Some other things to chew upon from the latest KP investors presentattion
Total msf under development (KPDL share ) - 15.2 msf of which about 80% is sold so remaining is 3.04 msf
Forthcoming phases of already existing projects - 3.7 msf
Expansion of Life republic ( which is an already existing project) - 6.6 msf
The rest of the Future Development i havent considered in the calculations ( but given in the presentation) as it may or may not happen. So its an optionality that may not materialize.
This gives a total of 13.34 msf of visibility i.e current projects unsold + phases of current projects that are selling on ground with execution teams working on them.
The EV is about 3200 cr. So per sqft comes to ~ Rs 2400.
replicating 13.34 msf for a new player will require Rs 1200 ( Land ) + 1700 ( construction costs ) + 400 sf ( Liasoning costs ) = Rs 3300 psf, producing a valuation gap of about 30% even at these levels.
Structural audits are largely ignored in the real estate value chain which is more focused on new projects etc. However, Cities like Mumbai and Pune are very old with a scores of buildings constructed pre 1987 era. Many of these buildings are old housing societies where until recently 70% of the residents had to give their approval in order for the society to go ahead with redevelopment. Now the rule stands repealed with only 51% giving a tailwind to redevelopment plans. Redevelopment of buildings with structural weaknesses is a previously untapped opportunity as many buildings will only now enter the 30+ age level which will necessitate a structural audit.
@bheeshma Kolte should get benefitted from this as this is asset light higher margin business where execution and brand comes in. In concalls they have given some guidance on revenue and profit contribution .also, in such projects chances of delays etc r lesser
In redevelopment of registered housing societies the community angle comes into the picture. Maharashtrians prefer a maharashtrian developer due to the cultural match. I donât want to get into the cultural aspects but it is a strong deal making parameter. I have sat in some of these redevelopment meetings and deals are made based on the family lineage dating back generations and the quality of the âpohaâ served. Kanda poha v/s batata poha with the former being symbolic of the proud maharashtrian culture. It is a different ball game and the patils have the heritage which is a strong intangible.
Kolte exits its Urse land parcel. I think its a good move. The average realization they would have got in urse would have been way lower than their current average.
great results. Best part is lift in bookings . Looks like industry has bottomed out and things are in upward direction. Listened to Ashiana concall yesterday. Very conservative management but after many quarters, sounded them positive and bullish. Disc : Invested in Kolte and Ashiana from lower levels
Can someone guide on the âongoing projectâ part in the quarterly presentations where the numbers stated are only for the sales pertaining to that quarter. Is there a way by which we can get cumulative sales for all those projects till date?
and on the point of Kolteâs investment thesis, one needs to understand that the company is now graduating from Pune to higher level markets of Mumbai and Kormangla in Bangalore( yet to be launched.) these luxury projects should give a filip to Net profit margins. Infact the management themselves guide for a 11% NPM in the next 2 years. Asset turns will no doubt increase as incremental projects that are slated to come for launch/sales are on the JDA / society redevelopment mode. so in the ratio of Sales/Assets, sales keeps ticking up without incremental deployment on asset. In short, ROEâs should move north due to a magnified effect of increase in asset turnover and Increase in net profit margins
Good set of numbers n 25% from Mumbai n Bangalore looks on cards. Letâs see if next year they are able to cross psychological barrier of 2 million square foot . One concern point was yoy sales for this quarter is low. Considering last year , it was demonetisation, this seems little worrying but might be due to inventory maturity basket mix
Lots of questions obviously on volume & mumbai. Some of the things i could note down
Fy19 is the launch year
Prices are stable across Pune
4M pipeline FY19 so will aim to cross the 2M new sales threshold line, 2.5M - 3M can be expected in fy19
10-11% revenue expected from Mumbai in fy19 & 7% from Mumbai in fy18
1cr-3.5cr is a good product with good demand in Mumbai
Dahisar to be launched in the next 3-4 months
In redevelopment Roc is much better and can expand rapidly , but ebitda same at 22%
1 or 2 projects can be converted in redevelopment , no new redevelopment unless we have 5-6 launches and bring it to the execution stage
Most stable but little bit over supply. Pune is a volume market so good for cash flows.
6-7 million potential next 1 year from the funding platform to increase volume
27-28% ebitda fy19, 10-12% pat in next year ( 14-15% PAT margins 2 years down the line)
0.2 million ready inventory currently in Pune , & rest sanctioned but in various stages of construction
1300-1400cr free cash flow ( existing unsold + sold â cost to complete)
Any errors please correct.
Overall, the sense I get is that the company is obviously looking to scale but in real estate crossing the 1000 cr mark takes doing and its not very easy for a Pune based company but that milestone has been achieved, The next say 500 cr is going to be incrementally difficult but it does seem that there is a plan in place in multiple geographies. Overall looks good.
If you see his interview with bloombergquint available on youtube, he mentions that mumbai is the best place for realestate companies as there is no place to expand, so already built properties will need to be demolished to bring up new ones. This redevelopment will keep happening over multiple decades and he never wants to sell these companies ever.
All past accumulated profits for under construction projects will be converted to debt. So debt to equity ratio will rise significantly. Itâs difficult to estimate the impact but in the long term real estate sector barely recovers its cost of capital and they need a lot of it - so unless the co is available at throwaway valuations - there will be severe pressure on the valuation front as many of them are at 3 times book - which to mind is not sustainable as there is no clarity on the return ratios going forward with the new project completion accounting rules.
Yes, thats the new rule. Until very recently, the revenue recognition rule was percentage completion now it has become project completion. So revenue earned but deferred until project completion will be classified as a liability & associated costs will be classified as an asset.
I am not entirely sure about this but read this in a broker report
âHowever, as per our understanding, under provisions of the Maharashtra Real Estate Regulatory Act (MahaRERA), Sunteck/Oberoi may be allowed to continue to follow the percentage completion methodâ
P.S: exited recently as sentiment will swing unless we see reported numbersâŚalso exit was part of broader portfolio re-positioning and holding some cash
. One concern point was yoy sales for this quarter is low. Considering last year , it was demonetisation, this seems little worrying but might be due to inventory maturity basket mix