Multibagger ideas: SP Tulsian's 2 picks for good returns

Q: What about Brigade Enterprises?

A: I have been keeping my positive view on the real estate stocks. If you see in each pocket, whether you talk of Mumbai, NCR region or Bangalore, Brigade is termed as a very quality developer in the pockets of Bangalore. Though they have presence in the southern parts of India, Mysore, Chikmagalur, Chennai, Bangalore, but about 80% of their projects, in terms of value or in terms of area, are concentrated or located in Bangalore.

If you see for the year from 2007 to 2011, the company used to be in India’s top-10 builders. That means they have been keeping the pace with a size also and with the quality also. Going by their land bank, if I take the net present value of the lands, though it is very difficult to take a call because of the diverse land parcels held at various locations, but rough calculation indicates that the net present value works at about Rs 92-100 per share.

If you go by the debt positions, which has been the main reason for fall of all the real estate stocks, this company has a debt of about Rs 600-650 crore on a net basis. I am seeing that it is not as such a big threat for the company of this size, which is expected to have a top-line of close to about Rs 600 crore with bottom-line of close to about Rs 60 crore and EPS of maybe about Rs 6 or so.

If you go by the shareholding pattern, 58% is promoter holding, 32% is held by the individuals, the HNIs who are holding the stock in the company for quite some time, maybe for last three-four years. So, taking all this into account, I think the stock looks to have bottomed out and can move to about Rs 60 in the next six months or so.