There was a mass exodus on this stock in the month of April by Indian mutual funds. From 3.96 million shares held by mutual funds in March 2008 ... the MF holding of the stock fell to a little over 72,000 shares in April 2008. And yet, when you look at the stock ... it is currently sitting pretty at a price-earning of 11.33. The NCAV of the stock is 78 rupees per share which is not bad at all (2.25 of CMP). While LY profits were 131 crs, this year's profits (FY08) are expected to close at 180 crs.
The stock price has been beaten down from a high of Rs. 500+ to about 176 rupees per share now. I found a couple of negative reports on the stock ...
a) In Feb 2008, Goldman Sachs in their report had removed Ansal Properties from the Conviction Buy list. The reasons sited was : "We have limited visibility on when option value on its Hi-Tech City project in Greater Noida is likely to be realised. The stock could remain on the sidelines until the market gets greater confidence on the group’s execution capability. We still rate the stock Buy and our revised 12-month potential RNAV based target price of Rs367 (from Rs410), implies 48% potential upside" (here)
b) This other one by ICICI Direct is even more interesting. I couldnt find too many details on the expected dip in profits (from 216 crs in FY07 to 50 crs in FY09) but I would assume that the lack of profits is due to some really long-term projects that the company has taken over such as the SEZ development in Punjab. (here)
I am a bit confused. At Rs. 174, the stock is very tempting and unless there is an event which I have missed out, the stock's a buy. Ansals' is a known name in the construction industry (although I have heard a number of stories in the press of the company bending rules in the past, I would like to believe that the outfit has improved in time by being more professional and transparent in dealings) and a PE of 11 is quite an anomaly.
However, I am still perplexed on why would mutual funds suddenly move away from a stock in herds. 4 million to 72,000 shares in MF ... there has to be an explanation !
Wednesday, May 7, 2008
Ansal Properties and Construction Limited
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Not sure if you tracked this news piece. http://www.hinduonnet.com/2007/11/21/stories/2007112156421600.htm
Amit's link relates to the Uphaar cinema tragedy verdict. The news item says that the verdict did little for ten years of trauma that the families of the 59 victims have suffered. Under the verdict, owners of the theatre - Sushil and Gopal Ansal - were convicted under less stringent penal provisions, and face a maximum punishment of two years imprisonment.
On the day of the verdict, Ansal Properties’ shares fell 5.85% to close at Rs 252.50 on the BSE. But the verdict didnt stop the interest in the Ansal Prop. stock. Shockingly, within 1 month of the verdict ... the stock had made gains of 65%.
The Association of the Victims of Uphaar Tragedy (AVUT) maintains a blog : http://rememberuphaar.wordpress.com/
A P/E of 11.33 is not really very low considering the valuations of other real estate companies (a much faster-growing prajay engineers is available for a P/E of just 4!)..plus promoters do not have a good history..
Hi Amit,
Checked up on existing PE of other companies. You are right .. there are a few more companies which have a lower PE as compared to Ansals. 1-2 of them have a better NCAV aswell.
I am still surprised at this MF exodus. In Oct/Nov/Dec, MFs were lapping more shares even as Ansals was valued at 450-500 rupees a share. The dip of 65% is very prominent. Also, the results have been better.
I suspect - the future cash flows are not stable .. that may be a reason. Being the construction industry, how should it work? You build a house in year 1, so your cash flow is say, -10. In year 2, you sell it for 20. So your cash flow is +20. You reinvest the 10 bucks in year 3 (cash flow = 0) and get another 20 bucks in year 4. Notice the cash movements .. -10, +20, 0, +20.
Would u hv any insights on these type of companies?
Warm Regards
Shankar
Hi Shankar,
I dont really have much idea about this sector..although I have a small investment in Prajay (done purely on the basis P/E, growth parameters..what amazes me is why is the stock not going anywhere despite being owned by almost every major FII?!).
I dont think conventional methods of valuations will be helpful for this sector. Have seen industry experts talk about land bank (but am completely clueless about its method of measurement), order book and the like.
I guess the major reason for good performance of real estate stocks in the last 2 years is on the back of land acquired cheaply (in 2001-03). But given that property prices have risen significantly since then, future gains may not be as high. Probably, that is what is factored into the valuations.
Given the transparency of the sector, my advice would be to consider (if u have to) the big boys (dlf, unitech, hdil etc).
regards,
amit
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