Saturday, 11 April 2015

VALUE PICK - SUNTECK REALTY LTD - GTS 1 ANSWER


About The Company & Business
Sunteck Realty Ltd (SRL) is a ultra-luxury real estate company headquartered in Mumbai.
The company is promoted by Mr Kamal Khaitan and is listed on both NSE and BSE.
The company boasts of a city centric development portfolio of about 25 million square-feet spread across 24 projects at various stages of development and 4 rented assets. Of the said portfolio, the company within a span of four years has completed six projects with a developed area of about 2 million square feet comprising of residential and commercial developments.

SRL which has attracted investment from Ajay Piramal led (Akshar Fincom) is also into a joint-venture with Piramal Enterprises, the JV is named Piramal Sunteck Realty Pvt Ltd.
Kotak Private Equity too has earlier partnered with SRL for some of the projects.
 
Coming to the projects, SRL has a Mumbai and city centric portfolio.
In Bandra-Kurla Complex (BKC) one of Mumbai's leading CBD it is only Sunteck which is developing three residential projects including a landmark project named Signature Island which has only started attracting the uber rich Indians.
 
The company's customer list for its BKC duplexes has names like: Gautam Adani of Adani Group, Vikram Pandit (ex-Citigroup head), Harsh Mariwala of Marico, Jalaj Dani of Asian Paints, Kishore Lulla of Eros, Ashok Wadhwa of Ambit Holdings, Gunit Chadha of Deutsche Bank, Nimesh Kampani of JM Financials, Pramit Jhaveri CEO of Citi India, Mickey Doshi country head of Credit Suisse and Surat based diamond-merchant Hitesh Patel who became popular after being the highest bidder for PM Narendra Modi's suit.
 
SRL has launched four new projects in Mumbai this quarter along with one in Nagpur, SRL has tied up with The Charcoal Project (Interior designing firm owned by Sussanne ex-wife of Hrithik Roshan) for its luxury project in Nagpur.

The Ace Investor - Value Pick
SUNTECK REALTY LTD.
BSE:512179 - NSE: SUNTECK
Company listed on both BSE & NSE is trading around 280 with a market cap of about 1735 crores.
Promoter holding is at 73.49%, total debt on the books is at around 592 crores.
The current price to earning ratio is around 10 and the stock is under-valued.
 
The company is having a total inventory of about Rs 5200 crores and total unrecognized sales stands at about Rs 2200 crores. As the company is reporting numbers via project completion method these figures will add up on project completion.

The inventory of Rs 5200 crores is not from some small remote town of Gujarat but majority of it is in India's best city and financial capital: Mumbai.
 The company has landbank of approx 7 Acres in Mumbai.

The rich are becoming richer and the upper middle class is going bullish to become rich, there is a shift in corporates with Ratan Tata hanging his boots and many others to follow, Superstars getting married or aging and Cricketers too announcing retirements. All these stuff only increases the investments for usage in properties like Signature Island and other Sunteck luxury projects therefore it is clear that inventory isn't an issue here. I mean who doesn't want to be the neighbor of richest and famous Indians?

Citigroup had initiated a Buy on Sunteck focusing on the Net Asset Value (NAV) of the company staying stable on back of a city centric portfolio.

A Morgan Stanely note too made a reference to SRL as being the cheapest among its peers with a discount of 60% to its NAV compared to 18-47% discount in other companies.
 
Coming to P/E based valuations, SRL p/e of 10 is cheap compared to India's largest real-estate firm DLF which is trading at p/e of 43. Point to note is that DLF is having serious debt issues and SEBI too has issues with promoters intent.
SRL having partnership with Piramal and Kotak too is re-assuring.
Piramal is not some other guy but a honest businessman with serious business sense.
 
Coming to the Financials, Sunteck witnessed YoY topline growth of 2963% and bottomline growth of 3655% - FY14 v/s FY13 on back of some completed projects.
Company has reported healthy margins, here is a snapshot of annual results table :-

Particulars
FY09
FY10
FY11
FY12
FY13
FY14
Sales
20.60
28.40
20.39
17.00
30.21
925.56
Operating Profit
10.32
12.11
3.49
4.21
5.42
278.50
OPM
50.10%
42.64%
17.12%
24.76%
17.94%
30.09%
Other Income
10.18
2.02
9.94
13.37
19.96
12.70
EBIDT
20.50
14.13
13.43
17.58
25.38
291.20
Interest
0.05
0.50
3.66
5.09
11.01
17.00
Depreciation
1.40
1.15
1.47
1.48
1.41
1.41
Profit before tax
19.05
12.48
8.28
11.01
12.96
272.79
Tax
2.73
5.67
5.23
6.46
6.19
90.02
Net profit
16.84
6.18
3.18
3.11
4.02
150.97
EPS
2.95
1.03
0.53
0.52
0.67
25.16

As clear from the above financial statement the company has reported great numbers in FY14.
However, it is not wise to compare quarterly and annual earnings for a company which is reporting numbers as per the project completion method as they do not give the accurate picture of how the business is faring right now in a quarter due to the project being under-construction.

I have rather aggressive projections for FY17 rather than FY15/16, i expect FY17 topline around 2800 crores and EPS of around 65-70 which means that a P/E of 30 will work out to be at 2100 rs per share.
 
Some might think how does 30 P/E make sense, I explain: We are talking about FY17 and i don't expect Sensex to languish at under 30k at FY17 end. Even on this day Sunteck should trade at 30 P/E, If a Mumbai-centric low-cost housing company like Poddar can trade at a P/E of 44 why can't our rich man's poddar (Sunteck) attract such valuations specially with the projects and partnerships it has.

All in All i feel, It is wise for the retail Indian investors to buy shares of Sunteck for their portfolio before huge investments flow in: Citi has already rated a BUY and Morgan Stanely too has taken note of the cheap valuations Sunteck is trading at.
 
  Technically above 292 there is long-term breakout on the charts for a huge target of more than 90% return, That is just according to the charts, I expect this stock to turn into a multibagger in future. Ofcourse the future means long-term.
 
Note: The above is not a research report but information as available on public domain and it should not be treated as a research report.

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

Disclosure: It is safe to assume that i might have Sunteck Realty Ltd in my portfolio and hence my point of view can be biased. Readers should consult their financial advisory before any investments.
 
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 Name of the winners for Guess This Stock - 1 is posted below as "comment" on this post.

62 comments:

  1. There was huge response to Guess This Stock - 1 but mostly with wrong answers.

    Over 430 answers were received out of which only 11 were right.

    01- Vijay
    02 - Ravish
    03 - Neha
    04 - S Iyer
    05 - Amit Khanna
    06 - Ragin
    07 - Jai
    08 - Waheed
    09 - Himanshu
    10 - Sandeep
    11 - Sujoy

    ReplyDelete
  2. Sir, the balance sheet reflects that in MAR 14 qtr the huge profit is only due to other income of 152 crores. What is that other income ?

    ReplyDelete
    Replies
    1. Kuch bhi? Since when did you start seeing profit in the balance sheet?

      http://www.bseindia.com/corporates/results.aspx?Code=512179&Company=SUNTECK%20REALTY%20LTD.&qtr=81.00&RType=c

      Delete
    2. Sorry by mistake it was written balance sheet instead of qtrly result.

      Delete
    3. The whole question of yours was a mistake, in the Mar 14 quarter sunteck has reported :-
      Sales: 890+ crores
      Operating Profit: 264+ crores
      Other income : 3.73 crores
      Net Profit: 143+ crores.

      Where do you see the other income of 152 crores?

      Delete
    4. Jas was actually referring to Annual P&L dated Mar 14. Other income was 132 Crores.

      Delete
    5. Fy14 full year other income is 12.70 crores.

      Delete
    6. I was referring to Standalone results:

      http://www.moneycontrol.com/financials/sunteckrealty/profit-loss/SR05#SR05

      However, your figures are correct w.r.t. Consolidated Results. If we compare Quarterly consolidated results, there sudden burst in Sales in Mar'14 Quarter of Rs. 890 Crores. Subsequent Quarters, it is in the range of 20-80 Crores.

      http://www.moneycontrol.com/financials/sunteckrealty/results/consolidated-quarterly-results/SR05

      It may sum up to 250 Crores for FY 14-15, which is far lower compared to FY 15-16.

      Performance has, of course, improved if we exclude the sudden burst in Sales in Mar'14 Quarter.

      Delete
    7. Why should you refer to standalone numbers?

      The company as said in the blog post is reporting numbers via the project completion method and that is why the boom, and such boom will also be present for next FY, this FY i expect around 400 crores topline and EPS of 8-9 but this FY results shouldn't be taken seriously as 4 new projects are launched and delivery wasn't done in this FY.

      Delete
  3. Sir what is your view on sumeet industries?

    ReplyDelete
  4. Gujarat automotive gear has given very good value pick to retail investor. people are making huge huge losses every day. better you shut down this rubbish blog. also I know you have not courage to post my comment

    ReplyDelete
    Replies
    1. Talk about yourself my readers are happy.

      GAGL posted at 290 went 414 (42.75% return) cmp 230 down 20% from 290.. As an investor if you cant wait for long term in a scrip posted for long term, How dare you call yourself an investor?

      Delete
    2. prem jee do not reply these losers

      Delete
    3. I am very happy with your analysis. Please don't care about these type of comments.

      Delete
  5. Great report Ace . congrats to all who guess it correctly . looking forward to this share now with bigger interest

    ReplyDelete
  6. Dear Premji,

    Richa industries is moving northwards for the last 3 sessions. Any good news behind the movement. pls advice.

    Thanks

    Amudhan

    ReplyDelete
    Replies
    1. Railway orders started to come, Wipro giving repeat orders, Company getting PSU and govt. orders.

      When we posted on the blog, we expected all this.

      Now wait, I believe soon it will be 100+

      Delete
    2. Premji, after getting orders from Railways & wipro the scrip moved northwards and for the last 3 sessions it has come down to the previous value. any negative news because today i am buying another 1500 shares @ 28.60. pls advice.

      Delete
    3. Major rerating will happen in Richa.. Today new MES order news out, check http://richaindustries.wordpress.com

      Delete
  7. Another gd find by you ,,, it is well known that realty is a prime focus for Modi G n sector is already in focus in capital mkt .

    So hope for great return as time passes :) :)

    ReplyDelete
  8. Sir ... ur view on MAKE as huge upside seen in it , if one can had .. shd he hold or sell

    ReplyDelete
  9. Sir, ur view on Nitin Fire Production?

    ReplyDelete
  10. Hi Sir, your view JP power

    ReplyDelete
  11. Replies
    1. I think vakrangee is fairly valued at cmp and i don't recommend a fresh entry at this level.

      Delete
  12. digjam, veer energy, tulip telecom, rei agro..your view on these stocks ?

    ReplyDelete
    Replies
    1. I won't invest a dime in all these stocks.

      Delete
  13. Hi, can i know your view on Surana Telecom and kokuyo camlin for next few quarters.

    ReplyDelete
    Replies
    1. I am not tracking both the stocks closely.

      In terms of results, i see nothing in Kokuyo Camlin which justifies the stock price.
      Sames goes for Surana Telecom.

      Delete
  14. Dear ACE,

    Can you please have a look on Dr Datson Labs BSE: 533412

    ReplyDelete
    Replies
    1. Something is cooking in this stock, Let us see what unfolds :)

      Delete
    2. Thanks for your kind reply.

      Delete
    3. Most likely to be a repeat of the movement from 9 to 20 during 27 Aug to 17 Sep 2014.

      Delete
  15. Hi, ur view on MRPL?

    ReplyDelete
    Replies
    1. Technically bullish, fundamentals not known.

      Delete
  16. Sunteck Realty Ltd shareholding Pattern is out. Noted investor Ashish Dhawan whose portfolio is tracked by many for multibagger stocks has entered into the stock.

    ReplyDelete
  17. Hi sir i am new to you .after reading your blog i invested in suntek

    ReplyDelete
  18. want ur advice on Newly listed Closely held Talbros Engg (538987) only listed on BSE on small equity of 2.53 cr , net profit of 3.89 cr ,EPS 18.03
    all cos in this sector available around 25 to 35 PE ratios......

    ReplyDelete
  19. I do not think you have down background check of the promoter . They are the same guys who screwed up thousands of minority investor in Khaitan Hostombe Ltd. If you have access to MD ask him. Where is that company gone now.

    ReplyDelete
    Replies
    1. I think you have not done any check before posting this, Mr Kamal Khetan was never in Khaitan Hostombe and I think it belonged to the Khaitan family that you now associate with Radico Khaitan.

      Mr Kamal is a Khetan not a Khaitan. Even the spelling is different, Next time check your facts before posting anything.

      Delete
  20. Hi Ace,
    Thanks for great help you are doing for value investing community.
    I have a small doubt. While going through financials of Sunteck I observed that while Standalone Cash Flow From Operating Activities in March 2014 is positive ( 268.09 cr); consolidated cash flow from operation is a negative figure ( -103.92 cr).
    What is sifnificant of this? or am I missing something.
    Regards

    ReplyDelete
    Replies
    1. Check FY13, Operating cash flow more than net profit.
      No issues with this, Ignore this and hard to explain.

      Delete
  21. One of the stock analyst suggested Dr.DAtson and Subex are potential multibaggers eventhough the promoter share is almost 0 (2.5 to 3%) and the company run by the board of directors with FII's holding. can i buy at current levels. pls advice.

    Thanks
    Amudhan

    ReplyDelete
    Replies
    1. Not keen to know what other analysts suggest but does the 0% promoter stake increase confidence?

      Why not go for Parnax Lab in the pharma space where the shareholding pattern is out and Promoter stake has increased from 61.26% to 61.61%

      Delete
    2. Thanks for your reply .But the in the last 3 years parnax labs sale has come down 54 crores (11-12) to 19 crores (fy 13-14) and even in this year also it will be around 16-17 crores only and also consistent loss making for the last 3 years. will you still advice to buy at CMP.

      Thanks

      Amudhan

      Delete
    3. Sir check consolidated numbers that include subsidary NAXPAR PHARMA and see the turn around.. This fiscal 100+ crores sales expected.

      Delete
  22. Your observation is reassuring. I was and am accumulating Parnax on declines?

    ReplyDelete
  23. Sir, view on zen technologies and adi finechem

    ReplyDelete
  24. Hi, yesterday huge volume in Parnax labs, accumulation going on, thank u for ur views

    ReplyDelete
  25. Hi whats ur view on yes bank????

    ReplyDelete
  26. Sir, I am new to see your blog. I request you to kindly comment on SKM Egg.Products about Q4 results and CMP can I enter present price ?

    ReplyDelete
  27. Sir, The EPS on Moneycontrol shows as 11 and PE of 24. What you have shown is the other way round.

    ReplyDelete
    Replies
    1. When i published this only FY14 embers were there.. now FY15 is out so please think before commenting. I am not showing anything other way around.

      Delete
  28. Your views on Sunteck now. Can one take a 5% exposure

    ReplyDelete
  29. sir sholud we continue to hold sunteck reality or sell ; as this year numbers have been pathetic ; the half year eps is just .5 ; so do you still stand by that fy17 sales would be 2700 crore ; pls can you tell how will they get to it ; your advice is needed ; pls tell the poor investor

    ReplyDelete