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Note on Brigade Enterprises 8 July 2008 Source: www.keynoteindia.net
Highlights - Investor sentiment for the real estate sector (post Sub Prime Mortgage crisis) has been negative. The sector has also been impacted by negative news flows, including consistent increase in inflation and interest rates and the slowing economic growth. The BSE realty index recorded a fall of 64.3% since January 1, 2008, while BEL stock fell by 72.4%. The 69% discount to NAV, and low financial leverage vis-?-vis other realty players make it attractive at current levels. - Strengths of the company: strong management capabilities (executed 67 projects of 6.9mn sqft of land), well-entrenched board of directors which comprises professionals as non-executive directors from various fields related to real estate sector. - Negatives include small size of land bank vis-?-vis other listed players, volume decline of 20% in Bangalore, increase in construction costs and focus on Bangalore region (73% of total land bank). We have serious reservations about the promoters’ remuneration. For FY08, the two main promoters were paid an aggregate remuneration of Rs15.15Cr, or 12% of PAT before such remuneration. - Strategy: In our view, the stock has a limited downside (trades at discount of 69% to NAV) from the current levels. We see strong visibility on revenue growth. However, we also believe that the stock price performance will be in line with the realty sector performance. Positive triggers can only come from economy which includes inflation under control and declining interest rate scenario. We believe value investors may consider this stock from a medium term perspective. To read more download full version of Brigade Enterprises Note |
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