Nesco

Wework is starting at Nesco in 3rd quarter of 2019. What will be its effects.

Really!. . . Whats your source of info? how correct is it?

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This information is being flashed on screens at Wework premises in Vikhroli

ok! . . if anything, it’s a good positive, in my pov. . its just makes NESCO Office complex a more of an ‘in-thing’ i.e. WeWork usually is host to more younger teams / offices needing lesser space; its of the appeal of Instagram generation. . . it makes it a more contemporary office environment with modern flavor and current times and not the more fuddy-duddy old-school office image. . . will attract more leasing requests!

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As per Oberoi concall, wework has signed up with them too (commerz is near NESCO) and commercial rents are almost at similar rate.

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Everytime I go past Nesco I look at the progress being made with IT Bldng # 4. Management had stated the work will be done by Dec 2018. They then pushed it forward to Jan 2019.

Looking at the building I don’t think it is ready yet and I won’t be surprised if they say Feb 2019 or a few months from now. The glass facade is yet to be put up on the entire building and to be honest I think it is looking the same since the beginning of Dec 2018 (this is the sense I get looking at the building from a distance, that the work has stalled).

Can anybody working closer to the building or within Nesco confirm if my assessment is correct or off? Thanks.

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As per former colleagues at MSCI (new tower visible from their window + walking distance), external work progress seems slower since December. However, internal fit-out work seems to be on track. Rumours of Wework picking up space are ripe too.

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. . . the results are comme ci comme ca

quarter-on-quarter:

  • overall drop in revenue (105.13 > 101.50)
  • and a drop in PAT too (48.36 > 42.04)
  • and the resultant drop in TTM PAT, which has been on the decline for a while.

year-on-year

  • IT Park is the same (35.18 v/s 35.63)
  • The loss by Exhibition Biz (-2.66 Cr.) is compensated by the increase by capital goods (+2.44 Cr.)
  • Hospitality wasn’t there until the same quarter, the last year

Questions?

  1. Why has hospitality revenue dropped so much, q-o-q (6.88 v/s 9.01)? . . . does it mean that food biz revenue will always be in the same proportion as exhibition business (which too has dropped somewhat in the same ratio i.e. 37.01 v/s 39.67)??
  2. What has caused such a huge boost in revenue from other income (12.97 v/s 4.10), which as known from past is income from investments? especially this is surprising as the cash balances are supposedly reducing due to the increase in spending in Building 4; so how this magic happened? or has the management done some number jugglery to keep the overall performance seem decent?
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Thanks for sharing your analysis. Have some questions if you can answer : what’s the big other income item in last December (all the numbers are in crores right)?
And what’s the reason for drop in margins from 50%+ to 40%+ (is that because of the cost of developing some new building or what…

nesco.pdf (1.1 MB)

Latest Investor Presentation.

Disc: Sold holding as the completion date keeps on moving.

Stellar Q4 results by NESCO thanks to BEC and Foods.

Revenue up ~ 25%. PAT up by ~20% + YOY

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Good results, that too without the support if IT Tower 4.

I don’t think it’s exceptional result. We need to focus at Yearly Consolidated result and not quarterly results

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Indeed it is flattish year on year.But good to see BEC revenue going up. Any updates on IT bldg 4 and how leasing negogiations going on.

Good results QoQ. Key is to watch if food revenue sustains at this levels + IT 4 contracts which will decide on occupancy. Overall good visibility for next 1-2 years.

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Any idea , Have they started giving IT4 for fit-outs ? have they started signing agreements for lease of IT4 ?
generally they post the investor presentation , Post the FY 2019 results , they are yet to publish the presentation and also the co does not hold any con-call, so let the management give some clarity on IT4 !
I agree with Mr vivek on the visibility and good qrtrly no of march 2019 qrtr .

I do not recall exactly which brokerage firm but in Feb 2019 came up with management update. Below are my notes from same. Will try to find full report and send. Also, updated group excel on valuations based on latest changes and my own understanding

Notes from Latest Brokerage Reports (Feb 2019):
• Agreement signed for two units out of 39 in case of IT Building IV.
• Letter of Intent (LoI) received for 17 units and they are under the negotiation stage.
• Possibility of a delay in receiving occupation certificate for IT Building IV from December 2018 scheduled earlier to January 2019.
• BEC’s (Bombay Exhibition Centre) growth expected to be ~4-5% in FY20, despite
shutdown for refurbishment.
• Plan to start IT Building V and the leasable area could range between ~1.2mn sqft -~2mn sqft.
• Threat from upcoming Reliance Convention Centre at Bandra-Kurla Complex or BKC partially impacting BEC segment’s revenues.
•
Phase-1 of expansion remains on track with the planned addition of a 450-room hotel
and 1mn sqft of BEC space.
• NESCO has been able to draw an insurance company to lease two units out of total 39 units of IT Building IV. The fit-outs are expected to start by February 2019 and should take around six to eight months.
• NESCO is expected to generate revenues from the units by 3QFY20. The lease rentals of specific clients have not been disclosed, but on an average IT Building 4 could draw lease rentals ranging
from Rs118 sqft/month to Rs120 sqft/month.
• The management plans to add another 0.2-0.3mn sqft of temporary BEC space which shall be operational by 3QFY20. The addition will help in balancing the loss of revenues from planned refurbishment of halls developed prior to FY17 and also aid in achieving 4%-5% revenue growth in FY20.
NESCO_model_v3_08112018.xlsx (24.9 KB)

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The management has highlighted that lease agreement has been entered for
40% of leasable area in Building - 4 and an MOU has been signed for upto 60% of leasable area.
The above is from a research report by Prithvi Finmart P. Ltd. - from Researchbytes.com

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Any update on how big is the Dhirubhai Ambani Exhibition space in BKC ??