Prestige Estates projects - Recommendations

[sunil]

DalalStreet.Biz Analysts have Put a AVOID - http://www.dalalstreet.biz/ipo/2010/10/avoid-prestige-estates-constructions-projects/

Edelweiss has a AVOID With the Following note,

Our NAV for Prestige stands at INR 57.9 bn or INR 174-176/share and the issue is available at 1% discount/4% premium to NAV at the lower/upper price bands, respectively. However, considering factors such as RoE of ~20% with a JDA model, high gearing level (2.6x as of June 2010), and presence of structured instruments/variable rate entities and minority stakes in many rental projects, we believe the issue price offers limited margin of safety. We, therefore, recommend ‘DO NOT SUBSCRIBE’ to the IPO.

[sunil]

Unicon Analyst Falgesh Sanghvi recommends HIGH RISK Appetite with Long Term Investment Horizon Investors to Subscribe

On valuation parameters, PEPL at the upper price band is offered at 40.7x its FY10 earnings which is expensive when compared to its peers in the regional market. But given the size and scale of its operations and superior RoNW (~19% compared to ~9% earned by its peers), valuations are justified. Investors with high risk appetite and long term horizon can Subscribe to the issue.

[sunil]

Sharekhan's Views,

Prestige has displayed strong execution skills by completing approximately 35 million sq ft of projects till date, which is uncommon among the listed players. Further it has a strong client base helped by a strong brand image. However, it trades at a Price/Book Value (P/BV) of 2.9x-3.0x at its lower and upper end of the price band respectively. Though the company has good execution skills, track record and sizeable potential for growth, the valuation looks slightly aggressive compared to its peers.

[chetan]

Angel Broking analysts Mihir Desai and Mihir Salot have recommended to AVOID,

We have assumed an eight-year development period based on PEPL’s existing land bank. We have assumed average realisation of Rs6,000/sq. ft. on PEPL’s saleable interest based on its geographical presence, which gives us a fair NAV of Rs164/share. At the lower band of the issue, PEPL will trade at 2.5x FY2012E P/BV and 4% premium to our one-year forward NAV, which is at a premium to its peers. Thus, we recommend Avoid to the issue.

[chetan]

HDFC Sec says the IPO is expensive,

The issue seems expensive relative to its peers on both P/E and P/BV basis, especially as Q1 numbers for PEPL on the margin front have been uninspiring.

[chetan]

I know I shouldn't be saying this, but anyway I will,

Save all the Money you have for Coal India IPO by AVOIDING prestige estates. Even if you sell COAL India in Grey Market you will make Rs 4,000 on an application of Rs 1 Lakh.