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 The Equity Desk Forum :Investment Ideas - Creating winning portfolios! :Large Cap Blue Chips
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furkanalam
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Quote furkanalam Replybullet Posted: 23/Nov/2007 at 4:19pm
Can someone please compare DLF and Unitech.....and lets try to gauge which is a better buy now....
 
The only info that i have is DLF has 10000 acres of land bank while Unitech has 20000 acres....
 
DLF has a market cap of $37bn while Unitech has a market cap of $13bn....
 
DLF is trading at a P/E of 317(FY07 earnings) and Unitech at  a P/E of around 26-27(FY07 Earnings)....
 
Owners of both the companies are in the list of top 10 richest Indians......
 
So what lies ahead...which is a better bet.....
 
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Quote smartcat Replybullet Posted: 23/Nov/2007 at 5:11pm

There seems to be some factual errors in your numbers. DLF is trading at FY07 P/E of 68 while Unitech is trading at 48. And DLF land bank is more than twice that of Unitech.

Which is a better buy? Chinese real estate companies are valued on P/E basis. So if you want to adopt the P/E model, Unitech is trading at 20 times FY09E numbers while DLF is trading at 19 times (Source: Motilal Oswal Report).
 
But most brokerages are looking at NAV values of the real estate companies, and assigning a premium or a discount to the NAV value, going by the size and execution capabilities of the companies. Both Unitech and DLF are top quality companies - so they can trade at 20% premium to the NAV.
 
Things to remember before investing in real estate companies like DLF or Unitech -
 
- It is impossible for you and me to value these companies. To value it, you need to know where these companies hold land and what is the current market price of that land. This is a job best done by the brokerages, who have access to the management.
 
- Invest in DLF/Unitech based on the presumption that land values will appreciate continuously over a period of time. The stock price will reflect the average appreciation rates.
 
- Investing in Unitech will not give you better returns than DLF just because it has a smaller market cap. Land is land, whether it is 10,000 acres or 20,000 acres, and the average land value appreciation of a smaller company will be the same as that of large cap company.
 
- The above statement does not hold true in cases of a few companies like Indiabulls, which holds land mostly in Mumbai. So the stock price appreciation of Indiabulls might depend on how Mumbai real estate market is. Also, some midcap developers like Parsvanath have land mostly in tier II cities - so its stock price appreciation might be slower but steadier than the rest.
 
- DLF seems to concentrate only on generating revenues from development and sale of projects + sale of land. Unitech does the same, but it has a third source of revenue which rental/lease income through developed properties. DLF has another promoter group company called DLF Assets which does this. That's why Unitech has more diverse revenue sources than DLF.


Edited by smartcat - 23/Nov/2007 at 5:12pm
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PKB2000
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Quote PKB2000 Replybullet Posted: 23/Nov/2007 at 5:51pm
I like both DLF and UNITECH but as per above logic I get more support for DLF and that is the only estate company in my stock.
I like UNITECH because whaever be the status of growth story, land bank eps etc etc. I know UNITECH has always rewarded share holders to the maximum extent since its begining. Some Experience People may have natural logical  inclination towards UNITECH.
But what we expect is that DLF will give more reward to its share holder in the coming days. We have already experinced that even listing in most negative sentiment (against real estate) days, the stock has never shown any risk for its shareholders. I am talking of stock performance of DLF.
The first preliminary tests are well qualified by DLF and we know he is a good studious student who can pass the future exams with high percentile.
I am always doing that which I cannot do, in order that I may learn how to do it. ~Pablo Picasso
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deveshkayal
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Quote deveshkayal Replybullet Posted: 23/Nov/2007 at 11:55am
DLF sold stakes in 69msf of mid income home projects in Chennai, Bangalore, Indore, Kochi, Panchkula to a set of private equity investors. In addition to the one-time cash flow of Rs16.75bn and the profits earned to the extent of their stake in the projects, DLF would earn project management fees (PMC) of 7% of sales, and land acquisition fees. DLF will also open India's first Luxury Mall in Delhi - DLF Emporio.

Price target of Rs 975 is based on 10% premium to the 12m forward NAV. Of this, residential is 27%, commercial 52%, retail 15%, hotels 3% and Bidadi 3%. At a 15% premium to NAV, the price target would be Rs1,020. UBS Maintains a NEUTRAL rating on the stock.
"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett
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smartcat
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Quote smartcat Replybullet Posted: 26/Nov/2007 at 3:53pm
Hold DLF: Emkay Research
 
We have arrived at the target price of Rs 868 based on a premium of 20% to the NAV of the company’s land bank. The stock seems to be fairly priced with limited room for upside in the short run.
 
However, given the strong visibility (huge land bank coupled with an established brand) and established track record of the management, we believe that the company has the potential to deliver growth on a sustained basis. We maintain ‘HOLD’ rating on the stock
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basant
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Quote basant Replybullet Posted: 26/Nov/2007 at 5:35pm
Is that an adjustment for the super built up area?Big%20smile
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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kulman
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Quote kulman Replybullet Posted: 26/Nov/2007 at 6:24pm
Big%20smile Maybe, the Car Parking Area is getting lower multiple nowadays!
Life can only be understood backwards—but it must be lived forwards
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deveshkayal
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Quote deveshkayal Replybullet Posted: 26/Nov/2007 at 6:45pm
I would go with firangi when it comes to Real-estate reports bcoz they have access to other real-estate markets valuation reports by their colleagues in Singapore, Hong Kong,etc.
 
Real-estate stocks are the most difficult to value.
"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett
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