Monday, March 28, 2011

>UNITECH: What's the land value? At least Rs 62/share, in our view.

In calculating the land value, we have re-valued just two large
parcels in the company’ portfolio, viz. 1) 900 acres of high value land
parcels along the company’s traditional stronghold of Sohna Road,
Gurgaon region. (Land transactions at Rs 35-100MM/Acre vs. Book
value Rs 15MM/Acre) and 2) Noida land holdings especially on its 350
acre parcel in Noida (Grande). This is a prime piece of land, 20 minutes
away from South Delhi, but where monetization has remained slow.
Transaction rates around this parcel have ranged from Rs130-
200MM/Acre (Book value Rs 49MM/Acre).

Liquidity is not really a issue with the company having pre-sold
approx. Rs 95B of property over the last two years (FY10/11). We
estimate UT has yet to receive Rs 30B cash flows from these (net of
construction/taxes). This coupled with its annuities of Rs2B should cover
large part of its repayments, implying no stress in the business.

Earnings ramp up will be the key trigger- UT’s bookings run rate over
the last two years has been at Rs10-12B per Q. However, revenue
recognition from RE continues to lag at Rs5.5B per Q. As FY11/12
projects contribute to revenues progressively over FY12E, we forecast
earnings ramp up can be meaningfully high (JPM FY12E +90% Y/Y).

Upgrade to OW, Mar-12 TP Rs 60/share, based on 10x FCFE and in
line with current land value estimate. The upgrade is primarily due to the
removal of discount on FV given issues on telco (25% previously).
While there is still no clarity on it, newsflow on the same has started to
subside.

To read the full report: UNITECH LIMITED

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