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Ansal Properties ProjectsPrice: Rs 40 BSE Index: 17,507 20 June 2011
Maintain OutperformerVISIT UPDATE
Share Data
Reuters code APIL.BO
Bloomberg code APIL IN
Market cap. (US$ mn) 139
6M avg. daily turnover (US$ mn) 0.4
Issued shares (mn) 157
Target price (Rs) 73
Performance (%) 1M 3M 12M
Absolute (3) 14 (48)
Relative (2) 16 (49)
Valuation ratios
Yr to 31 Mar FY12E FY13E
EPS (Rs) 8.3 11.0
+/- (%) 29.4 31.8
PER (x) 4.8 3.6
Dividend/Yield (%) 2.7 2.7
EV/Sales (x) 1.5 1.2
EV/EBITDA 7.5 5.8
Major shareholders (%)
Promoters 46
MFs/FIs 3
FIIs 22
Public & Others 29
Renewed focus on execution to improve cash flows and earnings
We met the management of Ansal Properties (APIL) and visited their five
prominent projects across Noida, Greater Noida, Gurgaon and Lucknow. Most
of the projects we visited were more than 50% sold out (of the launched area)
while level of construction were varying for different projects.
Construction work picking up pace
The developers have learnt a hard lesson from the last recession. Accordingly, apart from
launch of new projects, APIL is equally focusing on construction and execution. In FY11,
the company launched 19.3 mn sq ft of new projects and delivered 10.8 mn sq ft. With Rs 5.1
bn expensed towards construction in FY11, management has strongly indicated its focus on
increased execution and delivery of delayed projects.
Considerable portion sold
The company presently has 125.1 mn sq ft (co’s share) of ongoing projects in hand, of which
70.4 mn sq ft (56%) is already sold out. In the projects we visited, Esencia and Megapolis
projects, which were launched in 2010 have already been sold out 51%, because of their
good location and pricing along with the management’s increased focus on these projects.
Slowdown in fresh sales, halt in price increase
As the latent demand has almost dried up and prices have reached back to peak levels, the
fresh sales have come down significantly. APIL’s average realisations have increased from Rs
778 per sq ft in FY10 to Rs 1,067 per sq ft presently. However, majority of the developers
have done considerable sales in the last 12 months and are having good pre-sales inventory
(APIL has 70.4 mn sq ft of pre sales out of 125.1 mn sq ft of ongoing projects). Thus, they do
not intend to decrease the prices in the short run and instead are focusing on execution. Due
to oversupply of projects in the recent months and fall in fresh sales, the developers are
unable to increase prices further.
Esencia project in Gurgaon saw good pre-sales
In FY11, sales momentum was good in Gurgaon with key real estate players like Unitech and
DLF drawing a nice response to their attractively priced residential and plotted development
projects. Ansal also has witnessed an encouraging response to its Gurgaon Esencia project
(~3.1 mn sq ft) launched in FY11, which is 70% sold out.
Outlook and valuation
This last recession has forced the developers to reconsider and restructure their policies.
Now their increased focus is on construction and execution unlike before, when they used
most of the internal accruals from the projects to purchase land. Accordingly, APIL is also
focusing on construction and execution. Though fresh sales have slowed down because the
latent demand has almost dried up and prices have reached to peak levels, significant sales
bookings in few of its major projects during the last financial year along with renewed focus
on execution augurs well. Though the interest rate hikes (impacting demand and cost of the
Batlivala & KaraniSMALL CAP
Relative performance
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Ansal Properties andInfras trucrure (Actual)Sensex
2ANSAL PROPERTIES PROJECTS
B&K RESEARCH JUNE 2011
companies) and limited availability of additional debt to the real estate developers is concerning,
APIL is trying to match its cash flows by customer advances and exit from its smaller projects.
We have arrived at an FVPS of Rs 73 and maintain our Outperformer rating on the stock.
We visited five prominent projects of APIL, since these contribute 51% to its
total GPV and delta on FVPS is high in terms of execution, sales and pricing of
these projects.
Project statistics
Esencia, Esencia Sushant Sushant Megapolis,
Gurgaon Extension, City I, City II, Dadri*
Gurgaon Lucknow Lucknow*
Land area ( acres) 112 108 1,765 800 1,371
Land purchased ( acres) 112 75 1,723 400 580
Pending land payments (Rs mn) – 600 325 1,200 4,746
Type JV JV Fully owned Fully owned Subsidiary
Saleable area ( mn sq ft) 3.1 5.9 59.3 22.6 42.8
Co’s share (%) 48 74 100 100 55
Co’s share (mn sq ft) 2.1 4.3 59.3 22.6 23.5
Area launched ( mn sq ft) 3.1 1.3 39.1 10.1 16.9
Area sold ( mn sq ft) 2.2 – 23.6 4.3 5.1
Cash received (Rs mn) 2,122 – 9,114 1,110 2,171
Sale value (Rs mn) 5,112 – 19,094 2,932 5,341
Per sq ft realisation 2,345 – 808 688 1,062
Construction cost incurred (Rs mn) 39 – 2,312 9 481
Note: All figures as on 31 March 2011. *Since development agreement has been signed for – 800 aces inthe Lucknow Phase II (out of 1,765 acres) and 1,371 acres in Megapolis (out of 2,504 acres), we have takennote of all statistics pertaining to only 800 and 1,371 acres, respectively.
Source: Company, B&K Research
3ANSAL PROPERTIES PROJECTS
B&K RESEARCH JUNE 2011
Project details
Esencia Esencia Extension
Saleable Co’s Area Co’s Avg. Current Saleable Co’s Area Co’s Avg. Current
area share sold share selling price area share sold share selling price
price price
Mn sq ft Rs per sq ft Mn sq ft Rs per sq ft
Plots 2.1 1.5 1.4 1.4 1,615 6,000 0.4 0.3 – – – 6,000
Floors 0.7 0.4 0.6 0.3 3,842 5,000 4.2 3.1 – – – 5,100
Group Housing – – – – – – 1.3 1.0 – – – 4,500
Group Housing FSI – – – – – – – – – – – –
Commercial – – – – – – – – – – – –
Commercial FSI 0.2 0.2 0.1 0.1 2,817 3,000 – – – – – –
Others 0.1 0.1 – – – 1,300 – – – – – –
Total 3.1 2.1 2.2 1.8 – – 5.9 4.3 – – – –
Source: Company, B&K Research
Site visit of "Esencia" at Gurgaon
Source: B&K Research
Esencia
Badshahpur, SohnaRoad (7 kms)
Distance betweenGurgaon Toll Plaza and
Esencia is ~19 kms
Rajiv Chowk(12 kms)
Gurgaon Toll Plaza
Esencia – Gurgaon
The project is a luxury JV project spread across 220 acres (including 108 acres of its extension)
Plots were launched at Rs 1,615 per sq ft and villas at Rs 3,842 per sq ft with prices having
gone up to currently selling at Rs 6,000 per sq ft and Rs 5,000 per sq ft, respectively.
The Esencia project is in Gurgaon with total saleable area (including Esencia extension) of
more than 6.5 mn sq ft (co’s share), and accounts for ~13% of the GPV for APIL. The project
was launched in April 2010 and currently work has started on construction of roads, leveling
of land and laying of sever lines. Its good location at Sohna road extension, along with
projects of many other prominent developers like Unitech, DLF, Parsvnath, etc. in this region,
augurs well.
4ANSAL PROPERTIES PROJECTS
B&K RESEARCH JUNE 2011
Entry gate Construction work on the entry gate
Roads inside
5ANSAL PROPERTIES PROJECTS
B&K RESEARCH JUNE 2011
Sushant City – Lucknow
This is one of the largest integrated township in APIL’s pack (~3,530 acres) of which
development agreement has been signed for 2,565 acres cumulating to saleable area of 81.9
mn sq ft, and accounts for ~24% of the GPV for APIL. It is a Hi-tech township under the Hi-
tech policy of Government of UP. It has a combination of residential plots, group housing,
villas, retail mall, hotel, commercial complex, golf course, etc. A, 18 hole Golf course is being
developed in the township by Martin Hardy. The area of the entire golf course area is 441
acres, of which 180 acres is devoted to the golf course and the rest is planned to be developed
as golf villas and golf group housing around the golf course.
It is located on the Lucknow-Sultanpur National Highway on Amar Shaheed Path, Ring Road
in Lucknow, which at present is on the outskirts of the city but is strategically located between
the airport and upscale Gomti Nagar. There is a bridge being built on the Gomti river
connecting Sushant Golf city to Gomti Nagar which will reduce the distance to around 6 kms
( from presently 12 kms). Out of 81.9 mn sq ft of saleable area 49.2 mn sq ft has been
launched of which 57% is sold out. Construction work is in full swing with 80-85% of
infrastructure work almost complete (in phase-I of 1,765 acres). First phase of villas have
been handed over to customers in FY11 and construction work on the group housing and
commercial complex, has started. Till date ~Rs 2.3 bn has been expensed towards construction
expenses.
Project details
Sushant City I, Lucknow Sushant City II, Lucknow
Saleable Co’s Area Co’s Avg. Current Saleable Co’s Area Co’s Avg. Current
area share sold share selling price area share sold share selling price
price price
Mn sq ft Rs per sq ft Mn sq ft Rs per sq ft
Plots 10.8 10.8 7.9 7.9 702 1,556 8.5 8.5 3.7 3.7 435 1,000
Villas 4.4 4.4 2.2 2.2 2,029 2,816 1.6 1.6 0.6 0.6 2,375 2,800
Group Housing 8.4 8.4 3.7 3.7 1,354 1,959 7.1 7.1 – – – –
Group Housing FSI 3.2 3.2 2.3 2.3 570 650 – – – – – 400
Commercial 0.2 0.2 0.1 0.1 2,429 2,532 4.5 4.5 – – – 3,300
Commercial FSI 16.5 16.5 2.3 2.3 493 686 1.0 1.0 – – – 500
Others 15.8 15.8 5.0 5.0 242 350 – – – – – –
Total 59.3 59.3 23.6 23.6 22.6 22.6 4.3 4.3
Source: Company, B&K Research
6ANSAL PROPERTIES PROJECTS
B&K RESEARCH JUNE 2011
Site visit of "Sushant City" at Lucknow
Source: B&K Research
Charbagh RailwayStation (8 kms)
Gomti Nagar(10-12 kms)
Lucknow Airport
Sushant Golf City(6 kms)
Amar Shaheed Path(2 kms)
Entrance of the township Water body within the township
Roads within the sectors EWS LIG
7ANSAL PROPERTIES PROJECTS
B&K RESEARCH JUNE 2011
Shopping square Commercial complex - Felix Square
Golf course Golf villas
G.D Goenka School within the campus
8ANSAL PROPERTIES PROJECTS
B&K RESEARCH JUNE 2011
Megapolis – Dadri (Greater Noida)
This is a Hi-tech township being developed in adherence to the Hi-Tech Policy of Government
of Uttar Pradesh. The licence to build 2,504 acre township has been awarded to a consortium
including APIL and is being developed in a SPV. Out of this, the company has entered into
development agreement for only 1,371 acres cumulating to saleable area of 23.5 mn sq ft
(co’s share) and till date has acquired 580 acres of land parcel. We have valued only 580 acres
and it accounts for ~14% of the GPV for APIL.
Structure of the SPV
This township is being developed in a SPV with APIL having 63% stake and the remaining in
the hands of three consortium members. APIL cannot dilute its stake below 63% in this
consortium, it can, however increase it. Further to this initial consortium, HDFC real estate
fund invested in first phase Rs 2.3 bn (Rs 1.5 bn by way of subscribing to 15 mn Secured
Redeemable Optionally Convertible Debentures (SROCD) and Rs 7.5 mn by way of equity
shares for 8.5% stake. Post HDFC, effective stakes are APIL (55%), HDFC (14%) and remaining
in the hands of the other consortium members.
Saleable area statistics
Saleable area Co’s share Area sold Co’s share Avg. selling price Current price
Mn sq ft Rs per sq ft
Plots 9.1 5.0 4.0 2.2 1,264 1,684
Villas 1.8 1.0 0.1 0.1 2,447 2,631
Group Housing 9.2 5.0 0.9 0.5 1,869 1,953
Group Housing FSI 1.8 1.0 – – – 800
Commercial 12.8 7.1 0.0 0.0 2,847 4,355
Commercial FSI 2.3 1.3 – – – 1,200
Others 5.8 3.2 – – – 867
Total 42.8 23.5 5.0 2.8 – –
Source: Company, B&K Research
Site visit of "Megapolis" at Greater Noida
Source: B&K Research
Megapolis
Noida Expressway,Amity Chock
Distance from NoidaExpressway to
Megapolis is (~34 kms)
Boraki RailwayLine (6 kms)
Pari Chowk(24 kms)
Wipro Campus(3 kms)
9ANSAL PROPERTIES PROJECTS
B&K RESEARCH JUNE 2011
Entry point to township Landscapping
Roads inside the township Parks
Sever lines being laid Construction work going on
10ANSAL PROPERTIES PROJECTS
B&K RESEARCH JUNE 2011
Fairway apartments Sample villas
Valuation
We have valued the company on a mix of DCF (118 mn sq ft – co’s share) and land valuation
(100.4 mn sq ft – co’s share). For our valuation, in Dadri township we have considered, of the
total licenced 2,504 acres, 580 acres (has purchased only 580 acres as yet) and in Lucknow
township of the total approved 3,530 acres only 2,565 acres (development agreement has
been signed for 2,565 acres).
SOTP valuation
APIL Esencia (incl. Sushant Megapolis,
Rs per share Extension), City, Dadri
Gurgaon Lucknow
Plots 40 9 4 15
Residential 7 2 3 –
Group housing 27 – 6 7
Commercial 27 1 11 8
Retail 23 – 5 –
Miscellaneous 1 – – –
Land value 92 17 22 –
Total GPV 217 28 52 30
Less: Outstanding land cost per share 51 – – –
Less: Net debt per share 93 – – –
No. of shares (mn) 157 – – –
FVPS (Rs) 73 – – –
Source: B&K Research
11ANSAL PROPERTIES PROJECTS
B&K RESEARCH JUNE 2011
Balance Sheet
Yr end 31 Mar (Rs mn) FY10 FY11P FY12E FY13E
Cash & Marketable secuties 1,081 1,284 793 1,160
Other current Assets 47,843 51,342 53,382 55,817
Investments 122 13 13 13
Net fixed assets 1,243 1,164 1,152 1,149
Other non-current assets (41) (21) 23 24
Total assets 50,247 53,782 55,362 58,162
Current liabilities 18,739 20,521 21,594 22,604
Total Debt 17,183 15,878 15,743 15,972
Total liabilities 35,921 36,399 37,337 38,576
Share capital 616 787 787 787
Reserves & surplus 12,380 15,782 16,424 17,985
Less: Misc. expenditure (0) – – –
Shareholders’ funds 12,995 16,569 17,211 18,772
Minorities interests 1,330 814 814 814
Total equity & liabilities 50,247 53,782 55,362 58,162
Capital employed 30,178 32,447 32,954 34,744
Income Statement
Yr end 31 Mar (Rs mn) FY10 FY11 FY12E FY13E
Net sales 8,621 12,571 14,369 17,745
Growth (%) 15.4 45.8 14.3 23.5
Operating expenses (6,758) (10,150) (11,555) (14,098)
Operating profit 1,863 2,421 2,814 3,647
EBITDA 1,863 2,421 2,814 3,647
Growth (%) 55.2 30.0 16.2 29.6
Depreciation (97) (96) (109) (104)
Other income 320 307 285 286
EBIT 2,085 2,632 2,989 3,828
Interest paid (1,061) (923) (1,000) (1,192)
Pre-tax profit 1,024 1,709 1,990 2,636
(before non-recurring items)
Non-recurring items 156 – – –
Pre-tax profit 1,180 1,709 1,990 2,636
(after non-recurring items)
Tax (current + deferred) (380) (629) (657) (870)
Net profit (before Minority 800 1,080 1,333 1,766
Interest, Pref. Dividend, etc.)
Prior period adjustments 66 – – –
Minority interests (63) (66) (20) (35)
Reported PAT 803 1,015 1,313 1,731
Adjusted net profit 581 1,015 1,313 1,731
Growth (%) 95.2 74.8 29.4 31.8
Cash Flow Statement
Yr end 31 Mar (Rs mn) FY10 FY11P FY12E FY13E
Pre-tax profit 1,180 1,709 1,990 2,636
Depreciation 46 108 94 84
Chg in working capital (4,010) (1,727) (967) (1,425)
Total tax paid (290) (659) (700) (871)
Cash flow from oper. (a) (3,075) (570) 417 425
Capital expenditure 248 (29) (82) (82)
Chg in investments 159 109 – –
Cash flow from inv. (b) 407 80 (82) (82)
Free cash flow (a+b) (2,668) (490) 335 343
Equity raised/(repaid) 638 3,020 – –
Debt raised/(repaid) 3,143 (1,305) (135) 229
Dividend (incl. tax) (66) (72) (171) (171)
Other financing activities (332) (368) (501) 0
Cash flow from fin. (c) 2,736 693 (827) 24
Net chg in cash (a+b+c) 68 203 (491) 367
Key Ratios
Yr end 31 Mar (%) FY10 FY11P FY12E FY13E
Adjusted EPS (Rs) 4.7 6.4 8.3 11.0
Growth 80.0 36.7 29.4 31.8
Book NAV/share (Rs) 116.1 110.2 114.3 124.2
Dividend/share (Rs) 0.6 0.6 1.1 1.1
Dividend Payout Ratio 12.4 9.1 13.0 9.9
Tax 32.2 36.8 33.0 33.0
EBITDA margin 21.6 19.3 19.6 20.6
EBIT margin 24.2 20.9 20.8 21.6
RoCE 7.0 8.1 8.9 11.0
Net debt/Equity 112.4 84.0 82.9 75.6
Valuations
Yr end 31 Mar (x) FY10 FY11P FY12E FY13E
PER 8.4 6.2 4.8 3.6
PCE 7.2 5.6 4.4 3.4
Price/Book 0.3 0.4 0.3 0.3
Yield (%) 1.5 1.5 2.7 2.7
EV/Net sales 2.6 1.7 1.5 1.2
EV/EBITDA 12.0 8.6 7.5 5.8
Du Pont Analysis – ROE
Yr end 31 Mar (x) FY10 FY11P FY12E FY13E
Net margin (%) 6.7 8.1 9.1 9.8
Asset turnover 0.2 0.2 0.3 0.3
Leverage factor 3.3 3.3 3.1 3.0
Return on equity (%) 4.1 6.4 7.4 9.2
12ANSAL PROPERTIES PROJECTS
B&K RESEARCH JUNE 2011
Analyst Declaration: We, Neetika Singhal & Rahul Khursija, hereby certify that the views expressed in this report accurately reflect our personal views aboutthe subject securities and issuers. We also certify that no part of our compensation was, is, or will be, directly or indirectly, related to the specificrecommendation or view expressed in this report.
Neetika Singhal Rahul Khursijaneetika.singhal@bksec.com rahul.khursija@bksec.com+91-120-460 5611 +91-120-460 5608
B & K SECURITIES INDIA PRIVATE LTD.Equity Research Division: City Ice Bldg., 298, Ground/1st Floor, Perin Nariman Street, Behind RBI, Fort, Mumbai - 400 001, India. Tel.: 91-22-4031 7000, Fax: 91-22-2263 5020/30.
Registered Office: Room No. 3/4, 7 Lyons Range, Kolkata - 700 001. Tel.: 91-33-2243 7902.
B&K Research is also available on Bloomberg <BNKI>, Thomson First Call & Investext.
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B&K Securities is the trading name of Batlivala & Karani Securities India Pvt. Ltd.
B&K Investment Ratings:
1. BUY: Potential upside of > +25% (absolute returns)
2. OUTPERFORMER: 0 to +25%
3. UNDERPERFORMER: 0 to -25%
4. SELL: Potential downside of < -25% (absolute returns)
B&K RESEARCH JUNE 2011
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