Lancor Holdings looks undervalued: A Chugh

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Lancor Holdings looks undervalued: A Chugh

Ashish Chugh, Investment Analyst & Author of Hidden Gems is of the view that Lancor Holdings is looking undervalued at this level. They have a couple of projects going on in Chennai. For FY09 it has achieved sales of close to 160 crore as against 25 crore, which they did for FY08, which means a six fold increase in sales.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See previous views by Ashish Chugh See what other Experts & Brokerages are saying about Lancor Holdings See messages about Lancor Holdings BSE | NSE 01/01/70 Are Mutual Funds betting on ?

Ashish Chugh , Investment Analyst & Author of Hidden Gems is of the view that Lancor Holdings is looking undervalued at this level.

Chugh told CNBC-TV18, "Lancor Holdings is a Chennai based real estate company. They have a couple of projects going on in Chennai. Beside Chennai they have small presence in Bangalore and Mumbai. They have completed some residential as well as commercial projects in Chennai, Mumbai and Bangalore. Some of the prominent ones being DBS Westminster in Chennai, they have also done a building for a Ramco Systems in Chennai and they have done a residential complex called Belvedere Court in Mumbai. They did it for a company called Modern India Ltd."

He further added, "Currently this company has got six projects which are under execution. If you take a look at the financials of the company, for FY09 this company has achieved sales of close to 160 crore as against 25 crore, which they did for FY08, which means a six fold increase in sales. Profit after tax (PAT) has also gone up six times from 5.5 crore to about 33 crore. At the current price for FY09 the EPS for this company is 16.5, market price is close to Rs 44. So the company is traded at a price to earnings ratio of less than 3."

"In a year which was supposed to be a difficult year for the economy in general and real estate sector in particular, this company has managed a six-fold increase in both sales and profitability which is commendable. The second thing is that unlike most other real estate companies, this company has been able to adhere to strict time schedules for implementation of the projects and it has delivered most of its projects as promised."

"As the company is taking close to 40-50% from its customers' upfront and because of the trust created by this company, the customers are also willing to give them so much money upfront before the construction has actually commenced. So at the current price of about Rs 44, market cap of the company is just about 85-90 crore. Profit for FY09 was 33 crore and as per the management, this profit is likely to be maintained for the next two years. In fact they are talking of about increasing this profit slightly for FY10 and FY11."

"Here is a business, which is available at less than three years of its PAT and also if you closely look at the financials, there is a rental income about 4 crore. So a rental income of 4 crore assuming a rate of return of about 8% would translate into a property value of close to 50 crore - their own property from which they are getting the rentals. So at a market cap of about 85-90 crore, having their own property worth about 50-60 crore, making a net profit of about 33 crore which is likely to be sustained in the future also, the stock looks undervalued. I have investments in Lancor Holdings."