Sell Sunteck Realty for target Rs 490: Citigroup
Citigroup initiates coverage of Sunteck Realty with a `Sell’ rating and a target price of Rs 490.
By ET Bureau |
RESEARCH: CITIGROUP
RATING: SELL
CMP: RS 547
Citigroup initiates coverage of Sunteck Realty with a `Sell’ rating and a target price of Rs 490. However, following reduction in ownership for a key BKC (Bandra Kurla Complex) project, and more visibility yet to be seen on pre-sales and execution, Citigroup feels valuations leave little margin for error. Super luxury positioning with apartment sizes of 7,000+ sq ft, elite buyers being CEOs/celebrities, and prime location of BKC make this a unique offering.
With 23 apartments (of the 79) presold , Shahpoorji Pallonji’s construction progressing well, and enquiries picking up, the management expects to sell about five at about Rs 39,000/sq ft by March 10. This flagship project will set a benchmark for other developments. With pre-sales /new launches still to pick-up meaningfully, and large pending land-dues (Rs 420 crore) - of which about Rs 212 crore is due over the next 12 months for its key BKC projects , the cash flow timing is critical, and further land acquisition would need more capital.
Given its limited track record, and with the stock trading at about 17% discount to NAV, Citigroup believe Sunteck’s valuations ignore execution risks. Further, any regulatory hurdles/penalties resulting from overdue land payments for a part of the BKC property would be a sentiment dampener. That said, faster-than-expected pre-sales for its BKC projects and new land additions in South Mumbai at nominal land costs, could pose potential l upside risks.
RATING: SELL
CMP: RS 547
Citigroup initiates coverage of Sunteck Realty with a `Sell’ rating and a target price of Rs 490. However, following reduction in ownership for a key BKC (Bandra Kurla Complex) project, and more visibility yet to be seen on pre-sales and execution, Citigroup feels valuations leave little margin for error. Super luxury positioning with apartment sizes of 7,000+ sq ft, elite buyers being CEOs/celebrities, and prime location of BKC make this a unique offering.
With 23 apartments (of the 79) presold , Shahpoorji Pallonji’s construction progressing well, and enquiries picking up, the management expects to sell about five at about Rs 39,000/sq ft by March 10. This flagship project will set a benchmark for other developments. With pre-sales /new launches still to pick-up meaningfully, and large pending land-dues (Rs 420 crore) - of which about Rs 212 crore is due over the next 12 months for its key BKC projects , the cash flow timing is critical, and further land acquisition would need more capital.
Given its limited track record, and with the stock trading at about 17% discount to NAV, Citigroup believe Sunteck’s valuations ignore execution risks. Further, any regulatory hurdles/penalties resulting from overdue land payments for a part of the BKC property would be a sentiment dampener. That said, faster-than-expected pre-sales for its BKC projects and new land additions in South Mumbai at nominal land costs, could pose potential l upside risks.
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