[informed-investor] Credit Suisse Puts A SELL on DLF-Target Rs 167

 

High exposure to NCR market and gearing are a key concern.

DLF continues to derive more than 60% of its sales (volume and value) from the

investor-driven NCR market, which is a key risk in the current environment.

NCR markets currently have among the highest inventory overhang among

major metros, suggesting a potential slowdown of sales and price correction,

which increases risk to cash flows. Further, DLF's key focus in FY12 is on

plotted sales in the NCR region, where investors are key.

 

 

Non-improvement in cash earnings remains a worry. The increase in

receivables (billed and unbilled), totalling Rs95 bn have contributed nearly

25% to core property sales (ex-DAL and rent/maintenance income) between

FY08 and FY11. Further, we do not anticipate a rapid improvement in the

unbilled receivables (almost 65% of total receivables) as almost Rs33 bn

relates to an FY11 FSI increase in Gurgaon, where incremental construction

progress on new FSI is slow.

 

 

Defensive rent portfolio appears weak. The pending litigation on

CyberCity and Silokhera SEZ is likely to impact fresh leasing progress and

raises risk of potential tenant churn. Our channel checks and documents

from SEZ Board suggest some of DLF's tenants, such as Accenture, are

contemplating a move to other properties, which can raise vacancies over

near-term.

 

 

Gearing to decline, however, near-term earnings at risk. We assume

coverage of DLF with an UNDEPERFORM rating and a target price of

Rs167 (from Rs210) (downside of 31%) based on 1x FY13E P/B (FY13E

ROE of 6.1%). While DLF can meet near-term debt obligations through asset

sales, we believe near-term earnings remain at risk. We would wait for more

comfort in cash flow improvement before turning positive in the current

environment. Key risks to our target price include faster monetisation of its

non-core assets, higher volume growth, and resolution to pending litigations

in some of its assets.

 

 

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

--
Invite friends, colleagues and associates to join the Informed Investor mailing list
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
STOCKS DISCUSSED ON THIS LIST ARE ONLY FOR EDUCATIONAL PURPOSES AND ARE NOT RECOMMENDED INVESTMENTS. PLEASE DO YOUR OWN RESEARCH OR CONSULT A PROFESSIONAL ADVISER BEFORE INVESTING.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
You are subscribed to the "informed investor" mailing list #
Our email id: informed-investor@googlegroups.com #
Our web address: http://groups.google.com/group/informed-investor?hl=en
To unsubscribe: informed-investor-unsubscribe@googlegroups.com #