Subscribe to Vascon IPO with long term view: Indiabulls Sec

VasconEngg BSE | NSE 02/03/12 Are Mutual Funds betting on VasconEngg?

Indiabulls Securities Research has come out with a research report on Vascon Engineers IPO (initial public offering). The research firm has recommended investors to subscriber to the issue with a long term view.

The company's IPO of 10,800,000 equity shares opened for subscription. The price band of the issue is between Rs 165 and Rs 185 per equity share.

Indiabulls Securities Research report on Vascon Engineers IPO -

Vascon Engineers (VEL) is an engineering, procurement and construction (EPC) services and real estate development company based in Pune.

At a lower price band of Rs 165, as per our estimates the Company would provide an ROE of 11% and 14%, for FY10E and FY11E, which is in-line with an average of its peers set of Brigade Enterprise, Mahindra Lifespace Developers and Gayatri Projects. Moreover, at a lower price band of Rs. 165, the Company proposes an EV/EBITDA for FY11E of 11.1x, which offers an upside against its peers set average of 12x for FY11E.

Nevertheless it is fairly valued at the upper band with an EV/EBITDA for FY11E of 12.3x. Moreover, our DCF based valuation (Cost of Capital 14.3% and Terminal Growth rate 5%), suggests a fair value of Rs. 189. Thus, we recommend investors to Subscriber to the issue with a long term view given VEL's robust order book position, expected improvement in margins with recovery in real estate sector and strong execution capabilities.

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To read the full report click on the attachment