 financial performance, (being its first year of operations), posted a net loss of Rs 47 crore. For 6 months ending 30-09-07, the topline of the company was at Rs 502 crore with PAT of Rs 129 crore. With this kind of performance, the promoters of the company, are dreaming to mobilize close to Rs 6,464 crore, by diluting close to 10%. Really dreaming big.
If we compare its valuations, with other realty companies, it is nowhere matching with them. The per sq. ft. cost of land works out to Rs 1,097 per sq. ft. for the company, on expected market capitalization of Rs 62,114 crore. Parsvnath Developers has a market capitalization of Rs 5,000 crore with 220 million sq. ft. of saleable area, translating into a value of Rs 225 per sq. ft. Apart from this, Parsvnath Developers, has about 55% area in A Class cities, and 55% of this is in NCR region. Promoter’s stake is also quite high at 80% and company has presence in residential integrated township, shopping, commercial, hotels, SEZ and hospitality sector.
Parsvnath Developers with market capitalization of Rs 5,000 crore posted total income of Rs 488 crore and PAT of Rs 115 crore for quarter ending December 07. Omaxe with market capitalization of Rs 5,000 crore had posted a topline of Rs 576 crore with PAT of Rs 154 crore, for quarter ending December 07. Omaxe is developing 20 million sq. ft. in FY 08 and plans to develop 40 million sq. ft. in FY 09.
Unitech having market capitalization of Rs 61,000 crore is posting quarterly topline of over Rs 1,000 crore and bottomline of close to Rs 500 crore. DLF having market capitalization of close to Rs 1,40,000 crore had posted a topline of Rs 3,650 crore and PAT of Rs 2,145 crore, after paying tax of over Rs 320 crore, for December 07 quarter.
Inspite of losses in FY 07, and meager profit of Rs 132 crore in first half of FY 08, the company dared to capitalize Rs 760 crore, out of share premium, to issue bonus shares in the ratio of 7 shares for every 1 share held. This is inspite of the fact that more than 50% equity capital, (pre-bonus), were issued at par.
The company seems to be more building its brand image and visibility, based on the track record of Emaar, a Dubai based company. Even in Hyderabad, where the company is owning 510 acres of land, at its Boulder Hills project, has presently developed a 18 hole golf course on about 180 acres. Not a single sq. ft. of saleable area has been developed by company, as yet, on this project. So, who will come and play on this golf course? Probably, golf course would help the company in marketing its realty project. In the vicinity of Boulder Hills project, Lanco is selling residential premises at Rs 4,000 to Rs 4,500 per sq. ft. while company dreams of realizing Rs 6,500 to Rs 7,000 per sq. ft.
The issue has no positives at all to attract any prospective investor, in view of umpteen mid and large size realty companies being available in the secondary market. The financial performance, not likely to take off for FY 08 and FY 09 (part) would keep the share price depressed, as post listing, financial performance of the company would get compared with DLF and Unitech where company won’t be able to stand.
Give a pass to the issue and go for existing established players showing growth coupled with better margins and diversified range on pan-India basis. |
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