Friday, March 7, 2014

Prestige Estates - Sell

Dear Smart Investors,

Company Background :
Prestige Estates Projects Limited is a real estate development company. The Company’s business segments include Residential, Commercial, Retail, Hospitality and Services. The Company’s residential developments include Prestige Golfshire, Prestige Neptune’s Courtyard, Prestige Oasis, Prestige Bella Vista, Prestige Westholme, Prestige Royal Woods, Prestige White Meadows, Prestige Tranquility and Prestige Ferns Residency. Its commercial buildings include Prestige Dynasty, Prestige Nebula, Prestige Shantiniketan Commercial Precinct, Prestige Atrium, Prestige Meridian, Prestige Towers and Prestige Pegasus. Its retail buildings include UB City, the Forum, the Forum Vijaya Mal and the Forum Value Mall. Its hospitality building include Angsana Oasis Spa & Resort, Oakwood Premier Prestige Bangalore serviced residences and The 24 Tech Hotel. Under the labels of Morph Design Co and Prestige Interiors, the Company offers customized interior design solutions and fit out services.

Q3 Results & forecast :
The debit pile of this company is huge and Management is well aware of this.  Efforts to bring down the debt by QIP preferential offers are in the offing.  25% vs. our estimate of 26.5% (down 506bps YoY) led to EBITDA of Rs 1.2bn and PAT of Rs 0.8bn, ~10% below estimates.  The  lower  margins  were  attributable  to majority  of  revenues  being  recognized  from   mid- income projects such as Tranquility (Rs 1.5bn) and Bella Vista (Rs 1.1bn) during the quarter. Other expenses increased 68% QoQ to Rs 251mn  on  account of re- classification of agent commissions  underoverheads vs. project-level expenses (material expenses).

Technical view : 
Although PEPL continues to have a strong launch pipeline, PEPL continues  to invest in augmenting its land bank through a mix of JDAs and outright acquisitions and is incurring annual capex of Rs 5-6bn on annuity assets. Hence, the key monitorable in our view is the company’s ability to keep debt levels in check in FY14-15E (PEPL’s consolidated net debt increased by Rs 4.0bn in 1HFY14 to Rs 21.9bn). Maintain Sell around Rs.165 stop loss of 170 with TP of Rs 150 /share 


Traders Delight :
The scrip provides enough trading opportunities for the risky traders.  Any fall below Rs.140 should be considered as an opportunity to buy and hold the stock for a target price of Rs.170 

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Smart Investor
Ravina Consulting
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BANGALORE 560048

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