Wednesday, July 22, 2009


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.

To see full report: PENINSULA LAND