3e1cf81b-0448-4183-8604-fdbd8ed53b9e.pdf (828.5 KB)
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Actually Google reviews of naigaon was 1.3* suddenly it got to 3.8* is the water issue solved there?
Three positive updates (including one industry update) for Sunteck…
- Water issue in naigon is almost addressed (as per my channel checks)
- Nepean Sea Road (Malabar hill ) project is being launched in FY24 itself
https://www.sunteckindia.com/images/new/we-are-planning-750-Cr-Affordable-housing-project-large.webp
So two major launches in FY24…
Industry update :
Finance ministry approved the interest subsidy and due for notification
Disclaimer : Invested
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Promoters bought around 1.3 lakh shares from market.
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Half this amount of 21000 cr will go to land owner as this is a JV, right!!
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Promoter group entities sold 4% stock. The reason for the sale appears to be:
Sunteck Realty has reduced its net debt to zero by gaining a cash flow surplus that will be utilised to further accelerate business operations.
A recent sale of 60 lakh shares (4.10%) of Sunteck Realty by its wholly owned subsidiaries Satguru Infocorp Services and Starlight Systems have generated a substantial cash flow which shall be retained & consolidated with Sunteck Realty, leading to nullifying the net debt and generating positive cash flow in the company.
Source: Construction Week Online
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The market seems to have been spooked by this sale and has not yet grasped that it was a treasury sale and that the money stays with the company. I think this shows the prudent nature of the management and their conservative capital allocation philosophy. In a time hen there is so much of talk on real estate cycle taking off, in my opinion it is good to see that the management is still focusing on cash infusion for growth without raising additional debt when the interest rates are close to medium term highs.
Sunteck is still not cheap, probably fairly valued at about 4 times EV/pre-sales. The good news is the P&L will start reflecting growth from this quarter as Max World Naigaon gets completed, and will continue next year as ODC and Goregaon projects get completed then.
With the low float, these spokes can easily create fresh interest among retailers. Let’s see how things play out.
Disclosure: Invested from mid 200s
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I am evaluating Suntek and have few questions if someone can address:
- Growth outlook: What’s growth outlook for company, how’s projects pipeline in MMR, is it poised to gain due to RE boom? As I read in this forum, company has prioritised balance sheet over P&L growth in the past few years (net cash vs. other players having significant net debt). Is there any change in this strategy/capital allocation to benefit from RE boom?
- Cash generation: My understanding is that company will generate very healthy cash flows over 7-10 years as per management guidance. Infact, cumulative FCC generation will be 5-6 times market cap. Whats risk to delivery on this guidance?
- Execution Track record and Management: How is the Management and how will you rate corporate governance as per past experience?
- Valuation: Stock has been a laggard, fetching meagre <40% return since last 5 years while all other players have doubled or tripled since pre-Covid days. Whats holding the stock to perform in this bull market, any triggers that’s worth following on Suntek?
P.S. Didn’t know that Prestige estates has sizeable presence in Mumbai, i thought its dominant only in Bangalore.
Appreciate thoughts/clarifications on my above questions, if anyone is following this company closely. Many thanks!
At the moment I don’t know answers to above questions, but would like to share Q2FY24 concall mgmt comments-
- FY24 sunteck maxxworld will be completed then 750 to 850 crs will be recognized in FY24
- FY25 sunteck city 4th Avenue in ODC Goregaon west will be completed then 950 to 1050crs revenue will be recognized in FY25
- Approvals received for Kalyan project, launch before diwali (2023 diwali). Post Kalyan project, 6 large projects are ongoing, example Nepean Sea road project expected to be launched in FY25
- In FY24, 1 commercial project completed-sunteck bkc 51, fully leased for 29yrs, nearing completion, will also be completed in FY24. ROIC on both projects is 30%.
- no significant price increase at the moment
- 7 large projects with GDV of 30K crs and expect it to go upto 50k crs in next 2-3 yrs
Invested and biased. Not a buy or sell recommendation. Not a registered advisor.
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Mohnish pabrai has sold 2 percent of the company.
He still holds 6 odd percent in his various funds. In some past videos he had explained he had bought the maximum allowable (close to 10 percent). I suspect he will sell out of the position in a few months.
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The latest Rating Update has few useful points:
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Significant improvement in bookings; recent and upcoming launches to drive the momentum: As on September 30, 2023, the company has booked more than 70% of the total revenue potential of ongoing projects. Among ongoing projects, the company has sold more than 80% of area in three projects: Maxx World- Naigaon, Sunteck City-4th Avenue, and 2nd Avenue Pinnacle, Goregaon. It has sold more than 60% area in two projects: Sunteck One World and Sunteck Skypark and close to 40% in the recently launched project: Sunteck Beach Residency- Vasai.
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Strong committed receivable coverage ratio indicating low funding risk and healthy cash flow visibility: The company has achieved substantial booking level in its ongoing project portfolio, which resulted into build up of sizeable- committed receivables. As on September 30, 2023, the company has committed receivables of over ₹2,200 crore, which covers more than 120% of the balance project cost and outstanding debt. Around 10% of committed receivables pertains to completed projects which are due to be received post possession delivery; hence, there is strong cash flow visibility in the near-term. Amongst ongoing projects, three ongoing projects are in advanced stage of completion with over 70% of cost stands incurred, and three projects in the nascent stage of construction with less than 30% of cost incurred. As on September 30, 2023, SRL has incurred close to 60% of project cost, reflecting intermediate stage of execution. While residual execution risk exists, adequacy of committed receivables indicate a low level of funding risks.
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The gross and net debt levels were still pretty low even before the stake sale. The stake sale makes little sense to me, maybe I’m missing out. Please share your thoughts
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all the peers of the company are doing so well why sunteck overall pre sales growth reduced ? in such good environment
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The management is alluding that the presales number shall reach 2000 levels by the end of current quarter, there is high chance that in this quarter company shall be able to add 750 odd crore to presales value of existing 1250 crore presales numbers.
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Q3 Fy24 concall notes:
- GDV more than doubled from 13,650crs in FY22 to 30,000crs in FY24. It is expected to further go up to 60,000crs by next 3 yrs.
- Going to expand commerical portfolio (rental) at 2 key business locations BKC and ODC with potential capital value of 5000crs. 2 commercial projects at BKC already completed- BKC Icon and BKC 51 and one of which is already leased out.
- Pre sales 1,237 crs for 9 months and qtrly 455 crs. Cash inflow at 940crs for 9 months and qtrly 438crs in q3fy24. Cash surplus of 304 crs in 9 months.
- 1 tower of Kalyan Crescent Park launched at the end of the qtr, contributed 73 crs to q4 pre sales number. Can do 250-300crs pre sales each yr from Kalyan. (As per me, This might be reason for lower pre sales also as Kalyan project was launched at end of qtr).
- Yearly pre sales guidance of 2000crs, can do 750crs in the last qtr. Launch of Third tower in Mira road can help in meeting the target.
- Borivali project, Nepean sea road, South Mumbai - luxury home projects can add to GDV around 10Kcrs.
- GDV may go up by 10K crs from 30K crs by this yr itself.
- Management focussed on sales growth through volume than price. Will take price hike if needed.
Please let me know in case of any updates.
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