MOSL: OBEROI REALTY (Buy)-Subdued residential performance- rentals remain strong
Oberoi Realty: Subdued residential performance; rentals remain strong
(OBER IN, Mkt Cap USD2.2b, CMP INR440, TP INR560, 27% Upside, Buy)
- Presales value declines 41% YoY: OBER’s 3QFY19 sales volumes showed a de-growth of 3% YoY to 1,47,276sf, while its sales value reported a de-growth of 41% YoY to INR2.4b. SkyCity reported strong growth of 60% in volumes YoY, while 360 West disappointed with no sales reported during 3QFY19. Overall collections declined 19% YoY to INR3.4b. OBER reported overall revenue of INR5,286m (est. INR5,311m) in 3QFY19, YoY growth of 48.4%, while EBITDA margins contracted 1,850bp to 35.6% (est. 50.6%).
- On 9MFY19 performance: Revenues grew over 100% to INR20,090m YoY; EBITDA grew 92% and PAT grew over 100% compared to 9MFY18.
- Robust rental growth: Overall rental revenue grew 46% to INR868m in 3QFY19. Rentals at Oberoi Mall grew at a robust 42% to INR242 psf/m in 3QFY19. Rentals remained stable for Commerz at INR140 psf/m in 3QFY19. Commerz II reported 21% jump in rentals to INR141 pdf/m in 3QFY19, supported by increased occupancy at 64% in 3QFY19 from 45% in 3QFY18. Tenants for the entire space in Commerz II have been locked in and it should be fully occupied by Mar’19.
- 3QFY19 Earnings Call Highlights: (a) The launch of Exquisite phase III and Thane is expected in FY20, (b) EBITDA margins were lower at 35% due to higher contribution from the SkyCity (Borivali) project in the current quarter. Under the accounting norms, the land cost is fully attributable to Phase-I, which has optically impacted margins, and (c) The Ritz Carlton Hotel will be launched towards end-CY19.
Oberoi Realty is a real estate development company operating in Mumbai, focused on premium developments. Co.'s main focus is residential projects but they also have a diversified portfolio of projects covering segments of the real estate market, which target the upper end of the respective income or market segment. Co.'s operating investments comprise the Oberoi Mall, Commerz (commercial tower), Oberoi International School (social infrastructure) and The Westin Mumbai Garden City (269- keys five-star hospitality property).
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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