Stock Review: DB Realty

The Mumbai-based realty developer, DB Realty, is seen as a frontrunner when it comes to revival of real estate stocks. After getting battered immediately after its listing at `468 on February 24, the share price plummeted to `355, but has now recovered to settle at `430 levels. It still remains below the listing price. However, acquisition plans of around 44 million square feet land in and around Mumbai has boosted sentiment. These will be through the joint development or joint venture route and will mostly involve redevelopment and rehabilitation. The initial cost of these acquisitions is expected to be around `3,300 crore. Analysts estimate the company can manage it with its strong cash position. The company's net worth is almost `3,000 crore.

It has a cash balance of around `660 crore, while sales are expected to bring another `1,000 crore, say analysts at Enam Securities.

The gross debt is expected to increase to `1,470 crore from `580 crore. Analysts at Antique Securities expect the company to have anet debt of around `930 crore in the year ahead. The interest cost will also rise, but the growth in net earnings will be stronger, reckon analysts. The June quarter saw net profit double to 61.8 crore as against `25.2 crore a year ago.

Till August 24, the company had sold around 1.12 million square feet property at around `566 crore. This should give traction to revenues and earnings, despite an increased interest cost. The price to earnings for FY10, at around 42.3 times, is expected to rationalise in the current financial year at around 15 times. This would be a solace for investors, especially those who bought shares in the initial public offering. Steady execution and visibility in earnings could be added bonuses.

A series of acquisitions and projects will prop up earnings to normalise valuation parameters