Stock Review: JP Associates

This company is implementing 165 kilometer six-lane expressway. But along with that they have the 6,175 acres of land available for development which translates maybe 400 million of sq ft. Now, two news are coming in this stock are that the company is ahead of the completion of this expressway, the deadline for completion is April 2013. But part of this expressway will get commissioned maybe in the month of April 2011. Post that, maybe by end of 2011, maybe by December 2011, we will be seeing the complete starting of this 165 kilometer of expressway patch because even the F1 track is coming in that area which is also likely to get completed by October '11. So, this is one trigger.

Second, we have seen company prepaying part of the debt, which they have availed for the completion of this loan, i.e. largely because of the sell of the premises. Presently company is only developing the first pocket which they are holding at Greater Noida of about 1,200 acres. For FY11, the company is likely to make a net profit of about Rs 2,000 crore which will translate into EPS of about Rs 15. But since that is not the trigger here, the amount which they are mobilising by this development of properties getting used for repayment of the loan, so maybe because company is entitled for 80I income tax benefit, so all their profits are tax free for next ten years. Company maybe next two-three years will try to accelerate the process of development of this land and then mobilise a huge chunk of money. I won't be surprised to see a mobilisation of close to about Rs 10,000 crore as cash flow from development of property by the company in next three-four years because the entire sale proceed is not getting booked into accounts because of the project completion method.

So, taking all this into consideration the completion of the expressway ahead of schedule with concession period of 36 years and the development of the real estate, which they have acquired again at the acquisition cost by the authority and the entire land is in their possession, the entire land is 98-99% paid. So, taking all this into consideration, this is a very excellent play on infrastructure as well as on the realty. Again realty cost, they have not acquired the land at a very high price and share is now available maybe 30% cheaper than the issue price which the company has made last year. So, taking this into account, Think that share is capable to give a return of about 40-50% in 2011 from the current levels.