I look at it from a different perspective and it actually boils down to the time horizon and the business model…The model followed by Ashiana Housing is very similar to a US based home builder called NVR which rose by 292 times in a period of 20 years(1992 to 2012) if I remember correctly. (you can read about in this book called 100 bagger)…In the same period the US real estate market went through one of its toughest times…it was a downturn that not many expected…nobody could predict or extrapolate it…despite that the company did tremendously well for its shareholders even post 2008…
NVR follows an asset light model by buying options on the land and does not believe in building huge land banks…it doesn’t require equity dilution or additional debt to grow…it is led by transparent management etc.
I see similar traits in Ashiana…the point I am trying to make is that if you believe in the business model, the demand for its products, the management of the company and at the same time are willing to take some pain due to inherent cyclicality in the business then you will do reasonably well over the long term…one need not worry about predictability of earnings in this case…Ashiana fits this criteria for me…its not often that you get to invest with people who are open to public feedback and increase transparency…I see demand for affordable and senior housing even 20 years down the line…
I think the market will perhaps realize that nos. need to be looked on YoY basis going forward. A look at Q4 nos of FY15,16 makes me feel that realizations mostly happen in Q4.
Disc. Invested at much higher levels and waiting for recovery.
Excess of Area Booked over Revenue over the past 8 years (sum of the last column): Rs 1283 cr
Three conclusions can be drawn from the above figures:
On an average, only about 60% of the area booked is getting translated into Revenues over the next 1-2 years. Hence, about 40% of the bookings seem to be getting cancelled.
The Area booked peaked (in Rs cr) in FY14 and has been falling over FY15 & FY16. Hence, the Revenues (and hence EPS) are also likely to fall over the next 1-2 years tracking the falling bookings.
The income tax is very low (8% for FY15 and just 1% for FY16). There will be a depressing effect on PAT once the tax rate starts inching up over the next few years.
@AlokBhola There is about 28lsf which is area booked but not delivered/booked as revenue as of Q416. At Rs.3200 psf realisation this would work out to about 900 crores. Also, I think that the Value of Area Sold number referred to by you is inclusive of partnership projects. If true, then that entire value will never come into revenues as only profit from partnerships is recognized by AHL. So IMHO, the cancellations number as estimated by you might be highly overstated.
Just to be correct with the calculations, if you sum the revenues from real estate sales only, the cumulative revenues from FY2009 to FY2016 (I have estimated 2016 number at 450 crores) comes to 1200 crores whereas the total value of area booked in that period is 2900 crores. So the excess would actually be about 1700 crores. From this, if the 900 crores still to be delivered but booked is deducted, one is left with 800 crores.
In just 2015 and 2016, total area delivered through partnerships / SPVs is 18 lsf which at Rs.3000 would be about 540 crores leaving unaccounted only 260 crores worth of area booked which works out to about 9% cancellations, even if all of it is because of cancellations. In this calculation, neither the undelivered bookings from prior to start of FY09 considered nor the area delivered under SPV from 2009 to 2014 are considered. The cancellations are most probably overstated even at 260 crores.
This might will help with understanding partnership accounting. For 15 and 16, if total revenues from area delivered under partnerships is about 540, total profit at 30% should be 162 crores. At 50% share, AHLs profit should be 81 crores. For 15 and 16 total income from partnerships is 84 crores.
Nice analysis. can you explain why do you take profit margin as 30%? It would imply pretax profit margin of about 40%. I would think that margin would be lower now that their low cost invenotory of land is over. Assuming cost of construction and project management (say rs 1500 psf) and cost of land (750 psf) would leave margin of rs 750 psf. This corresponds to 25% profit margin before tax. I would expect net margin to be close to 20%.
To be honest, I used 30% just to illustrate my point as I anyway have not used precise numbers for realisation. It is just coincidental that the profit from partnerships in my illustration is similar to the reported number. That said, NPM has averaged around 25% over the past few years, albeit on the total income and at their current low tax rate. If I remember correctly, mgmnt has also guided for around 25% NPM real estate operations. Hope that answers.
Guess people are really unsure about the real estate sector right now. Ashiana’s area booked have also come down due to the sluggish market conditions.
Having said that I believe Ashiana, being among the top, well managed affordable housing company, with a very healthy future pipeline of projects, has a lot of value in it. People with conviction and patience can be rewarded here.
Screener.in shows the price at around 12.5 times the earnings.
Disclosure: Invested from lower levels. Having a long term view. Views might be biased.
Hi everyone…Would like to know the prospects of ashiana housing on long term basis. Near term bottom looks like 150. Risk rewards looks great currently.
Does anybody have any idea why June quarter results are not yet out? I checked company website as well as BSE website. But could not find quarterly results for Apr-Jun 2016?
Please ignore my earlier post. Just now came across following declaration by company on BSE website
Ashiana Housing Ltd has informed BSE that the next meeting of the Board of Directors of the Company is scheduled to be held on September 14, 2016 to consider and approve the unaudited quarterly financial results for the quarter ended on June 30, 2016.
Further, in the regular course the quarterly results are to be approved and furnished within 45 days of the close of the quarter. As this is the first quarter in which the Company have to submit unaudited quarterly financial results as per the Companies (Indian Accounting Standards] Rules, 2015 find AS”), notified by the Ministry of Corporate Affairs, the Company will require some extra time. Accordingly, The Company are utilizing the time relaxed by SEBI, vide its circular dated July 05, 2016, to furnish the quarterly financial results for June 2016 quarter by one month i.e. upto September 14, 2016.
My understanding is we should not look this company from quarter perspective (considering the structure of P&L of handover based delivery revenue and expense items not having a one to one relationship). However, yes, results are bad but not unexpected. Further, i think share price is more about future. Specially, in this case, considering current projects, anyway, next 2 years they wont be able to deliver more than 500-550 crore revenue every year with some hit on profitability too (higher revenue quarters should have profitability, quarters with mass level delivery of flats will be those quarters). The good part I see is that there is an improvement in quarterly bookings both on QoQ basis and YoY basis. though the improvement is 46%, considering a 60% fall from 2014-15 to 2015-16 (~22 alkh sq feet to ~8.5 lakh sq feet), we must consider lower base rathr than seeing this 46% growth in booking in absolute sense. Also, looks like Bhiawadi which is ~29% of revenue is the biggest pain areas in terms of unsold inventory n sales pipeline.
PFA investor update on result and revenue.
These type of business are not analysed on quarterly basis. YoY there are much improvement overall and thats the reason stock has not nose dived.
