Last Updated : Feb 27, 2019 01:42 PM IST | Source:

Oberoi Realty gains 4% after Antique initiates coverage with buy call, sees 29% upside

Antique said leasing risk of Worli Mall, high level of inventory in Mulund micro-market and slow sales velocity of Three-Sixty West are the envisaged downside risk.

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Mumbai-based real estate developer Oberoi Realty's shares rallied 3.6 percent intraday Wednesday after Antique Stock Broking initiated coverage with a buy call on the stock, citing healthy rental income and strong balance sheet. It expects 29 percent potential upside in the stock.

"With net asset value (NAV) of Rs 525 per share (Thane, Sky City extension and social infrastructure not included) and potential volume growth due to new project acquisitions, the target price of Rs 630 is a significant upside," the research house said.

The stock was quoting at Rs 494.80, up Rs 4.45, or 0.91 percent on the BSE, at 13:12 hours IST.

With expected revenue of Rs 2,400 crore in FY19E, Oberoi Realty is a dominant real estate developer in Mumbai, the most lucrative real estate market in India, the brokerage house believes.

With a robust execution track record Oberoi Realty is one of the strongest brands in Mumbai Metropolitan Region (MMR) and second largest developers in terms of sales value (INR million) in last 5 years.

Antique said company's existing inventory in the ongoing residential projects (excluding Three sixty West) is around 2.79 million square feet (projects in western and central suburbs) and another 6.68 million square feet of residential projects in the pipeline, all in the western suburb.

Sales Booking of Rs 1,900 crore in residential expected in FY19 and expected to increase further with the launch of three pipeline projects, it added.

The developer has a diversified product portfolio comprising residential projects and income generating annuity assets such as Grade A offices, large format retail and luxury hotel. The company also has good mix of residential/ annuity assets in the pipeline.

The operating assets - the offices (Commerz and Commerz II Phase I), retail (Oberoi Mall) and the hospitality asset (The Westin) are already generating more than Rs 300 crore as income per annum, the research house said, adding another 238-room Ritz Carlton hotel in Worli is expected to be operational by end of 2019 and to add income of another Rs 75 crore once the asset stabilises.

According to Antique, the total income from income-producing portfolio is expected to be around Rs 1,500 crore in 4-5 years timeline.

The brokerage house said although Oberoi Realty is executing two mixed-use developments at Borivali (1.73 million square feet) and Worli (1.70 million square feet), both of which are high capex intensive, the company has strong balance sheet and has one of the lowest D/E ratio (around 0.20) in the industry.

Although gross debt would be around Rs 1,400 crore but cash and liquid investment is around Rs 970 crore and the debt can easily be serviced with the healthy income (EBITDA Rs 300 crore per year) from the operational rental assets, it added.

Antique said leasing risk of Worli Mall, high level of inventory in Mulund micro-market and slow sales velocity of Three-Sixty West are the envisaged downside risk.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.
First Published on Feb 27, 2019 01:42 pm
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