From what I gather from interaction with the management during the AGM, Nirmal Bang’s figures appear quite conservative. Rs 570 cr revenue in FY 22 would translate into around Rs 700-750 cr or so the following year.
The management has set higher internal targets which are far higher than these estimates. Lollapalooza effect would come when the NESCO events business gathers scale. Right now they are on a learning curve with just a handful of events like Paddy Fields and an auto show, but these are going to be scaled up. NESCO’s own events will account for around 50 per cent of the revenues from the Exhibition business in five years. Management is also looking to improve occupancy at the exhibition centres but more than 60 per cent is unlikely, I am told. So there will be plenty of value addition by own events.
Also under consideration are ticketed events. I think one event has already been started by an exhibitor rather than by NESCO itself. We have to also see how the Maharashtra government’s new initiative to let businesses stay open 24X7 play our for NESCO. The new metro line outside metro too could be operational in about a year’s time. The big development here is that the metro line on the highway is being linked to newer lines that will go all the way to Thane, so access to NESCO property would be vastly improved in three years or so.
Other upsides can be expected from scaling up the kitchen business which caters to visitors to exhibitions rather than employees of the IT buildings.
The proposed convention centre appears to be a defensive move as Reliance is setting up its own exhibition and convention centre at BKC. However NESCO management does not see a big threat from this.
One big takeaway I got the from management at the last AGM was that they are on a huge learning curve. While IT Building 3 took nearly five years, the new one was completed in three with new floors being constructed every fortnight at one stage. Similarly a lot of domain knowledge is being acquired in the exhibition and events businesses which can only be quantified after a time lag.
I will go out on a limb and say that NESCO’s topline could touch Rs 900-1000 crore by FY 24 with net profit margin of 45-48 per cent.
In the absence of an proper website, it is difficult to get regular updates on the company. Over the past couple of years, NESCO Events/Exhibitions have set up properties like Carnival (for used cars), India Auto Show, Paddy Fields (a music event) and Rangilo Re (I presume its connected with dance). Just googling NESCO Exhibitions threw up a new event called Arogya (for the wellness industry) which is being organized from January this year.
NESCO Foods seems to be set up like a separate vertical which helps planning of weddings organized at the venue. They have also branded the kitchen and restaurants in the venue. Remains to be seen how this is scaled up.
IT park4 80% leased out and expected to be fully leased by march-2020
seeing good demand from companies trying to set up in mumbai including companies from Japan
IT park5 which will be built in place of IT park2 - built up area -40 mn sq ft- 25mn leqsable area. also exapnding BEC by 1mn sq ft. not to take any debt for this expansion. IT park in final design state with singapore consultant. shall start both of these project in fy21.
no pressure on rental to lease the space
expect fY20 PBT to be range of 300-320cr, tax of 60 cr.
I am quite impressed the way how management is driving the company and ancillary thought process around capital allocation.
First, although despite bit delay in construction, they swiftly were able to book many tenants and some even very premium clients like WeWork for longer duration.
Secondly, the connectivity to this place still remains great and value migration from expensive South Mumbai to relatively good location like Goregaon, Malad etc. is still playing out and expected to continue for next few years. And with cost pressures, such arbitrage opportunities are explored at accelerated pace by companies.
Third, on supply front due to slowdown in real estate and lesser options around prime location land, Nesco is getting tremendous advantage.
Fourth, with new DDT regime, the REIT structure might be slightly less lucrative for taxable investors, and Nesco being able to re-invest at good RoCE becomes good proxy choice in the same space.
Overall, good tailwinds and continue to hold.
Disclosure: No transactions in last few months. Holding since 5+ years now.
Disclaimer: This is not a buy/sell recommendation. Kindly do your own due diligence or consult your advisor.
Good numbers from Nesco. Broadly consistent with last quarter.
If we see the breakup, IT park segment revenue is showing uptick from new tenant addition. BEC revenue has dropped considerably compared to last quarter (which looked one-off) and need to understand why this has happened.
Important note 2 from results: Company has applied Ind AS 116 - Leases. Ind AS 116 “Leases” requires the lessor to recognize lease income from operating leases on a straight-line basis over the lease term which includes rent free period. Thus, contracted lease rental income including future escalation is straight lined over the lease term. This has resulted in recognizing unearned lease income amounting to 2399.33 Lakhs for the Quarter ended 31 December 2019 and 4020.27 lakhs for the Nine Months ended 31 December 2019.
Disclaimer: This is not a buy/sell recommendation. Kindly do your own due diligence or consult your advisor.
Hi, actually am re-visiting NESCO after few years. Had invested and exited by 2 fold gains. But was always on my radar. Few years back I was looking for say 20-25% growth businesses, but recently after reading few great investors, realaised the ‘DULL & BORING’ businesses are also investment-worthy. So again having a look at NESCO.
All the said things are fine, but my only worry is the future Reliance Exhibition centre in BKC. We know what Reliance can do with the example of JIO. It can simply wipe out the competition.
So can anyone share the ‘ACTUAL’ progress of the upcoming Reliance exhibition centre at BKC. Means proposed built-up area, actual how much groundwork has been done.
I don’t think Reliance is really going to compete with Nesco. Reliance has many facilities like serviced apartments, offices, convention centre in addition to the exhibition business at BKC.
Considering how Reliance’ other businesses are growing, the capacites at BKC may entirely be consumed in-house.
Nesco is also building it’s own convention centre and the are plans for a four star hotel when it’s exhibition centres are developed down the line.
Been trying to analyse this stock since 2 weeks. Understanding the supply side is simplistic as Nesco is adding huge capacities to BEC and the towers.
I am trying to evaluate more demand side triggers.
Real estate and commercial space demand in Mumbai
This includes more specific factors intrinsic to the industry. Just like we have SSG for retail industry, do we have any parameters for this industry and see how they have grown?
Direct competitors (Nirlon, Oberoi, Mindspace etc)
Office renting trend vs GDP growth/Sector growth. Impact of possible recession on the growth/renting abilities of companies??
Most offices in Nesco are IT/Finance (Here maps, msci, BlackRock, KPMG, etc.) Any information on the office space growth and new investments in these industries?
Through annual reports and concalls of competitors, trying to evaluate rent renegotiation and pricing power of Nesco in the industry. How much power does Nesco have to increase rents a few years down the line for additional services and facilities it provides
Overall LT trend of offices and new capex in Mumbai by MNCs. Want to check if new offices are being added in Mumbai at prime locations or in Pune/Bangalore/Jaipur etc.
Vacancy levels in Grade A offices in MMR is at an all time low. There is very limited supply at the moment in prime locations in MMR, also read about substantial price increases in BKC offices leasing given lack of stock last year.
From a rent escalation perspective, 5% annual would be a fair assumption- especially in an economy which is in a slow growth phase. Guess the key would be how soon can they lease the commercial towers and generate cash flows - that would be the main trigger in my opinion.
rents have been rising gradually. Rentals for IT Buildings have been increasing from Rs 75-80/ sq ft in 2012 to Rs 90/ sq ft in 2014 and about Rs 144/sq ft/ month.
The direct numbers you can get from historical documents , research reports. Industry wise Commercial is more stable than residential . Howver, there are few things which one must dig deeper
Topology of Mumbai , what happened to Nariman point prices when BKC came up n what we should derive from this
Impact of transharbour link project if any
How internally real estate has moved in financial capital cities
Corona Virus is the global thing right now. It is expected to reach Indian shores and is widely expected to effect businesses from 3 months to 1 year.
In this context we have to re-examine the effects on revenue of Nesco. The IT Rental business which comprises of 55% of revenue will not have a major impact. However, the BEC Business along with food business will be effected as business exibhitions will be postponed/cancelled either due to panic or govt directive. So in the short term there is bound to be some impact on NESCO’s shares
The Mumbai terror attacks really damaged the exhibition business causing the stock to fall sharply. The IT business was negligible then, so the bottomline had taken a big hit.
Such incidents are similar to Maggi issue with Nestle, even better, where risk is known and timeline is uncertain, but one thing is certain that this shall pass (if not, the world will freeze anyway ) Interesting times for long term investors…!!
Disclosure: Holding. Kindly do your own due diligence and impact analysis.
The only difference between then and now was valuation. At that time, the fall brought huge undervaluation with it. That’s not the case this time around.
To anyone who’s been invested from lower levels - they can continue to hold\add more. But anyone planning to enter now will have no margin of safety valuation-wise.
Disclosure :- Held for 5 years before selling it early this year.
I totally agree with @vivek_mashrani the NESCO story is a long term play, however in short term the impact may be reasonable. From a long term investor perspective it gives a huge opportunity to slowly accumulate. The timeline is the real puzzle here.
. . . does anyone here know where can one see the list of event lined up for coming days at NESCO’s exhibition center?? and also get to learn if there are any cancellations or any shifting of dates due to corona virus scare??
The last I checked, most of the events in March were cancelled/postponed. Later month events were mostly officially not cancelled, but in my view if the situation persists, they might not want to take a chance and may cancel.
In addition to this if there is any government measure or circular to shut down such gatherings, then it would become compulsory. But surely there will be impact on exhibition business revenue it looks like.
) Interesting times for long term investors…!!