Oberoi Realty’s consolidated revenues grew by 17% q-o-q to R217 crore aided by better pre-sales from Exquisite project. Income from rental properties grew by 7% y-o-y to R6,870 lakh driven by hospitality revenues. Operationally, Q3 was strong with 200% q-o-q and ~400% y-o-y jump in pre-sales aided by new launch, Prisma (JVLR, Mumbai).
FY15e earnings cut by 31% and FY16e earnings up 15%, factoring in revenue booking from Esquire (Mumbai) in H1FY16. Oberoi scores high on operational transparency and disclosures, a key differentiator in the sector. Also, a conservative land acquisition strategy has helped Oberoi remain less levered. With R2,000 crore of revenue recognition pending and a growing number of projects (Esquire and Worli) reaching revenue recognition threshold, we expect a strong 44% CAGR in earnings over FY14-17e. Though FY14-H1FY15 was subdued, H2FY15-FY16 would be stronger given likely new launches , improvement in cash flow and strong earnings momentum. Reiterate outperformer, with a target price of R340.
During the quarter it closed its first leasing transaction (~50,000sq ft) for its Commerz II facility, which is almost ready for fit-outs. Once fully leased out, the property could fetch R100 crore of rental income annually. Management expects leasing activity to pick up. Unrecognized revenues were flat q-o-q to R2,000 crore as of December 2014.
