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Last Updated : Jul 28, 2017 10:19 AM IST | Source: CNBC-TV18

Buy Cineline India: SP Tulsian

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com shared his readings and outlook on the market and specific stocks and sectors.


In an interview to CNBC-TV18, SP Tulsian of sptulsian.com shared his readings and outlook on the market and specific stocks and sectors.

Below is the verbatim transcript of the interview.

Q: You are recommending a stock called Cineline India; tell us about the company and why you like it?

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A: This company belongs to Kanakia Group and they are the leading real estate developer in Mumbai. In fact you see many of their projects, commercial and residential, and some of them are in the high-end also. This company, promoters are Kanakia Group and the company owns nine multiplexes and all those nine multiplexes have been leased out to PVR on which regular rental income is earned by the company along with the other parking charges and all those things are accruing to the company.

Now those nine multiplexes are situated or located in the prime location of Mumbai, maybe Eastern and Western suburbs like Andheri, Sion, Goregaon, Kandivali, Thane, or Navi Mumbai. Many of these properties are seen to be of depleting condition which may require redevelopment and all that, and that is what we have gathered that even if out of nine properties, even if they take couple of properties for development, that can give them huge value unlocking going forward.

Apart from that, the company is also owning Nagpur Eternity Mall; that is a mall in Nagpur which is 90 percent occupied and the company has given the statement that they intend to monetise this property. The net present value is seen anywhere at about Rs 200 crore. Just to retire the debt which the company has in its book.

Thirdly, company has booked about 84,000 square feet of sellable area or 50,000 square feet of carpet area in the new Kanakia project coming up that is called Kanakia Wall Street at Andheri East. The company intends to lease that out also because Kanakia Wall Street is a themed commercial space where the financial intermediaries, brokers, merchant bankers, and this property is developed on the theme of a Wall Street where the development work which is going on and will get completed in next one year.

That property company has acquired from the group company at armslength at about Rs 145 crore for which part of the amount has been availed as debt to finance that project. However, insiders or the estimates goes that probably the company can yield an annuity income of about Rs 15 crore while the interest burden on acquiring this property is seen somewhere at around Rs 10-11 crore. So, additional income of about Rs 4 crore after knocking off the interest payment will start accruing to the company.

Come on the financial performance, EPS for FY17 has been at Rs 3.80 which was at Rs 2.10 for FY16. Now, market capitalisation is very low at Rs 200 crore. If you take a net present value of all these properties because appreciation is seen in the property having booked in Kanakia Wall Street, estimates are coming in at somewhere at around Rs 1,000-1,100 crore for all nine multiplexes, Eternity Mall at Nagpur, and this Andheri property , while the market cap of the company is closer to about Rs 205 crore and enterprise value (EV) of about Rs 325 crore. If you go on the annuity model also the share is available at a P/E multiple on the expected EPS of about Rs 5, for FY18 share is available at a P/E multiple of 14-15, on a net present value basis it is available at 0.2 of the net present value.

So, taking all this into consideration, this should be taken more as a real estate stock and we have seen that recently the real estate stocks have started running up and more especially the Mumbai based real estates like DB Realty, HDIL, Indiabulls Real Estate. So, probably this should be taken as a real estate stock and not as a media stock and I think that the stock which is now ruling at Rs 72, can move to a level of about Rs 90 in next six months or so.

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First Published on Jul 28, 2017 10:05 am
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