Why is Tulsian positive on realty stocks?

With new projects being launched in Mumbai every day, S P Tulsian of sptulsian.com says that the real estate sector is going to perform extremely well.

Tulsian in an interview to CNBC-TV18 says he is positive on real estate stocks like Peninsula, Brigade, Prestige Estates, DB Realty, HDIL and Anant Raj Industries.
Also read: Landmark Prop Sep '12 sales at Rs 0.84 crore Below is the edited transcript of Tulsian's interview with CNBC-TV18 Q: What are your thoughts on two results to which the markets have responded positively - Reliance Capital and Puravankara Projects which came in just sometime back?
A: There is a big surprise in Reliance Capital. I am not focusing on the standalone or on the consolidated. We all know that the insurance sector has not performed well. However, out of the total income of Rs 1150 crore for the quarter, there has been EBIT of about Rs 545 crore. If you see the results of this segment for the whole of FY12, it was less than Rs 400 crore. Infact, this segment has been very lackluster. The largest capital is employed in this segment, while the income was never booked in the last four quarters.
Most of the things have come from the finance and investment sector. Maybe the investment income was booked in a very big way and that is the reason we have seen a consolidated EPS of Rs 16 with a PAT of close to Rs 400 crore. So, those are obviously very good numbers, but I don’t think that this kind of performance can really be repeated. Q: Your comments both on IGL and Puravankara. What you have made of the numbers?
A: IGL numbers really look very good. I won’t be surprised to see the company posting an EPS of Rs 30 plus for FY13. If we have some kind of relief from the Supreme Court in the Petroleum and Natural Gas Regulatory Board (PNGRB) matter, I think the matter is likely to come up for hearing maybe in this month or so. This can take the share back to about Rs 345-350, as I have been maintaining.
I have not gone through the numbers of Puravankara. So, it is difficult for me to comment on that.
_PAGEBREAK_ Q: What is your expectation from ONGC for tomorrow?
A: I do not think of any kind of positive surprises will be coming in from ONGC’s results. Firstly, I am not taking the quarterly calls on either of the oil marketing company (OMC) or the upswing companies- ONGC, Oil India and GAIL. You never know what kind of subsidy will be shared by them. So, in my view tracking the quarterly results of all these six companies is meaningless. I am keeping my neutral stance on the numbers.

Q: Anything in the real estate space that still deserves a mention? May be a trading bias on the long side?
A: You can pick and choose many of the stocks, but I will be keeping my eyes on two stocks- Anant Raj Industries and HDIL. Both will be declaring their results day after tomorrow and it will be interesting to see. I am not expecting much Transfer of Development Rights (TDR) sales to happen in HDIL. Inspite of that, things are looking to be better.
The kind of indications, which will be coming in from HDIL in respect to the TDR sales in the second half, that will be very interesting to see. The kinds of projects we have are seeing getting launched, especially in Mumbai everyday. We see the newspaper flooded with the advertisements of the builders every weekend.
Infact, the off take has really picked up very well. There are a number of properties under-construction and that indicates positive stance. So, you can keep a positive stance on the stocks like Peninsula, Brigade, Prestige Estates, DB Realty, HDIL and Anant Raj Industries. Q: What is the problem with S Kumars? Regardless of which way the market is heading, the stock loses 4-5 percent everyday, now Rs 13?
A: I am myself unable to understand the reason for this fall. When it used to be in the F&O space, we used to feel that the kind of open interest may have led to some financing arrangements and having given exit to the financials in the F&O space. But since then, even the chapter 11 of one of their subsidiary is positive. If the losses are getting reduced, then it has not been reflected.
So, whatever call you take on the stock purely on a fundamental basis, it is not turning out in that way. Now, if you have an EPS estimate of about Rs 13-14 for FY13 and share is ruling at a P/E multiple of 1, that means there has to be something which is not coming to our eyes.
Even if you take their domestic operations of Rs 5,000 crore from the India operations, which are very profit making, but it is very strange that why it is not getting reflected into the share price. On the contrary, it is going other way round. It is contradicting the opinion which we are taking on the stock.
_PAGEBREAK_ Q: We are expecting Tata Motors numbers’ anytime soon. How are you positioned on the stock and any disappointments that the market is going in to the numbers with?
A: I don’t think that any disappointment is really expected. I am expecting that the EBITDA should probably come at Rs 5750 crore with PAT at Rs 2222 crore. That is the estimate on a top-line of Rs 44,000 crore plus with margin of 13 percent.
I am expecting the margin to be at 13 percent. If the margin falls below 12.6-12.7 percent, then that will probably be seen as disappointing and maybe the PAT of below Rs 2100 crore will be seen as the disappointing. Sequentially, definitely there will be small drop on the bottom-line, maybe by about 2 or 3 percent. But overall I don’t think that there should be any kind of disappointment from Tata Motors. Q: You were betting on these sugar stocks to report good numbers. What did you make of Balrampur Chini and how would you be placed on the stock?
A: It has good numbers, but it is the magic of the inventory liquidation. They had an inventory of Rs 1450 crore as on June 30 and since they have sold more than 60% inventory, that’s the effect we are seeing in the form of the higher PAT. Inventory by and large of the sugar has been valued at about Rs 28-29 per kg . The realisation in this quarter must have been anywhere between Rs 34-35 per kg.
As usual, I don’t think that distillery and cogen must have contributed anything in that. So, entire inventory gain of 60% of the inventory has been booked. So, overall the numbers look good. Q: Most of the Anil Dhirubhai Ambani Group (ADAG) company stocks are out with their numbers. Do you see a potential for an incremental upside on any stocks based on what they have reported this quarter?
A: While I am keeping my positive stance on Reliance Capital and Reliance Infra, I am not so much impressed with Reliance Power. This is because all the expectations are because of the commissioning of Rosa Power .We will be seeing the capacity addition coming in till December 2012 or maybe March 2013.
I am not so much impressed with Reliance Power but Reliance Capital and Reliance Infra, both have been ruling at its lower end. I do think that the downside is much seen. Reliance Capital has posted very good numbers and maybe the value buying can come into the stock any time. So I am keeping my positive stance on both of them. Both can be expected to give a return of anywhere between 5 percent and 8 percent in this series.
_PAGEBREAK_ Q: Any thoughts on United Breweries that is announcing its numbers tomorrow as well?
A: I am expecting the EPS should be in double digit. Because going by the Q1 indications, even the Q2 numbers should be good, with an EPS of maybe Rs 10 plus. But again, I don’t think that result is really the trigger for the stock. All eyes are on whether the stake sale is likely to happen or not to Diageo. I am keeping my positive stance. Infact, it has been my view for the last three-four months that this stake sale is bound to happen. I will again keep my view on those things only. Q: What are your views on the index itself? For the rest of the series where do you see the markers? Has anything changed after this Presidential Election?
A: It is very strange and contradictory for me to take a positive view on the Bank Nifty. I have been keeping my negative stance on Bank Nifty. If you really see the results, for example Allahabad Bank, it posted really poor numbers, but today, it is up by about 5 percent. Same  is the case with Canara Bank, PNB. Today also, we have seen the bad numbers coming in from UCO Bank. But we are not seeing that kind of correction happening here. I am not seeing this as a short-covering as well, because if you really see the positions, nothing shorts have seen built up which have made the index to correct.
So, it is really strange. I see some kind of strong hands that are holding the stock because they have entered at a very low level. They are all having a profit of about 30-40 percent. So, the churning is going on. The trading is happening. Union Bank went up to about Rs 235-240 a few days back. Since then, it has corrected to Rs 215 till yesterday, today, again it has been up. So, all those stocks have been moving in a range. I am keeping my negative stance.
Suddenly whenever we will be seeing the corrections happening in the form of the delivery-based selling, coming in especially in the PSU banking stocks, I am expecting Bank Nifty to fall closer to about 11,000 or so.
I am expecting Bank Nifty to fall closer to about 11,000 or so, whenever we will be seeing the corrections happening in the form of the delivery-based selling, coming in especially in the PSU banking stocks.