Download Ganesh Housing Corporation Ltd

Ganesh Housing
Corporation Ltd
Qualitative Coverage - Strong Buy
Rating -
CMP: ` 201.75
Sector: Real Estate
Nifty: 5452.10
Risk Return Matrix
Risk
Gujarat based Ganesh Housing Corporation Limited (GHCL)
is engaged in the business of construction and real estate
development mainly in Ahmedabad. GHCL till date has
constructed around 16 million square feet (msf) of residential
space in Ahmedabad since their core focus has always been
in the residence space. Currently the company has 1.2 msf
of residential projects in channel. In the next eight-nine years
the company plans to execute 56 msf of space.
Market Data
Market Cap
: ` 6587.1 mn
52 week range
: ` 205 / ` 97
Every quarter GHCL is known to roll out one project and at
present has four projects in line i.e. Satva, Suyojan, Maple
County and Maple County-2. At the end of March 2010
quarter, the company in these projects had 1.656 msf (worth
`356.42 crore) of total saleable area under construction, out
of which, 1.224 msf (worth `245.07 crore), has already been
booked by the customers.
Bloomberg
: GHFC IN
Reuters
: GHFC.BO
BSE
: 526367
NSE
: GANESHHOUC
Avg Daily Vol. (1 year NSE)
: 54,668
No. of Shares
: 32.66 mn
Shareholding Pattern
DII
6%
As a strategic move GHCL other then residence project is
also focusing on commercial offices, retail malls, SEZ (IT &
ITES), hotels and townships. IT-SEZ ‘Million Minds’ and Golf
Township ‘Smile City’ are its two major projects in pipeline.
Yash Organiser Private Limited subsidiary company of
GHCL has its core focus on construction. It is constructing
‘GLOMAX’ the commercial shopping mall in Ahmedabad.
Investment Rationale
Others
19%
City: As of today it is clearly visible that Ahmedabad is well
placed for multi-pronged growth since it is growing
industrially, commercially, financially, infrastructurally and
culturally. The city is centrally connected to all ports in
Gujarat and is expected to be the main passage for trade,
which is expected to facilitate the growth of new high-end
manufacturing industries. Recently a business survey has
placed the city as one of the top five destinations for
investment in the country. The New International Airport is
expected to bring a lot of positivity into city’s investment
climate. In the next five years the city is expected to
generate large-scale employment through investments
worth US$15 billion, hence ensuring steady growth in real
estate.
Promoter
56%
Relative Performance
Source: Capitaline
Financial Performance (`
` Cr)
FY09
FY08
FY07
FY06
FY05
Sales
55.05
127.43
45.45
30.70
14.90
EBITDA
76.77
118.48
41.98
14.76
10.33
Adj PAT
16.79
106.06
16.57
14.47
10.54
EPS (`)
14.85
31.71
9.76
11.76
26.05
Analyst: Swapnil Suvarna
Date: August 13, 2010
Overview
Return
FII
19%
Sensex: 18167.03
[email protected]
Land Bank: The Company in its books has 662 acres of
highly developed land. The accumulated land bank spread
across the city of Ahmedabad at critical locations like SG
Road, Thaltej, Ognaj, Godhavi, Adalaj and Sola. Recently
the company added six acres of land located on SG Road.
The company is planning commercial development with a
saleable area of 6,75,000 square feet.
Strong Financials: In the financial year 2009-10 the
company posted net income of `100.57 crore and net profits
of `50.6 crore as compared to an income and profit of `89.5
crore and `49.4 crore respectively in the financial year 200809.
Ganesh Housing Corporation Ltd
Investment Rationale
Key Concerns
Strategic Alliances: An US based investment firm
Monsoon Capital has made an investment of `1,350
million in GHCL’s integrated township project named
‘Smile City’.
Single Location Focus: The Company’s entire land bank
and projects are concentrated in Ahmedabad itself. Any
negative event within the city could impact the company and
its future plan significantly.
Upcoming Mega Projects: The Company’s biggest
project till date is an integrated township project named
‘Smile City’ at Godhavi, which is only 4.5 km away from
the Ahmedabad city limits. The entire township is spread
over an area of 534 acres. This project has received an
FDI investment of `1,350 million through Monsoon
Capital and is expected to generate above `32,000
million over the period of seven-eight years. ‘Million
Minds’ an IT-ITES SEZ at SG Road in Ahmedabad is
spread over an area of 108 acres. In this project of
multiple use, 80 acres is notified for development of ITITES SEZ and the remaining 28 acres is would be
divided for other developments like residential,
commercial, retail, hospitality etc. The company may
denotify the above project and change the use of entire
108 acres as SG Road has a good potential for
residential, commercial and other developments. Godrej
Properties, which is batting heavily on Ahmedabad is
already developing township behind GHCL’s land, is a
positive to this project.
Economic slowdown: A slowdown in the economy due to
any internal or external reasons could impact the demand
and pricing of real estate.
Execution Risk: Though the management has increased its
pace of development, any delay in the execution of these
projects either through rise in operational cost or unexpected
delays would significantly impact the cash flow and the
projections of the company.
Recommendation
We see GHCL as an attractive opportunity for the long
term. Thanks to it’s huge low cost land bank and future
potential of Ahmedabad city. The company scores a 4
(out of 5) on our star matrix and has been assigned the
best risk-reward rating.
We recommend a Strong Buy on the stock.
Projects Summary
Methodology
Risk Reward Matrix: We use risk reward matrix to recommend companies that are currently a good buy. At times we may find a very good company but it may
be trading at very high price, reducing the ‘Reward’ from investing in it. And at other times we may find an average company available at deep discount,
substituting the little risk with higher Reward. We consider the companies risk, potential upside and stocks current market price among others while placing a
company in the risk reward matrix.
Star Rating: We use star matrix to highlight the inherent strength of the company. We consider the following areas when awarding Star Rating to a company.
1.
Investor Friendliness
2.
Growth (profit, sales & margins)
3.
Management Quality
4.
Historical Performance
5.
Group Financial Strength
6.
Management Aggression and Ability
7.
Management Vision
The scale if from 1 to 5 with 5 being the best.
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