Ashish Chugh positive on Ansal Properties

Ashish Chugh, Investment Analyst & Author of Hidden Gems is positive on Ansal Properties.

Chugh told CNBC-TV18, "Ansal Properties is a contrarian buy from a sector which is currently out of favour, from a sector which has virtually been written off by most investors and that is the reason you are getting this stock at close, not just close to its 52 week low but very close to its five year low. Now the reasons are many. One is that the interest rates are almost at their peak, which is hurting not just home sales but also it is hurting the debt servicing capacity of the companies."

He further added, "The other thing is that there is a lack of transparency and corporate governance in a sector as a whole. The other part is that most real estate companies are carrying huge inventories as on date and most of them are finding it difficult to sell those inventories."

"Ansal Properties is a company which is as old as I would say Unitech and DLF. This is a 40 year old company. It has been credited with developing more than 3,000 acres of land in Gurgaon alone, leave aside the other developments. Company has got current land bank of about more than 7,000 acres out of which 3,500 acres is in Lucknow and Megapolis, Greater Noida is about 2,500 acres. Company is doing a 200 acre township in Gurgaon and currently has got about 19 townships which are under development."

"Now if we look at the financials of the company, FY11 sales were about Rs 1,300 crore with a profit after tax of Rs 108 crore. EPS was about Rs 7.50. In Q1 FY12 sales are about Rs 300 crore which is up by 16%. Profit after tax is down by close to 40% or about Rs 22 crore. Now the heartening fact is that in the June quarter the company has booked sales of about 8.5 million square feet, which incidentally is the highest sales book by the company in any quarter."

"I think the negatives with respect to the sector maybe fully priced in the stock prices. Any indication by RBI that indicating an end to the interest rate increase cycle may lead to a sharp bounce back in the prices of many of the stocks in the sector. Also this company has got debt of about Rs 1500-1600 crore which is not I would say very low but it