https://www.sunteckindia.com/pdf/news/Sunteck-BUY-Kotak.pdf , this might help for our members.
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There might be temp stress on cash flows like most of the industries will be facing. But Sunteck catering to premium class will have limited impact on presales revenue. Also asset light model will help company. Itās REIT portfolio will add stability in future. Added to it the credible management of Kamal Khaitan, I guess itās good opportunity to add this stock at current price.
I think that there is more left to come. If bought at a lower price it would become more attractive set risk to reward ratio. Since itās in the luxury segment I donāt think maybe are going to go out and buy flats right now unless given at a discount. Being in the luxury segment I donāt think theyāll give alot of discounts aswell. Your views on this would be appreciated?
Going forward there will huge pressure on all real estate developers in next 2-3 year primarily due to cash crunch secondarily due to reduction in real estate prices because many IT companies which are 1 of biggest consumer in commercial rental space are going to start work from home, yesterday spoke to some of friend working in senior position in wipro and he also confirmed that management is planning to shift half of staff for work from home in next 2-3 years.
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WFH culture could also positively impact the residential RE market. IT Employees might opt for bigger apartments than individual homes to have separate room for WFH . It will have an impact in markets like bangalore/Chennai/Hyderabd ( IT Zone) but not much in Mumbai RE market.
Sunteck debt is very low and is other players go out of business then these people can become bigger and fat margins. But current project costs can go up and hence they may suffer. Price of 100 may be right from risk reward perspective.
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Can somebody share any news about q4 results as to when or why there is a delay
Is there any news on the q4 results? How can they not have declared the results till so late
Has anyone heard anything about the Q4 FY 20 results? Why is there no update from the company? Isnāt this extremely shady?
Seems to be delayed, but I guess something should be out anytime soon nowā¦ Both Q4 FY20 and Q1 FY21 results will be out together.
FY20 Results Trading Window Closure.pdf (180.3 KB)
Disc: Holding since a 4 years
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Isnāt this very unusual? Why would a company not put out its results, or provide any reason for delay, even though they had said that their pre-sales in Q4 were good? Is it not suspiscious?
Finally, Q4 results on 21th July
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Media reports today announced that Sunteck has signed a pack to develop a large 50 Acre land parcel in Vasai, a far-flung western suburb of Mumbai. Report quotes the project to have a 7 year timeline and a revenue potential of 5,000 crores
Lets analyse and decode the details of the deal and its possible impact on Sunteck
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Assuming 7 year project and 1 year poject approval lead time, revenue is likely to accrue for 6 years starting FY22
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Project has potential of develop-able area of 4.5 million sq ft, and on 50 acre plot, this translates to an FSI of little over 2.
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Havenāt verified it, but this FSI seems in reasonable range
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Taking into account 4.5 million of saleable area, average rate per sq ft comes to about 11,100 per sq ft
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If we check Sunteckās current project in Naigaon, Vasai they are quoting a 1 BHK flat of 392 carpet area at 34 lakhs, which comes to about 8,650 per sq ft
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So given the current damp economic sentiment in the country, especially in real-estate segment, this rate may be steep, but if we consider that the project sales cycle is going to strech to next 6-7 years, if economic recovery happens even within next 2 years, they can command a higher per sq foot realization towards the back-end of the 7 year project
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Also, since its a large 50 acre township kind of project, there is likely to be significant portion of commercial / retail component, which will yield superior rates, thus boosting overall per sq ft realisation of the project.
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Additionally, Sunteckās township projects come with all luxury amenities such as car parking, swimming pool, clubhouse, gardens, security etc. Again, its usual for builders to charge extra for all such amenities, over and above the price of the apartment. With such charges, the realisations do go up by 5% to 10%.
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Its a JV with the landlord bringing in land parcel and the development rights, for which he will get 25% of revenue
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So given the sales projection of 5,000 cr, Sunteck share of revenue is likely to be Rs 4,000 cr, translating to about 600 - 650 cr per year, considering a 6 year project timeline.
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Construction costs are pegged at about Rs 2,000 cr. With a large township project, the total built up area including non-FSI area could be close to aboout 63,00,000. At a constrution cost of about 2,800 per sq ft (including all expenses and overheads), the total construction cost of the project would be about 1764 cr. Considering inflation over next 6 to 7 years, the cost is likely to be in the range of 2,100 - 2250 cr, so the projected figure seems fairly realistic too
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Now, for those who are not familiar with locations in Mumbai, Vasai, is located in the far, far flung areas of Mumbai western suburbs. Vasai-virar has its own Municipal corporation, and its really, the end of Mumbai geographically. Though it is densely populated area, its not a very affluent area, so apartment sizes are typically small. Hence a significant volume of the apartments in this location could qualify under the affordable housing criteria
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As per GST councilās revised ruling, GST on affordable housing is levied at rate of 1%. GST of completed apartments is levied at 5%. Assuming a blended GST rate of even 5%, the revenue net of GST is likely to be in range of 3800 cr.
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So the gross margin from the project would be in the range of about 1550 cr, at 40%, spread over 6 years.
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Over the years, Sunteckās operating profit margin has been swinging from 44% in FY15, to 10% in FY16, to 36% in FY17, to 41% in FY18, to 44% in FY19, to 31% in Trailing 12 months. So gross margin from this project seems in line for a OPM of 30+%
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Historically, since they operate in luxury segment, their NPM has been pretty strong too, at 21.4%, 24.1% and 26.5% for the past 3 financial years, and at 20.5% for the TTM.
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With the existing large ODC project in Goregaon, existing township project in Naigaon, and this new one in Vasai, the project pipeline is definitely strenthening.
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Real-estate business typically deliver lumpy revenue, based on the cycle of project launch and completion timelines. Now, with these multi-year projects pipeline, hopefully, Sunteckās revenue visibility and certainity will be improving significantly
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If the company executes well, hopefully, within next couple of years, we could see the sales breach the 1000 cr mark, and if margins hold good, we could see a PAT in excess 200 - 250 Cr range
However, as with every project, there are associated risks that need to be considered
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Execution risk - with real estate, there is always the execution risk. What helps is tht Sunteck has a fairly clean reputation, and I have not seen any of their projects getting stuck in regulatory, litigation or other such mess
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Market risk - Real-estate has been on the downcycle for past 6-7 years, and demand as well as prices have been subdued, with one mega event after other impacting the sentiment. Demonitisation, NBFC / HFC meltdown, Slowdown in growth in economy and GDP, Constant flux in real-estate regulatory landscape in Mumbai and Regulatory delays due to mumbai 2034 DP approval, GST blow, and now Covid-19 induced economic mess. All of these have taken a toll on the industry, and if things worsen, people would be averse to taking big-ticket loans for purchase of properties, and this could have a direct impact on Sunteckās performance as well
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Price Realisation - If the real-estate market remains subdued for next 3-4 years, the realisation per sq ft may be lower, thus hitting the margins adversely
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Regulatory risk - If the benefits on lower GST on affordable housing and the interest subsidies under government schemes are withdrawn or reduced, it could also have adverse impact on housing demand.
Media report available at
Disc: Invested. This is not a recommendation.
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Sunteck is pursuing HDIL under IBC proceedings. HDIL RP released the provisional list of prospective resolution applicants on 3rd August 2020. Though its too early to assess the impact / implications of this foray, if there is any significant outcome for Sunteck in this pursuit, it will definitely have significant impact on the future of the company, hence this becomes a must-watch story for investors. HDIL had never been a great story, nor was it a clean story ever, so personally, this move does not enthuse me at all. However, a lot will depend on the contours of the final outcome, so it becomes important to keep a close eye on how this story unfolds.
Sunteck - Provisional-list-of-Prospective-Resolution-Applicants for HDIL.pdf (732.7 KB)
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Annual Report:
Few pointers from the AR:
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The Mumbai Metropolitan Region (MMR) recorded muted growth of 7% year-on-year (YoY) in launches in 2019 to 79,810 units on the back of ongoing economic slowdown, national and state elections in 2019, and the prolonged NBFC crisis which dented consumer sentiments and affected demand. The number of homes sold fell by 5% YoY to 60,943 units during the calendar year 2019. Weighted average home prices in MMR continued to correct in 2019, although marginally, by 2% YoY to 7,014 per sq ft. The prices have corrected by 14% from the peak of H2 2016.
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Despite the challenging economic climate, the office market in key micro markets like MMR exhibited resilience with low vacancy and limited new supply. Office leasing in MMR touched a historic high of 9.7 mn sq. ft. in 2019, registering a 22% YoY growth, driven by large deals in the BFSI sector while new supply of office space went down by 18% YoY to 5.4 mn sq. ft. in 2019. BFSI continued to have the largest share in office leasing activity in H2 2019, garnering 64% share of total transactions. Vacancy level in MMR declined from 21.5% during H1 2018 to 17.5% during H2 2019.
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Consciously undertook peak expansion of portfolio during and post Lehman crisis around 2009-10, thereby creating value for the Company. With the ongoing consolidation, a similar opportunity has presented itself today - paving the path for aggressive business development. In H1FY20, we announced an acquisition of a residential project in prime locality of Andheri Lokhandwala under the asset light strategy with minimal upfront capital investment. (This is what the management did in the last downcycle and bought prime locations at BKC and Oshiwara. So really upbeat on the new expansion strategy specifically in the new belts of Naigaon-Vasai )
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Declared 1.5 dividend to shareholders and reduced dividend for Promoters to 0.75/share. Promoters had voluntarily decided not to take any dividend during FY2014 and FY2015.**
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3 residential projects in ODC, Goregaon (W) contributed 22% of total pre-sales. Aspirational luxury housing project in Naigaon - Sunteck WestWorld & MaxxWorld contributed 63% of total pre-sales. (New projects have started contributing 2/3 to Pre-sales)
Had visited the Sunteck Naigaon project. Sunteck WestWorld Phase 1 is almost ready and as per the sales agent possession will start from December 2020 onwards.
Sunteck MaxxWorld (150 acre) project started this year and is expected to be completed by 2024. This project received a very good response at its launch and I could see many other people inquiring about the same. Sales team was preoccupied with inquiries.
About the project, I saw show flat for MaxxWorld and it was really nice. Luxury themed flats for aspirational buyers with a budget lesser than 1 crore.
Talking about the location, its 1.5 km away from Naigaon Railway station and 5 km away from Western Express Highway. Naigaon is the only stretch which is yet to developed relative to nearby places like Bhayander, Vasai and Virar.
Could not get any details regarding the new Vasai Project. This project will have total saleable area of 3.33 million sq ft.
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Some of the buyers in its BKC project have gone to court against the builder.
Also look up the company in youtube.
https://www.youtube.com/watch?v=Hss6VzntEmw&ab_channel=MichaelMoses
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This matter was brought up intentionally by a group of 100 buyers of Sunteck MAXXWORLD.Their main motive was to get a discount for the units that they had already booked @ around 7000/sqft ,as they thought due to covid prices should come down.
They even had a whatsapp group with only 100 members & most of them were there for the sake of having fun.
They themselves praised the quality & Brand name of SUNTECK & only 1-2 members were provoking & luring others of discounts.
Firstly they tried contacting co. n demanded discounts,Delayed payment etc. by threatening them that they will cancel the bookings.
When this didnāt work out they started doing negative publicity about Sunteck on Social Media & later hired this politically linked man to get their demands fulfilled.
As of now i think the matter is closed as they hv stopped ranting on social media,youtube etc. & additionally now they canāt take lockdown as a excuse too.
SO, NOTHING SERIOUSā¦
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Ask the people who bought flats at Signia Pearl BKC, they have gone to court against the builder.
That was his first major project and he still has a lot of unsold inventory.
Can you please share the source of your info?