Peninsula Land seen on growth track

Mumbai-based real estate developer Peninsula Land gained 5.3% on Friday against the half-a-per cent rise in the Realty Index. The stock rose after the company announced that it received Rs 275 crore as part payment of a Rs 1,100-crore sale transaction.

The stock has gained about 197% year-to-date against 69% surge in the Sensex and 59% in the ET Realty index.

Peninsula has a strong presence in upmarket south Mumbai and believes in strengthening its own geographic area rather than attempting a pan-India reach. Currently, two residential and two commercial projects are under construction with a saleable area of four million sq ft.

About 80% of these projects have been sold which will bring about revenue visibility for the next 18 months.

These projects will be funded through internal accruals and pre-sales. The company has revised the development plans for its Pune and Hyderabad projects from commercial to residential projects. This will help speed up the cash-flow turnaround, as residential properties have lower-gestation period than commercial projects.

The company’s cautious approach and an asset light model helped it beat the realty slowdown. Going ahead, the company is also looking at acquiring land in western and southern parts of the country. With average cost of land being low at Rs 175 per sq ft, its decision to sell upfront part of its commercial projects has kept it assets light.

Peninsula, which has debt on its books aggregating Rs 400 crore and a cash pile of Rs 175 crore, has also received approvals for its Rs 750 crore QIP. At 0.3 times debt-equity ratio, it is one of the least leveraged real estate companies. The company is currently valued at 13 times its trailing twelve months earnings. This makes it one of the few low P/E companies in this sector.

It reported a 53% growth in revenue for the quarter ended September 30, 2009 at Rs 168.7 crore compared to Rs 110.5 crore in the same quarter last year. It is one of the few real estate companies to have reported a year-on-year growth.

Net profit for the same period registered a 43% growth at Rs 83.1 crore compared to Rs 58 crore. The company expects to maintain this growth momentum in the forthcoming quarters.