VALUE PICK - SUNTECK REALTY LTD

About The Company & Business
Sunteck Realty Ltd (SRL) is a ultra-luxury real estate company headquartered in Mumbai.
The company is promoted by Mr Kamal Khaitan and is listed on both NSE and BSE.
The company boasts of a city centric development portfolio of about 25 million square-feet spread across 24 projects at various stages of development and 4 rented assets. Of the said portfolio, the company within a span of four years has completed six projects with a developed area of about 2 million square feet comprising of residential and commercial developments.

SRL which has attracted investment from Ajay Piramal led (Akshar Fincom) is also into a joint-venture with Piramal Enterprises, the JV is named Piramal Sunteck Realty Pvt Ltd.
Kotak Private Equity too has earlier partnered with SRL for some of the projects.

Coming to the projects, SRL has a Mumbai and city centric portfolio.
In Bandra-Kurla Complex (BKC) one of Mumbai's leading CBD it is only Sunteck which is developing three residential projects including a landmark project named Signature Island which has only started attracting the uber rich Indians.

The company's customer list for its BKC duplexes has names like: Gautam Adani of Adani Group, Vikram Pandit (ex-Citigroup head), Harsh Mariwala of Marico, Jalaj Dani of Asian Paints, Kishore Lulla of Eros, Ashok Wadhwa of Ambit Holdings, Gunit Chadha of Deutsche Bank, Nimesh Kampani of JM Financials, Pramit Jhaveri CEO of Citi India, Mickey Doshi country head of Credit Suisse and Surat based diamond-merchant Hitesh Patel who became popular after being the highest bidder for PM Narendra Modi's suit.

SRL has launched four new projects in Mumbai this quarter along with one in Nagpur, SRL has tied up with The Charcoal Project (Interior designing firm owned by Sussanne ex-wife of Hrithik Roshan) for its luxury project in Nagpur.

The Ace Investor - Value Pick
SUNTECK REALTY LTD.
BSE:512179 - NSE: SUNTECK
Company listed on both BSE & NSE is trading around 280 with a market cap of about 1735 crores.
Promoter holding is at 73.49%, total debt on the books is at around 592 crores.
The current price to earning ratio is around 10 and the stock is under-valued.

The company is having a total inventory of about Rs 5200 crores and total unrecognized sales stands at about Rs 2200 crores. As the company is reporting numbers via project completion method these figures will add up on project completion.

The inventory of Rs 5200 crores is not from some small remote town of Gujarat but majority of it is in India's best city and financial capital: Mumbai.
The company has landbank of approx 7 Acres in Mumbai.

The rich are becoming richer and the upper middle class is going bullish to become rich, there is a shift in corporates with Ratan Tata hanging his boots and many others to follow, Superstars getting married or aging and Cricketers too announcing retirements. All these stuff only increases the investments for usage in properties like Signature Island and other Sunteck luxury projects therefore it is clear that inventory isn't an issue here. I mean who doesn't want to be the neighbor of richest and famous Indians?

Citigroup had initiated a Buy on Sunteck focusing on the Net Asset Value (NAV) of the company staying stable on back of a city centric portfolio.

A Morgan Stanely note too made a reference to SRL as being the cheapest among its peers with a discount of 60% to its NAV compared to 18-47% discount in other companies.

Coming to P/E based valuations, SRL p/e of 10 is cheap compared to India's largest real-estate firm DLF which is trading at p/e of 43. Point to note is that DLF is having serious debt issues and SEBI too has issues with promoters intent.
SRL having partnership with Piramal and Kotak too is re-assuring.
Piramal is not some other guy but a honest businessman with serious business sense.

Coming to the Financials, Sunteck witnessed YoY topline growth of 2963% and bottomline growth of 3655% - FY14 v/s FY13 on back of some completed projects.
Company has reported healthy margins, here is a snapshot of annual results table :-


As clear from the above financial statement the company has reported great numbers in FY14.
However, it is not wise to compare quarterly and annual earnings for a company which is reporting numbers as per the project completion method as they do not give the accurate picture of how the business is faring right now in a quarter due to the project being under-construction.

I have rather aggressive projections for FY17 rather than FY15/16, i expect FY17 topline around 2800 crores and EPS of around 65-70 which means that a P/E of 30 will work out to be at 2100 rs per share.

Some might think how does 30 P/E make sense, I explain: We are talking about FY17 and i don't expect Sensex to languish at under 30k at FY17 end. Even on this day Sunteck should trade at 30 P/E, If a Mumbai-centric low-cost housing company like Poddar can trade at a P/E of 44 why can't our rich man's poddar (Sunteck) attract such valuations specially with the projects and partnerships it has.

All in All i feel, It is wise for the retail Indian investors to buy shares of Sunteck for their portfolio before huge investments flow in: Citi has already rated a BUY and Morgan Stanely too has taken note of the cheap valuations Sunteck is trading at.

Technically above 292 there is long-term breakout on the charts for a huge target of more than 90% return, That is just according to the charts, I expect this stock to turn into a multibagger in future. Ofcourse the future means long-term.

Note: The above is not a research report but information as available on public domain and it should not be treated as a research report.

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

Disclosure: It is safe to assume that i might have Sunteck Realty Ltd in my portfolio and hence my point of view can be biased. Readers should consult their financial advisory before any investments.

 

You have already put this note on ur blog. Now your putting the same stock suggestion out here. Are you operator or working on behalf of someone?
Or you have this company at higher levels?
FYI - price has gone down after you suggesting this stock!!

 

This person (Ace investor) has created a blog as well to promote SUNTECK REALTY stock. It was also observed that the boarder "Ace Investor" excessively posted about the aforementioned stock on MMB forum to create artificial hype. Later on the stock rose for about 17-18% and people who bought at such a high price got stuck.

All unskilled or new investors should act carefully on such advice. 8)

Admin of this forum should keep a hawk eye on such malicious boarders.