Hold Peninsula Land; target of Rs 46: PINC Research

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Hold Peninsula Land; target of Rs 46: PINC Research

PINC Research has maintained hold rating on Peninsula Land (PENL) with a target price of Rs 46 in its October 18, 2011 research report.

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PINC Research has maintained hold rating on Peninsula Land (PENL) with a target price of Rs 46 in its October 18, 2011 research report.

"Peninsula Land's (PENL) Q2FY12 results were well below our estimates. Topline stood at Rs 496mn (PINCe Rs 1.1bn) and fell by 59.6% YoY. Reported PAT stood at Rs 137mn (PINCe Rs 448mn) and decreased by 78.6% YoY. EBITDA margin at 30.9% was substantially below usual margins of 39%/43.1% (FY11/ 10). We believe the stock has corrected significantly due to the following concerns: (i) Competition for PENL in selling/leasing the phase-II of Peninsula Business Park (PBP)(0.6msf) due to stiff competition from Alok Infra, causing delays in cash inflow and recognition of revenue.(ii) Weak project launches leading to poor revenue & cash flow visibility (iii) PENL has acquired land for residential projects both in and outside Mumbai. These acquisitions have increased the debt levels and could be a concern as near term cash flow visibility seems bleak with projects still under approval process."

"PENL's Q2FY12 revenues fell by 59.6% YoY to Rs 496mn from Rs 1.2bn in Q2FY11. Revenue was below our estimate of Rs 1.1bn. Revenue in this quarter was recognized from sale at PBP (15,000 sq ft@ Rs 17,000psf - Rs 260mn), Swan Techno park(Rs 170mn) and balance from Ashok garden. However, owing to poor launches in the past 12 months, future revenue visibility remains weak. Also, for leasing/sale of PBP-II, we expect PENL to face stiff competition from Alok Infra to which it sold PBP Phase-I. In our FY12-13 estimates we account for revenues from sale of PBP, followed by Goa and Nashik projects (already launched and will be reflected in yearly consolidated revenue) where construction has commenced."

"EBIDTA margin in this quarter decreased to 30.9% on account of rise in other expenditure (18% of sales as against 6.59% in Q2FY11). Reported PAT decreased by 78.6% YoY to Rs 137mn on account of lower revenue recognition from projects and one time forex translation loss. The company converted a rupee loan into US dollar denominated loan during the quarter. Due to exchange rate movement during the quarter it provided for Rs 147mn notional forex loss due to translation of the unhedged portion of the forex loan. Adjusting for the one-time forex loss PAT fell by 55.5 YoY%. We upgrade our rating from 'SELL' to 'HOLD' since the stock has corrected significantly and we see limited down side from current levels. We have a target price of Rs 46 after assigning a discount of 30% (previously 20%) to gross NAV & a WACC of 14%," says PINC Research report.

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To read the full report click on the attachment