Originally posted by barla   Arre bhai, godrej properties hardly owns any land.   [QUOTE=manishwithted] GODREJ PROP

that makes it even more expensive at current valuations.

FutureBull,
                    That is why I  have not really invested in real estate companies for the past 16 years.Very easy and tempting to fool investors. I invested in a great real estate company 19 years ago at the right time and lost money. If they just maintained their business it would have been at least a 100 bagger for me by now. Too greedy in every way.


Edited by Ajith - 20/Feb/2011 at 10:50pm

[QUOTE=barla]
Godrej Prop - CMP 592

At consolidated level
FY 10 - for 12 m sales -  313.4 cr , EPS 19.50
FY 11 - for 9m sales - 123.5 cr ( 41.1 + 34.3 + 48.1 ),  EPS 10.13 ( 3.2 + 4.71 + 2.22)

Assuming an EPS of 14 for FY 11 , PE comes to 42 which is pretty high in my opinion and if the company doesnt own any land then it makes it worse.

Most of the companies follow % completion method as revenue recognition. The developer generally sells at least 30 % of the project before starting construction. So for example if the project is 30 % complete  the actual cost incurred are for that 30 % construction and then the company will recognize revenue equal to 30 % of the total revenue.
So i dont feel Godrej is accounting for higher costs and lesser rev.

Please correct me if I am wrong.

Mahindra Lifespace :  CMP - 345

On standalone basis
( could not find consolidated qtrly results)

FY 10 - for 12 m sales -  417.8 cr , EPS 18.93
FY 11 - for 9m sales - 312.6 cr ( 67.9 + 88.9 + 155.8 ),  EPS 17.75 ( 3.54 + 6.04 + 8.17)

So Mahindra lifespace is trading at a much lower PE.


Also as per an article in Outlook profit latest edn  OBEROI REALTY seems to be a good buy.

The share is currently trading at 233 - below its IPO price of 260.

As per the company and as mentioned in the magazine, the cost of acquistion of land is low for the comapny and the land can last for about 5 yrs.  The company has got land holdings in and around Mumbai.
It is planning to extend its presence in other major cities provided it gets land at reasonable price. The company is open to work with the land owners and as per management, they are in a better position becoz in times of crisis they can reduce the prices of the property as their cost of acquisition of land is low.

6 m EPS is 9.6 and the share currently seems to be available at reaonable valuations.

Also the company has 861 Cr of IPO proceeds left for deployment.

The company is DEBT FREE.

Comments please.


DISC : I dont own any of the above stocks. was waiting for Mahindra lifespace to fall below 300 , didnt happen. 
Have not carried out detail research on above companies. Above data is from BSE.




Edited by manishwithted - 21/Feb/2011 at 1:14pm

 barlaji

Appreciate your comments above.
yr understanding of the sector is definitely much better than mine.

I agree totally with you that it is not possible to value Godrej basis certain unknown / unclear factors.

If a company has got a large land bank it is definitely a positive and the company can be given a SLIGHTLY higher PE than the competitors.

Just because a company has a large land bank, though it is definitely a big positive but it doesnt mean that it will transfer the advantages to the shareholders.  Also to grow fast they will need to develop more no. of properties and sell more which should ultimately reflect in earnings. I would like to review the companies on earnings basis rather than on book value ( NAV ) basis.

As you said Godrej prop do not own land, that means the land is with other Godrej group companies. So why would the other Godrej group company transfer the advantages of low cost of land ownership to Godrej properties.  That will be unfair to the shareholders of the company holding the land. Most likely the deal will be done on or near market value or on revenue sharing basis.

As an investor, I would look at the past earnings and the expected growth in earnings to make a decision. In assessing the growth rate i would prefer to be on the safe side and cannot assume exponential growth for these companies unless i have  strong reasons for same.