Monday, August 4, 2008

Investment Pick: Kamanwala Housing

Investment Analyst, Ashish Chugh is of the view that Kamanwala Housing is looking undervalued.
Chugh told CNBC-TV18, "Kamanwala Housing Construction is a real estate company located in Bombay; it is doing most of the projects in Bombay only. This company was not doing well till about the year 2006. The company saw a turnaround in performance in financial year 2006-07, wherein the revenues of the company grew six fold from about Rs 12 crore to Rs 80 crore to Rs 85 crore and the PAT increased from about Rs 50 lakh to about Rs 12.5 crore. That was the starting point for this company and from there on, this company has maintained its performance and has given good performance QoQ."
He further added, "This Company is doing projects mainly in Bombay. Some of the projects which it is doing in Bombay are, one is the commercial project called Pinnacle corporate park which it is doing at BKC ( Bandra Kurla Complex), this is about 75,000 sq. ft and besides that, this company is doing a residential project in Malad (West) having a total saleable area of about 4 lakh sq. ft and in the first phase, it is doing about 2 lakh sq ft. It is also doing a residential project in Santacruz (West) which is about 60,000 sq. ft. It has also bought a building called Vallabh Terraces in Opera House in Bombay and it is doing re-development of this building and will probably sell this building after the re-development. It is also doing a commercial and residential project in Versova in Bombay and also developing the famous Filmistan Studio into a residential cum commercial project.”
“It has about 8-9 lakh sq. ft of area from Bombay alone and besides that the company has bought land in New Bombay also. It has bought about 10,000 meters of land at a total consideration of about Rs 15 crore. It is going to develop a residential and commercial project there also. To de risk the business model, it has diversified to Hyderabad also where in it has taken about 20% stake in a project which is spread over an area of about 35 acres."
"For FY08, this company has achieved the sales of Rs 96 crore. The PAT is of about Rs 24.5 crore. It’s got a small equity of about Rs 6.4 crore which translates into an EPS of Rs 40 for FY07-08. In the first quarter also, the performance has been maintained there. The topline is increased about 92% to about Rs 33 crore and the bottom-line is up by about 37% to Rs 4.25 crore. You may say that when the real estate market is bad and most analysts are predicting that the real estate prices might correct in Bombay. Why this stock, the reason this is trading at very reasonable valuations, it is going at a PE ratio of less than 2.5."
"The promoters have been increasing their stake for the past few quarters; they have increased their stake from about 40% to about 45% through the preferential route. The one which gives about confidence of sustainability of earnings is that the company has recently declared a bonus in 1:1 ratio. Declaring a bonus in an industry which most people perceive not doing well that only gives and talks about the confidence which the promoters have when talking about the sustainability of the earnings in future, so this stock is trading at a reasonable valuation and it is available cum bonus and dividend which is of 25%. Also, the promoters increasing their stake at a market cap of Rs 60 crore. This stock looks undervalued."



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