First Call Research calls a ‘Buy’ on Future Capital Holdings
CMP: Rs. 152 Target Rs. 173
Future Capital is a provider of financial services across consumer and wholesale businesses, with aspirations to grow into a significant financial conglomerate. During the quarter, the robust growth of Net Profit is increased by 21.43% to Rs. 266.84 million. Future Capital Holdings Ltd has assigned ‘CARE AA-’ rating to the Company’s NCD programmed for an enhanced limit of Rs. 1050 Crore. Future Capital Holdings Ltd has recommended dividend of Rs. 1.50/- per equity share of Rs. 10/- each (15%), Net Sales and PAT of the company are expected to grow at a CAGR of 42% and 55% over 2011 to 2014E respectively.
Investment Highlights: Q4 FY12 Results Update: Future Capital Holdings reported a phenomenal rise in consolidated net profit for the quarter ended March 2012. During the quarter, the profit of the company rose 21.43% to Rs 266.84 million from Rs 219.74 million in the same quarter previous year. Net sales for the quarter surged 55.88% to Rs.2258.58 million from Rs.1448.95 million as compared to same quarter last year. Total income surged by 31.30% to Rs 2262.01 million for the quarter ended. The EPS of the company is stood at Rs.4.14 for the quarter ended March 2012.
Recommended Dividend: Future Capital Holdings Ltd has recommended dividend of Rs. 1.50/- per equity share of Rs. 10/- each (15%), to the equity shareholders of the Company for the Financial Year 2011-12. As per recommendation of the Compensation and Nomination Committee, the Company has approved the introduction of a new Employee Stock Option Scheme - 2012 for grant of 25,00,000 Stock options representing equal number of equity shares of face value Rs. 10/- each of the Company to the Eligible Employees, subject to shareholder’s approval.
Open Offer: Kotak Mahindra Capital Company Ltd has acquired of upto 17,788,266 Equity Shares of Rs 10/- each at a price of Rs 162/- (Rupees One Hundred and Sixty Two only) per fully paid shares of the Future Capital Holdings Ltd (“Target Company”) constituting 26% of the diluted voting share capital of the Target Company by Coverdell Investment Ltd (“Acquirer”) along with Warburg Pincus Private Equity XI, L.P., Warburg Pincus XI Partners, L.P., Warburg Pincus Private Equity Xl-B, L.P, WP XI Partners, L.P. and Warburg Pincus Private Equity Xl-C, L.P.
Outlook and Conclusion: At the current market price of Rs.153.40, the stock is trading at 6.85 x FY13E and 5.37 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.22.39 and Rs.28.59 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 42% and 55% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 1.46 x for FY13E and 1.24 x for FY14E. Price to Book Value of the stock is expected to be at 1.01 x and 0.85 x respectively for FY13E and FY14E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs. 173.00 for Medium to Long term investment.
Prabhudas Lilladher calls a ‘Buy’ on Sobha Developers
CMP: Rs. 332 Target Rs. 360
Strong sales performance continues: Although launches were subdued for the quarter with only a small villa launch in Coimbatore, sales momentum continued at the company’s previously launched projects, thereby, ending the quarter at 0.83m sq.ft, representing 25% YoY growth and a marginal sequential decline.
Sales from the Gurgaon project witnessed a strong sequential increase of 24%. Realizations too remained firm at Rs5,737, an increase of 26% & 7% on a YoY and QoQ basis, respectively, resulting in total sales of Rs4.79bn. The company’s sales guidance for FY13 stands at Rs20bn as against sales of Rs17bn clocked in for FY12.
Upward trajectory to continue: Sobha has a launch visibility of ~5m sq.ft in the near term, with the Dairy Circle property in Bengaluru and a Thrissur launch being next in queue. Besides, the company has been releasing additional area at its previously launched projects, thereby, providing momentum to sales. We expect sales growth of 14% in volume terms to 3.75m sq.ft.
Deleveraging in process: On account of strong launches and monetization of old sales, coupled with a steady execution, the company has brought its net debt down from Rs12.1bn in FY11 to Rs11.4bn in FY12. We further expect net debt to reduce to Rs8.9bn FY13, resulting in a DER of 0.56, down from 0.67 in FY11.
Valuations: Sobha’s NAV stands at Rs39.8bn, translating to Rs406/ share. We attribute a 20% discount to this to arrive at the value of the real estate business. To this, we are adding the value of the contract business which is calculated at Rs35/share which translates to a target price of Rs 360. We maintain ‘Accumulate’ on the stock.