Subscribe to Omaxe, reasonably valued: Networth

RELATED NEWS Omnitech Info IPO looks to be good: Experts Retail investors make good money in BEML FPO Celestial Labs witnesses 70 bulk deals Subscribe to Omaxe IPO: Edelweiss Sec Refex Refrigerants to raise Rs 24.7cr via IPO Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

Omaxe, a real estate player, is open for subscription with a public issue of 1.78 crore equity shares of Rs 10 each with an additional green shoe option of upto 17.50 lakh equity shares in the band of Rs 265 to Rs 310 per share on July 17. The issue will close for subscription on July 20, 2007.

Networth Stock Broking report on Omaxe IPO

Company Profiles

Omaxe is a real estate development and construction company with operations in 30 cities and 9 states in India. It is involved in residential and commercial real estate development projects ranging from integrated townships, group housing and retail and other commercial properties, hotels, information technology and bio-tech parks and special economic zones.

Started in 1989 as a construction and contracting company, Omaxe diversified into Real Estate Development Business in 2001 with a focus on residential and commercial properties. As of March 31, 2007 Omaxe has completed eight residential projects, consisting of seven group housing and one integrated township project, and two commercial projects, including retail and office space, covering approximately 5.13 million sq. ft of built-up / developed area besides 120 construction projects as contractor.

Omaxe has land reserves of approximately 3,255 acres (including approximately 571 acres of land belonging to joint ventures and collaborations in respect of which Economic Interest is approximately 74%), of which approximately 95.1% i.e. 3,096 acres (including approximately 451 acres of JV land) relate to projects that are currently under development or under various stages of approval for development, representing approximately 150 million sq. ft. of saleable area, and approximately 4.9% i.e. 159 acres (including approximately 120 acres belonging to our joint ventures and collaborations) relate to the future projects and projects that are currently in various phases of planning.

As of March 31, 2007, Omaxe had 52 current residential and commercial projects consisting of 21 group housing projects, 16 integrated townships, 14 shopping malls and commercial complexes and 1 hotel. The 'current projects' include 38 projects which are under development and 14 which are under various stages of approvals for development. The company expects to commence development on these 14 projects within Fiscal 2008. The 16 integrated townships are essentially 'mixed use' townships consisting of residential and commercial projects and are expected to include 10 group housing projects, 16 commercial projects, one bio-tech park and one information technology park.

The company has significant presence in NCR in Greater Noida and Gurgaon (36% of under development) with rest in Tier II and Tier III cities in Punjab, Haryana Rajasthan and Uttar Pradesh. Omaxe are also developing projects in the hospitality sector. With hotels at Amritsar, Greater Noida and Patiala are part of commercial malls, which are under construction. The company is raising Rs 4716- 5516 million to fund its part of cost of land, repay debt and towards construction expenses of ongoing projects.

Investment rationales

Play on NCR region and Adjoining States: The company's has ambitious projects under developments and expects to roll out 150mnSQFT of salable area over next 4-5 years under Group Housing, Township, Commercial and Hotels predominantly in NCR region of Greater Noida and Gurgaon. And Tier II and III Cities of adjoining states of Haryana, Punjab and UP.

Type of Project    Saleable area (million sq. ft.)

Group Housing               66.6
Townships                     77.3
Commercial                   4.89
Hotel                             1.03
Total                            149.82

Innovation Focused: The Company has been coming out with innovative projects in terms of rolling theme malls like Wedding Malls, Interior Design Ware Mall House to Home and Ultra Luxury Apartments Forest in Greater Noida and Suraj Kund which is a differentiating factor for omaxe brand..

Valuation

At Rs 265 -310 price bands the stock would be valued at a FY07 PE of 16-18.7 x FY07 EPS and EV/SQFT of Rs 324 - Rs 367 of the developable areas of 183 million sqft which seems reasonable given the upside from Company's Commercial and Ultra-luxury projects. We recommend subscribe.