IGI Logo

Smartly manoeuvring through real estate cycle

Prestige Estates (PEPL) reported a standout quarter in the residential business backed by highest ever quarterly sales of INR 42.67bn (+111% YoY; +102% QoQ; c.78% of FY21 sales) coupled with strong collections of INR 24.3bn (+70% YoY; 57% QoQ). PEPL management has further upped the guidance for booking values to INR 100bn in FY22 (INR 70-80bn earlier guidance; 9MFY22: 71.1bn) on the back of strong traction across projects especially Prestige City, Bangalore. PEPL is simultaneously undergoing a major capex phase and is likely to deliver an annuity portfolio having c.INR 25-30bn of rental income over the medium term (INR 3.5-4.0bn FY22 exit rental guidance). In order to fund the capex and maintain debt at manageable levels, PEPL has concluded a deal with Blackstone for transfer of stake across 3 under-construction commercial assets and 1 mixed use retail asset at an EV of INR 10.1bn (Link) and is also looking to transfer c.50% stake in Prestige Star Tech asset at an EV of INR 20.5bn to a buyer, thereby substantially bringing down debt to c.INR 29bn (INR 41.7bn presently) by Mar’22. Going forward, PEPL is already in talks with institutions to create an Alternate Investment Fund (AIF) which allows PEPL to fund land purchases. We continue to like PEPL‘s aggressive growth across residential and commercial segments coupled with a superior execution track record. We maintain ‘BUY’ rating with a Mar’23 TP of INR 595 (implying 29% upside). Key risks: delay in construction of annuity assets.

* Further upping guidance to INR 100bn of booking values in FY22:

In 3QFY22, PEPL registered highest ever quarterly sales of INR 42.67bn (+111% YoY; +102% QoQ; c.78% of FY21 sales). The new sales were backed by a strong response to newly launched projects (8.27msf of launches); Prestige Avalon, Aspen, Eden Park (Part of The Prestige City, Bengaluru; INR 18bn of sales), Prestige Beverly Hills, Hyderabad (INR 4.9bn), Waterford (INR 3bn), Finsbury Park (INR 1.5bn) and a strata sale at BKC to a financial institution (INR 5bn) among others. By Apr’22, PEPL is expected to launch projects across MMR including Mulund (GDV of INR 111bn), Marine Lines (INR 22bn) and Pali Hill (INR 5.33bn) while the response to Jasdan Classic, Byculla has been tepid (INR 0.7bn sales).

* Multiple transactions + AIF creation to reduce debt:

PEPL has concluded Phase 2 of the Blackstone transaction and transferred upto 50% of PEPL stake across 3 underconstruction commercial assets i) Prestige Lakeshore Drive, Bangalore (4msf developmental potential; 90% economic interest), Prestige Cyber Greens, Kochi (1.5msf; 100%), Prestige Tech Park IV, Bangalore (1msf; 100%) and Forum Vijaya, Chennai mixed-use asset (0.64msf retail + 0.19msf commercial; 85% acquired; 50% PEPL economic interest) at an EV of INR 10.1bn (Link). PEPL further intends to transfer 50% stake in Prestige Star Tech, Bangalore (1.37msf; 51% PEPL stake) to a PE firm at an EV of 20.5bn. Moreover, it is already in talks with institutions to create an AIF (target next year; size not specified) which allows PEPL to fund land purchases while PEPL, the listed becomes the developmental entity which can grow with minimal debt.

* Maintain ‘BUY’; Mar’23TP of INR 595:

Key triggers in the stock include the launch of Mulund project, gradual completion of annuity portfolio and further project acquisitions. We maintain ‘BUY’ rating on PEPL with a Mar’23 TP of INR 595 (implying 29% upside).

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://www.jmfl.com/disclaimer

CIN Number : L67120MH1986PLC038784

Above views are of the author and not of the website kindly read disclaimer