Ashish Chugh positive on Ansal Properties

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Ashish Chugh positive on Ansal Properties

Ashish Chugh, Investment Analyst & Author of Hidden Gems is positive on Ansal Properties.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Ashish Chugh See what other Experts & Brokerages are saying about Ansal Propertie See messages about Ansal Propertie

Ashish Chugh, Investment Analyst & Author of Hidden Gems is positive on Ansal Properties .

Chugh told CNBC-TV18, "Ansal Properties is a contrarian buy from a sector which is currently out of favour, from a sector which has virtually been written off by most investors and that is the reason you are getting this stock at close, not just close to its 52 week low but very close to its five year low. Now the reasons are many. One is that the interest rates are almost at their peak, which is hurting not just home sales but also it is hurting the debt servicing capacity of the companies."

He further added, "The other thing is that there is a lack of transparency and corporate governance in a sector as a whole. The other part is that most real estate companies are carrying huge inventories as on date and most of them are finding it difficult to sell those inventories."

"Ansal Properties is a company which is as old as I would say Unitech and DLF. This is a 40 year old company. It has been credited with developing more than 3,000 acres of land in Gurgaon alone, leave aside the other developments. Company has got current land bank of about more than 7,000 acres out of which 3,500 acres is in Lucknow and Megapolis, Greater Noida is about 2,500 acres. Company is doing a 200 acre township in Gurgaon and currently has got about 19 townships which are under development."

"Now if we look at the financials of the company, FY11 sales were about Rs 1,300 crore with a profit after tax of Rs 108 crore. EPS was about Rs 7.50. In Q1 FY12 sales are about Rs 300 crore which is up by 16%. Profit after tax is down by close to 40% or about Rs 22 crore. Now the heartening fact is that in the June quarter the company has booked sales of about 8.5 million square feet, which incidentally is the highest sales book by the company in any quarter."

"I think the negatives with respect to the sector maybe fully priced in the stock prices. Any indication by RBI that indicating an end to the interest rate increase cycle may lead to a sharp bounce back in the prices of many of the stocks in the sector. Also this company has got debt of about Rs 1500-1600 crore which is not I would say very low but it's a manageable debt."

"It is not as high as which many other real estate companies are carrying which are much smaller in size compared to Ansal Properties. So I think the stock currently trades at about Rs 27-28. The 52 week high and low for the stock is about Rs 97 is the high and Rs 26 is the low. If you see the five year high/low - this company had touched a price of about Rs 550. So at Rs 27-28 it is available very low to its five year and 52 week low. I don't see too much downside from these levels. I think the negatives seem already priced in."

"In case any positive announcements with regard to the end of rate increase cycle may lead to a sharp bounce back in the stock price of the stock. So it is for the high risk investor and I think from Rs 27-28 another fall, maybe about 5-10% is the maximum which I expect in the stock."

"The good part is that the promoters have been increasing their stake in the company through market purchases. Between March and June they have increased their stake by about 1.3% and even after June you can see from the various disclosures made to the stock exchanges that they are still buying from the market. So I think these things make us positive on the stock of Ansal Properties."

Disclosure: Me and my family have got some investments in the stock of Ansal Properties.