MOSL: BRIGADE ENTERPRISES (Buy)-New launches to drive robust growth
Brigade Enterprises: New launches to drive robust growth; Expect 3.6msf of pre-sales and 3msf of pre-leasing in FY20
(BRGD IN, Mkt Cap USD0.5b, CMP INR248, TP INR316, 27% Upside, Buy)
We recently interacted with BRGD’s management to understand the progress of its two key commercial assets and its growth strategy for FY20.
- As outlined in our Initiating Coverage report dated 24th Dec 2018, BRGD appears all set for a in its portfolio with a clear focus on scaling up the high-potential leasing business. In FY19, leasing operations contributed 11% to revenues, which we expect should increase to 26% by FY21.
- BRGD is on track to complete the BTG Bengaluru and WTC Chennai projects by Dec’19. It has already pre-leased 0.6msf between BTG and WTC in FY19. We expect it to achieve 3msf of pre-leasing in FY20 comprising mainly WTC Chennai and BTG Bengaluru.
- Thus, we expect BRGD’s leasing revenue to grow at 28% CAGR to INR6.7b in FY23 from INR2.4b in FY19 and in the residential segment, we expect BRGD to achieve booking value of INR19b (up 16%) in FY20 and INR23b (up 21%) in FY21.
- We expect BRGD to achieve pre-sales of 3.6msf (v/s management’s estimate of 4msf) in FY20 and 4.2msf in FY21, aided by its ongoing but unsold inventory of 7.4msf and new launches of 4.4msf (BRGD’s share). Thus, BRGD will be equipped with 11.8msf of residential projects to achieve its targeted sales. In 1QFY20, the company launched 1msf Brigade El Dorado (total potential of 5.5msf) located in Huvinayakanahalli, North Bengaluru.
- Debt will continue to rise, but towards building significant leasing assets. Of the total commercial debt of INR21.3b, INR12.5b is secured against lease rentals, which provides comfort.
- We have valued BRGD on SOTP basis. Its leasing portfolio contributes 50% of our GAV estimate. We are particularly enthused with the ongoing traction in pre-leasing and residential sales. We maintain our PT at INR316. Maintain Buy.
Brigade Enterprises Limited is a property development company. The Company focuses on residential, offices, retail and hospitality projects. The Company operates through three segments: Real Estate segment, Hospitality segment and Leasing segment. Its residential properties include Brigade Altamont, Brigade At No. 7, Brigade Caladium, Brigade Cosmopolis, Brigade Exotica, Brigade Mountain View, Brigade Orchards Luxury Apartments, Plumeria At Brigade Meadows and Brigade Sparkle. Its commercial projects include Brigade Bhuwalka Icon, Brigade Irv Centre, Brigade Magnum, Nalapad Brigade Centre and Signature Towers Brigade Golden Triangle. The Company's retail projects include Orion East Mall, Nalapad Brigade Broadway and Brigade Vantage. Its hospitality projects include Woodrose Club, Augusta Club, Galaxy Club, MLR Convention Centre and Signature Club Resort. Its projects extend across various cities in South India, including Chennai, Chikmagalur, Hyderabad, Kochi, Mangalore and Mysore.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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