Sumit Woods Ltd - Asset Light Real Estate Business

(Amit Agarwal) #1

Sumit Woods Ltd is recently listed Co listed in SME Platforms at NSE Emerge…

Promotors:- Sumit Woods Ltd is leading Developer having projects in Mumbai and Goa, SWL take up mid size Projects. Co Promoted by Mitaram Jangid & Subodh Nemlekar now Second Bhushan Nemlekar (Harvard Graduate) too joined the Business.

SWL successfully running the Business since last 30+ Years and delivered over 5000 units spanning over 52 Projects.
All the Projects delivered with OC

Sector outlook :-

Real Estate Sector in MMR on revival mode, Mumbai will have World Class infra in next few Years that will attract huge demand going forward.
Unsold Inventory is big issue in the Sector but once we analyse the data most of the inventory belongs to large luxury projects and Projects in way far (Locations disadvantage) & Projects stuck due to approvals or Financial reasons. All such inventory having age of over 3 Years hence in normal ongoing projects inventory isn’t that big issue.

Business Model :-
Since the beginning Co working on Joint Development Projects, Redevelopment Projects, now started getting Projects on Development Management Model. Co provides housing to Mid Income Group.
Co adopted Asset Light Business Model since bigining and don’t believe in buying Lands.

SWL believe themselves as a huge beneficiary of RERA, SWL believe that they working according to the RERA norms since beginning.

Pros :-

  1. Strong Asset Light Business Model
  2. Strong and timely execution of Projects
  3. Strong execution lead better Reputation & enjoy better sales outcomes
  4. Inventory levels is almost Nil
  5. Start Projects with all necessary approvals and Financial Closures so risk of being stuck is Negligible
  6. Debt Equity ratio is nearly 0.30
  7. Finance Cost is nearly 12-13% which is phenomenal in the segment.
  8. Strong Project Pipeline, currently around 9-10 project in pipeline and 3-5 Projects may be added in next 2 Qtrs, Got Completion Certificates(OCs) for 3 Projects in past 3-4 Months
  9. Strong inhouse Team to execute the Projects.
  10. Zero litigation from Consumer

Cons :-

  1. Sector is very difficult to understand
  2. Recent liquidity crunch affected the Sector and it may harm further to the entire sector
  3. Policy and Tax issues affect the Industry
  4. Project Execution delay may harm earnings prospects
  5. Regulatory Changes may impact health of the Cos
  6. Every project have different Business Matrixes

Valuations :-

CMP 45
PBV 0.85
EPS (Diluted) 5.00 FY18, 7.00 FY19E
PE Ratio. 6-6.50
MCap 65-67 Crs
RoE & RoCE ~ 17%
Debt Equity 0.30
Expected 3-5 Years CAGR Profit 25-30%

Evaluating on going Projects and expected to commence immediate future I’m Expecting Rs 150-250 Crs Net Cash Earnings (Pre Tax & Amortisation & net of Debt) spanning next 3-5 Years

Disclosure : Invested & willing to add more!

Financial & Cash Flow abstracted from RHP

(sumit680) #2

I think it’s important to meet promoters and check prospects of the company on ground…micro cap and mid cap data should be taken with a caution

(Amit Agarwal) #3

I have met with Promotors few times and never let go any opportunity to meet them.

Meeting with Promotors provide better understanding of their Business

(Amit Agarwal) #4

One of the Best Real Indicators of Real Estate Sales is Tax Collections…
Robust Tax Collections data suggests Demand is very good

Realty market picks up, Maharashtra likely to meet revenue target?utm_source=whatsapp&utm_medium=social&utm_campaign=WhatsappShare :

(Amit Agarwal) #5

Now GST Council finally substantially lowered GST on Housing and Affordable Housing…

Rate Cycle seems to be reverse…

Housing demand set to Grow substantially…

(Amit Agarwal) #6

Sumit Woods Ltd, Godrej Properties Ltd will be huge beneficiary post new amendment on exemption of GST on JDA…

(Ashwini Damani) #7

Can you please share details of the projects that the company is undertaking. The area that it is looking to sell and the realisation that the company expects.

Also please share the Debt, profitability status etc.

This will be much more beneficial than giving projected EPS

(Ashwini Damani) #8

Also, Real Estate Companies are not valued on EPS, but on Asset values.

Can you please share the Expected Net Asset Value of this company and calculations thereof

(Amit Agarwal) #9

That’s true that Real Estate Cos not valued at EPS.
Being Asset Light Business Model SWL don’t buy much Land so valuing it on NAV basis will be very difficult.
Current Debt of the Co is around 25-26 Crs against Shareholders fund of around 75 Crs, so debt equity comes around 0.30-0.35
SWL work on JV Models and Development Management Model so better to value it on expected Cash flow generation.
SWL have 8-9 Project’s running out of these 5-6 are self funded which show financial strength of the Co.

Co maintaining around 30% EBITDA and around 20% PAT Margins.