maverick
13-12-2007, 04:56 AM
Lok Housing-Out Of The Blues
CMP Rs 350, Market Cap Rs14.71bn, Fully diluted Equity Rs 420m
What a difference a change in perception about Reality stocks can make to the valuation of companies is apparent. After hitting meteoric highs in 2006, the Lok Housing stock fell to lows of Rs 150, and now with the merger of Lok Shelters and a placement of Equity with Bennett Coleman and Company at Rs 196, the stock has more than doubled. However, there are more changes in the stock than a mere perception.
First, the repeal of ULCRA in Maharashtra has the potential to unlock previously unavailable land for Real Estate Construction, Second, the reduction in Stamp Duty rates on transfers will make Property transactions more transparent and be carried out at true values. In fact there are valid reasons to make Real Estate transactions totally free of Stamp Duty, this will at one stroke kill the Cash element in the Real Estate trade and bring all transactions being recorded at market prices in the Revenue records..but that however is a different and political ball game altogether.
The Basics
Incorporated in 1986, Lok Housing and Constructions Limited is the flagship company of the Mumbai based Lok Group of Companies.
The company has 560 acres of land bank in the Mumbai city and as in the process of acquiring another 500 acres of land in the next 3-4 months.
The major land bank is located at Chembur (175 acres), Vasai (136 acres), Banagalore at Whitefilelds Road (40 acres, Pune (200 acres), Kalyan (78 acres), Ambarnath (74 acres) and Turbhe (125 acres). Apart from this, it also has a 4 lacs sq ft of premium project at Khar (West) and small pieces of land in Andheri (West) and Mulund.
At present the ongoing projects of the company are in Kalyan, Ambarnath and Khar (West). The company is also in the process to start its major projects in the next 3-4 months.
Lok Housing's Khar (West) project will have 4 lacs sq ft of development (2 lacs-residential) and (2 lacs sq ft of commercial). This project will have a turnover of Rs10bn while the expected PAT is around Rs 5bn.The revenue from this project will start coming from he last quarter of FY08.
The company has purchased most of its land more than five years back and hence it will benefit from the recent increase in the property prices.
The market value of the land bank is around Rs22bn. As per the management the sales value of the developed properties will be Rs200bn.
The Blue Sky Opportunity:
The promoter of Lok Housing, Mr Lalit Gandhi has been instrumental in bringing the plan of redevelopment of the old structures of South Mumbai-about 5 kms from Nariman Point). The entire blueprint is worked out by an association called the remaking of Mumbai. Lok Housing holds 49% stake in the commercial arm of this association alongwith various local authorities as shareholders.
This is a 210 acre super premium project in South Mumbai and if commercialised will have a sale value of Rs 550 bn as per the management. The management is confident of getting a major part of this project in Lok Housing and the initial part of the project will commence in the next 4-6 months.
Conclusion
The current market cap of Rs14.7 bn does not capture the value of the existing land bank and if a part of the South Mumbai redevelopment project is allocated to the company, it will offer a major upside to the scrip.
CMP Rs 350, Market Cap Rs14.71bn, Fully diluted Equity Rs 420m
What a difference a change in perception about Reality stocks can make to the valuation of companies is apparent. After hitting meteoric highs in 2006, the Lok Housing stock fell to lows of Rs 150, and now with the merger of Lok Shelters and a placement of Equity with Bennett Coleman and Company at Rs 196, the stock has more than doubled. However, there are more changes in the stock than a mere perception.
First, the repeal of ULCRA in Maharashtra has the potential to unlock previously unavailable land for Real Estate Construction, Second, the reduction in Stamp Duty rates on transfers will make Property transactions more transparent and be carried out at true values. In fact there are valid reasons to make Real Estate transactions totally free of Stamp Duty, this will at one stroke kill the Cash element in the Real Estate trade and bring all transactions being recorded at market prices in the Revenue records..but that however is a different and political ball game altogether.
The Basics
Incorporated in 1986, Lok Housing and Constructions Limited is the flagship company of the Mumbai based Lok Group of Companies.
The company has 560 acres of land bank in the Mumbai city and as in the process of acquiring another 500 acres of land in the next 3-4 months.
The major land bank is located at Chembur (175 acres), Vasai (136 acres), Banagalore at Whitefilelds Road (40 acres, Pune (200 acres), Kalyan (78 acres), Ambarnath (74 acres) and Turbhe (125 acres). Apart from this, it also has a 4 lacs sq ft of premium project at Khar (West) and small pieces of land in Andheri (West) and Mulund.
At present the ongoing projects of the company are in Kalyan, Ambarnath and Khar (West). The company is also in the process to start its major projects in the next 3-4 months.
Lok Housing's Khar (West) project will have 4 lacs sq ft of development (2 lacs-residential) and (2 lacs sq ft of commercial). This project will have a turnover of Rs10bn while the expected PAT is around Rs 5bn.The revenue from this project will start coming from he last quarter of FY08.
The company has purchased most of its land more than five years back and hence it will benefit from the recent increase in the property prices.
The market value of the land bank is around Rs22bn. As per the management the sales value of the developed properties will be Rs200bn.
The Blue Sky Opportunity:
The promoter of Lok Housing, Mr Lalit Gandhi has been instrumental in bringing the plan of redevelopment of the old structures of South Mumbai-about 5 kms from Nariman Point). The entire blueprint is worked out by an association called the remaking of Mumbai. Lok Housing holds 49% stake in the commercial arm of this association alongwith various local authorities as shareholders.
This is a 210 acre super premium project in South Mumbai and if commercialised will have a sale value of Rs 550 bn as per the management. The management is confident of getting a major part of this project in Lok Housing and the initial part of the project will commence in the next 4-6 months.
Conclusion
The current market cap of Rs14.7 bn does not capture the value of the existing land bank and if a part of the South Mumbai redevelopment project is allocated to the company, it will offer a major upside to the scrip.