Buy Prestige Estate; target of Rs 140: Motilal Oswal

Motilal Oswal is bullish on Prestige Estate and has recommended buy rating on the stock with a target of Rs 140 in its July 31, 2012 research report.

“Prestige Estates' (PEPL) revenue for 1QFY13 declined 12% YoY (grew 8% QoQ). EBITDA grew 2% YoY (3% QoQ) to INR704m; EBITDA margin was 32% v/s 28% in 1QFY12 and 34% in 4QFY12. Net profit grew 35% YoY (29% QoQ), led by higher other income and lower effective tax rate (25.2% v/s 33.8% in 4QFY12). Debtors are down 6% QoQ to INR6.6b. Key projects with high outstanding debtors are: Shantiniketan (INR2.7b), (2) Oasis (INR1b), and (3) Golfshire (INR1.2b).”
“Sales momentum has been impressive at 2msf (INR10.1b) v/s 1.3msf (INR6.5b) in 4QFY12 and 0.5msf (INR2.1b) in 1QFY12. With this, PEPL is well on track to achieve the guidance of INR25b for FY13. The company launched 2.2msf across six projects in 1QFY13, most of which witnessed strong sales, with 35-95% of the stock already sold in 1QFY13.Collection run-rate stood at INR4.2b, down 7% QoQ, albeit in line with the guidance of INR16b for FY13. New leasing stood at 0.46msf (PEPL's share at 0.6msf) in 1QFY13, taking cumulative leasing to 8.44msf (PEPL's share at 5.1msf). Rental income was INR489m (up 3% QoQ and 27% YoY). Net debt is up by INR1.8b QoQ, largely led by fresh construction loan and considerations toward increase in stake in Cessna Business Park. Net debt stood at INR17.7b (effective stake of INR15.1b). Net debtequity stood at 0.7x v/s 0.68x in 4QFY12.”  “Amidst a challenging macroeconomic environment, the Bengaluru property market has been resilient compared with other markets due to (a) rational pricing movement, and (b) lower commercial vacancy. Given its presence across verticals and strong client base, PEPL would be a key beneficiary. Strong sales performance in 1QFY13 renders robust cash flow visibility and minimizes the downside risk to our estimates (sales of INR24b and collections of INR16b in FY13).”
“We expect PEPL to continue its strong operating performance, driven by healthy launch pipeline over FY13. Weaker revenue booking thus far and slower collections/execution in key projects (KF Tower, Golf Course) are concerning. We expect the overhangs to be mitigated partially over the coming quarters. Key triggers for the stock would be: (1) improvement in customer collections and debtors, (2) on-time monetization and execution of flagship projects such as Golfshire, Kingfisher Tower, etc, and (3) acquisition of new turnkey projects. The stock trades at 19.2x FY13E EPS, 1.6x FY13E BV, and at 38% discount to NAV estimate,” says Motilal Oswal research report.  Institutional holding more than 40% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment

Read More