>PENINSULA LAND (ICICI SECURITIES)

In line, yet no spark

Peninsula Land’s (PLL) Q1FY10 results were in line with our expectations, with sales and PAT at Rs1.2bn (I-Sec: Rs1.3bn) and Rs329mn (I-Sec: Rs339mn) respectively. Revenues dipped 7% YoY; however, PAT rose 5% YoY owing to higher interest income on surplus cash & investments. We are upgrading PLL’s FY10E NAV estimates 26% to Rs20.9bn or Rs75/share from Rs16.6bn or Rs59/share on account of Hyderabad project (7mnsqft) addition to the portfolio. Further, we believe that PLL will trade at ~20% discount to its NAV owing to better visibility and improved macro environment. Though the balance sheet and ongoing project portfolio is healthy, we are concerned about long-term value creation from PLL’s land bank; maintain HOLD with target price of Rs60.

■ Flat earnings. PLL’s Q1FY10 sales and PAT stood at Rs1.2bn and Rs329mn respectively, in line with I-Sec estimates. Q1FY10 revenues were booked from Ashok Towers (Rs310mn), Swan Mills (Rs320mn), Peninsula Business Park-Dawn Mill (Rs250mn) and Center Point (Rs420mn). Further, execution of major projects in Mumbai picked-up in the quarter. PLL has 4mn sqft under construction in Mumbai (at Lower Parel), which will be key to revenue generation in the next few quarters. The company registered 41% QoQ revenue decline; however, owing to high interest
income, PAT declined only 9% QoQ.

■ NAV upgrade. We upgrade our FY10E NAV estimates 26% to Rs20.9bn or Rs75/share on account of Hyderabad SEZ (~7mn sqft; mixed usage) addition to the project portfolio and better visibility on ongoing projects. We believe the stock will trade at ~20% (earlier estimate of 40%) discount to NAV owing to better visibility on project pipeline and improved macro environment for the sector.

■ Liquidity remains sound. PLL’s debt-to-equity stands at a healthy 0.4x. PLL’s cash position has deteriorated in the past couple of quarters; however, it remains relatively sound vis-à-vis peers. The company has ~Rs1.11bn cash and Rs4.15bn debt, as on date, with nil outstanding land payment.

■ Maintain HOLD. Given PLL’s earnings dependence on few key projects, any delay in execution may result in sharp decline in earnings and valuations. However, positive development on the Goa/Nasik SEZ would be NAV accretive. We estimate PLL’s sales & PAT CAGR at 33% & 19% respectively over FY09-11E. At current market price, PLL trades at FY10E & FY11E P/E of 8.3x & 7.5x based on EPS estimate of Rs8 & Rs8.8 respectively.

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