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    Atlanta infra report_june 18 Atlanta infra report_june 18 Document Transcript

    • C O M P A N Y U P D A T E India CMP 18 June 2012 Atlanta Limited Rs 58.2 Sector: Infrastructure New Roads to Success ...BSE Code ALTA.IN NSE Code ATLANTA Atlanta ended FY12 with order book in excess of RsCMP (Jun 18) Rs 58.2 52W H/L Rs 91/47 24bn which is over 4x FY13e revenues, set to put theNifty 5,064 Sensex 16,706Equity Cap (m) Rs 188 Face Value Rs 2 company on a new growth trajectory. Though theShares (m) 81.5 Free Float 26.35% company reported 31% decline in revenues in FY12Market Cap Rs 4,739 Avg Vol 265,401(m) (weekly) and lower EBITDA margin at 22.3%, with 3 new project wins in FY12, and commencement of second Shareholding Pattern (March 31, 2012) BOT project, Atlanta is set to achieve scale in its Public 10.58% roads business from FY13 onwards. Bodies 3 new road BOTs worth Rs 27bn won in F12 are key Corporat 12.79% growth drivers Domestic Institutions Company won 3 BOTs in FY12 – 1) Rs 12bn project in Bihar; 2) 2.98% Promoter Rs 2bn project in Punjab and 3) Rs 13.2bn NHAI project in UP 73.65% (49% stake, 51% with JV partner Essar Projects). These 3 projects collectively contribute over 70% to the EPC order book, giving strong visibility to the EPC business also. The infra EPC Price Performance (Last 6 months) order book is executable by FY15. Atlanta Nifty Two operational BOTs, road business set for further growth with improved cash flows 75 70 65 During FY12 Altanta has started collecting toll on its second BOT 60 project: the Nagpur-Kondhali BOT for NHAI. This adds to the 55 50 Mumbra bypass BOT where it has been collecting toll since FY08. 45 The projected cash flows from these 2 projects in FY13 and FY14 40 is Rs 783mn and Rs 941mn, respectively. With more bids likely 19-Dec-11 19-Jan-12 19-Feb-12 19-Mar-12 19-Apr-12 19-May-12 with Essar, and ability to bid for Rs 10bn projects on its own, road portfolio could grow further in the coming years.Valuation Rs Details We value all 5 BOT projects on Real estate would continue to be value accretive projected traffic growth rates. EPC isBase Case 113.2 valued at historical average of 5x Atlanta has prudently invested in land parcels near the BOT EV/EBITDA. Real estate project at projects sites, with plans to develop and monetise it post realization of Rs 4,670 per sq ft. development of infrastructure. A large residential project, Atlanta Revenue growth 10% more than the base assumption. Construction valued Enclave, near its Mumbra project, has the potential to generateBull Case 142.3 at 20% premium to average (6x). Rs 2.2-2.25bn in revenues. Since the cost of land has been very Revenue growth 10% less than the nominal, the project is expected to contribute significantly to the base assumption. Construction valued profitability of the company.Bear Case 86.1 at 20% discount to average (4x). We have revised our fair value target from Rs 134 to FY11 FY12 FY13E FY14E Rs 113 per share, due to slower growth expected inRevenue (Rs mn) 2,841.5 1,942.2 5,575.8 7,791.0 the EPC business during FY13 and FY14.EBITDA (Rs mn) 905.2 433.8 1,671.1 2,460.8 Despite challenges in FY12, Atlanta stock hasPAT (Rs mn) 439.9 (75.9) 351.0 980.3 remains attractive. The company is set to tie-upEBITDA Margin 31.9% 22.3% 30.0% 31.6% financing for its 3 new BOT projects over the next 2PAT Margin 15.5% -3.9% 6.3% 12.6%ROAE 14.9% -2.4% 10.9% 25.2% months. With portfolio of 5 BOT projects, supportingROACE 11.0% 3.5% 11.1% 13.2% EPC business, and low risk real estate projects, thereP/E 11.4 -66.2 14.3 5.1 is considerable value in the Atlanta stock.Price/Book 1.6 1.6 1.5 1.1 Even a bear case valuation (considering lower trafficEV/Net Sales 3.1 4.6 1.6 1.1 growth) gives a target price of Rs 86.1, suggestingEV/EBITDA 9.8 20.5 5.3 3.6 over 48% upside from the current market price.D/E 1.4 2.2 2.9 3.0Source: Company data, Four-S Research Four-s reports are available on BLOOMBERG, Reuters, Thomson Publishers and Market Publishers
    • Company Report: Atlanta Limited June „12 Performance Update Order books up ~3x in FY12 Ends the year with order book of Rs 24.65bnRobust order Atlanta ended the year 2011-12 with a strong increase in order book. Asbook of Rs on 31 March 2012, its order book was Rs 24.65bn; the corresponding25bn gives figure was Rs 8bn on 31 March 2011. The EPC order book stood Rsearning 22.41bn and real estate order book stood Rs 224mn. This is around 4.4xvisibility FY13e revenue. Driven by 3 BOT project wins during the yearStrong captive The increase in order book was driven by 3 major road BOT projectsorder book wins in FY12 - 1) Rs 12bn project in Bihar; 2) Rs 2bn project in Punjablends visibility and 3) Rs 13.2bn NHAI project in UP (49% stake, 51% with JV partnerto the EPC Essar Projects). The EPC for all three will be done by Atlanta. These 3business projects contribute Rs 17.5bn (71%) to the order book. In house projects not only provide visibility, but better payment flows and resource mobilisation. For the Bihar and Punjab projects, the company expects to achieve financial closure by July 15 and expected appointment date is August 01. For the UP project, financial closure is expected by June end. Commenced toll collection on second BOT projectCommenced During F12, the company also commissioned its second road BOToperations of project in FY12 – the Nagpur-Kondhalli project for NHAI. This project issecond toll a part of NH6 which forms major link in the road network connectingproject Hajira in Gujarat and Kolkata in West Bengal. A sizeable amount of inter-state and intra-state traffic passes through this route and there is no convenient alternative route to this stretch. The concession period for the project is 20 years. The toll collection commenced from September 2011 and the total toll collection for FY12 was Rs 140mn. Upside potential from ongoing Mumbra projectMumbra Atlanta has made a representation for extending the concession periodconcession for the Mumbra Bypass project from 2024 to 2044. It won an award inperiod could case of arbitration with Chief Engineer, PWD, Maharashtra due to whichextend from the concession period is expected to extend up to 2044. This is likely to2024 to 2044 provide huge upside to the company. Other projects progress on track In its real estate business, construction has started in the project Atlanta Enclave, in Sheelphata, Mumbai. In the first phase, the company is building 2 towers which is expected to be completed by December 2014. First tower has already been sold during the pre launch and the second tower is also half sold. For the entertainment city project near Surat, Atlanta has appointedFour-S Research 2
    • Company Report: Atlanta Limited June „12 master planning consultant and land acquisition is in progress. FY12 performance impacted by delay in financial tie- up During the year, total revenues on a standalone basis declined 39% YoY from Rs 2,785mn to Rs 1,702mn. This was due to delay in financial tie- up for the Bihar project due to which Atlanta realized EPC revenues of Rs 337mn as against the estimated Rs 1,500mn. Financial tie up for the aforementioned is now expected to be done by end June 2012, so revenue in F13 would reflect that. P&L Q4FY11 Q4 FY12 FY11 FY12 YoY Operating Income 869 335 2,785 1,702 -39% Raw Material costs 495 137 1,591 795 -50% Employee Cost 23 21 62 69 12% Other Expenditure 15 368 120 499 317% EBITDA 336 (191) 1,012 340 -66% EBITDA Margin% 39% - 36% 20% - Depreciation 65 (15) 140 94 -33% EBIT 271 (176) 873 247 -72% Other Income 44 67 61 247 302% Interest 104 127 286 432 51% PBT 212 (236) 649 62 -91% Add: Prior Period Adjustments - 156 - 156 - Tax 78 (48) 196 29 -85% PAT from ordinary activities 134 (32) 453 189 -58% Extraordinary items (37) - - - PAT 171 (32) 453 189 -58% PAT Margin (%) 20% - 16% 11% *Standalone results Rs Mn Other expenditure increased from Rs 120mn in FY11 to Rs 499mn in FY‟12. This was due to provision of Rs 327mn in the fourth quarter, which resulted in a loss in Q4. The provision was as per a ruling in an arbitration process involving a NHAI project in Orissa. Thus there has been a decline in EBITDA Margin – from 36% in FY11 to 20% in FY12. There has been prior period adjustment relating to amortization expense. At Mumbra Bypass, till 2011, amortization was charged on available concession period, thus every year same amount of amortization was charged. Now as per revised Schedule IV of Companies Act 1956, amortization has to be charged based on estimated revenue. Thus for FY12 differential amortization amount of Rs 156m has been added back to Profit. P&L FY11 FY12 YoY Operating Income 2,841.5 1,942.2 -31.6% Raw Material costs 1,608.2 908.2 -43.5% Employee Cost 62.9 74.5 18.5% Other Expenditure 123.2 525.7 326.7% EBITDA 1,047.2 433.8 -58.6% EBITDA Margin% 36.9% 22.3%Four-S Research 3
    • Company Report: Atlanta Limited June „12 Depreciation 141.7 131.2 -7.4% EBIT 905.5 302.6 -66.6% Interest 285.5 539.1 88.8% Other Income 25.9 36.5 41.0% PBT 645.9 (200.0) -131.0% Add: Prior period adjustments - 156.4 Tax 206.0 32.5 -84.2% PAT 440.0 (76.2) -117.3% Share of Profit/ (Loss) to Minority Interest (0.0) (0.2) 502.6% PAT 440.0 (75.9) -117.3% PAT Margin % 15.5% - *Consolidated results Rs Mn Projections and Price Target We revise the revenue and PAT for FY13 and 14 We have revised our estimates for Atlanta in FY13 and FY14 due to a likelihood that the EPC turnover buildup from the orderbook in hand could be slower than earlier expected. FY13E FY14E Revised Previous Var(%) Revised Previous Var(%) Revenue (Rs Mn) 5,575.8 6,023.2 -7.4% 7,791.0 11,384.0 -31.6% EBITDA (Rs Mn) 1,671.1 1,998.6 -16.4% 2,460.8 3,862.8 -36.3% PAT (Rs Mn) 351.0 687.4 -48.9% 980.3 1,939.4 -49.5% EBITDA Margin (%) 30.0% 33.2% 31.6% 33.9% PAT Margin (%) 6.3% 11.4% 12.6% 17.0% Strong revenue and profit growth ahead The current order book has to be executed over FY13-15, giving strong visibility to growth in the EPC business during this period. Based on this, we expect revenues from construction business to grow over ~5x in 2 years. Revenue from construction is expected to grow from around Rs 1.3bn in FY12, to over Rs 6.6bn in FY14. BOT toll income is also expected to approximately double over the same period as the company has started collecting toll from Nagpur-Kondhali project in FY12 in addition to toll from Mumbra Bypass project. Atlanta‟s residential project on Mumbra land would also contribute to the top line in FY13 and FY14 with Rs 225mn and Rs 300mn of revenues booked, respectively. Altanta‟s earnings are likely to show strong growth as well. Net profit of the consolidated business is likely to cross Rs 980mn level in FY14, giving PAT margin of 12.6%. Valuation and Price Target Fair Value of Rs 113Four-S Research 4
    • Company Report: Atlanta Limited June „12 We have revised the fair value at Rs 113 per share, down from our earlier estimate of Rs 134 per share, due to lower than expected growth in the EPC business in FY12. We have valued the company using the sum-of-parts method. The value can be broadly divided into three parts: Rs 106 from the BOT portfolio, Rs 3 from the construction business of the standalone company and Rs 4 from the wholly owned real estate project “Atlanta Enclave”. In these projections, we have not built any value for the planned mega project: the Entertainment City, near Surat, Gujarat. The project is in fairly early stages, and several details of the project are yet to emerge. Sensitivity analysis suggests low downside risk We tried various scenarios which could negatively impact the share price – like lower traffic growth, higher cost of debt, etc. Among the various variables taken above, lower traffic growth has the maximum impact. With 10% less revenue growth than the base case for each of the BOT projects, though the NPV of BOT projects go down by ~17%, there is still value in the business with fair value of Rs 86.1, suggesting low downside risk. A significant long term upside potential is possible from new tourism infra project, which may start reflecting in the stock price once the company gets land from the state government and environment clearance is in place.Four-S Research 5
    • Company Report: Atlanta Limited June „12 Financial AnnexureProfit & Loss Statement - Consolidated FY10 FY11 FY12 FY13E FY14EContract Income 1,648.1 2,490.7 1,305.9 4,567.4 6,550.1Toll Income 373.6 264.0 584.9 783.3 940.7Real Estate Income - - 6.0 225.1 300.2Other Operating Income - 86.8 51.5 - -Total Revenue 2,021.7 2,841.5 1,948.3 5,575.8 7,791.0Total Operating Expenditure 1,239.3 1,936.4 1,508.5 3,904.7 5,330.1EBITDA 782.4 905.2 439.8 1,671.1 2,460.8Depreciation & Amortization 141.3 141.7 131.2 392.7 408.8EBIT 641.1 763.5 308.6 1,278.4 2,052.0Other Income 165.9 168.0 37 259 272Financial Expenses 296.6 285.5 539 923 835Profit Before Tax and Exceptional Items 510.4 645.9 (194.0) 615.2 1,489.2Exceptional Items - - - - -Profit Before Tax 510.4 645.9 (194.0) 615.2 1,489.2Prior Period Expenditure - - 156.4 - -Tax Expenses (including Deferred Tax) 106.4 206.0 32.5 264.3 508.9Net Profit from ordinary activities aftertax 403.9 439.9 (70.1) 351.0 980.3Extraordinary items of expenses (net oftaxes) - - - - -Net Profit Before Minority Interest 403.9 439.9 (70.1) 351.0 980.3Share of Profit of Minority Interest 0.0 0.0 (0.3) 0.0 0.0Net Profit After Tax 403.9 439.9 (69.9) 351.0 980.3 (Rs mn)Four-S Research 6
    • Company Report: Atlanta Limited June „12Balance Sheet FY10 FY11 FY12 FY13E FY14EShareholders EquityShare Capital 188.0 188.0 188 188 188Reserves and Surplus 2,550.3 2,962.8 2,858.4 3,209.4 4,189.7Total equity capital 2,738.3 3,150.8 3,046.4 3,397.4 4,377.7LiabilitiesSecured Loans 3,250.9 3,603.1 5,337.9 8,780.3 12,016.3Unsecured Loans 257.8 927.6 1,276.1 1,236.4 1,236.4Minority Interest 3.0 4.9 12.2 12.2 12.2Deferred Tax Liability 139.8 133.8 148.7 148.7 148.7Total Liabilities and Owners Equity 6,389.7 7,820.1 9,821.3 13,574.9 17,791.3AssetsGoodwill on consolidation 5.4 5.4 5.4Gross Block 2,495.3 2,617.8 6,667.4 6,889.8 9,223.5 Less: Depreciation 687.8 801.3 932.5 1,325.2 1,734.0Net Fixed Assets 1,807.5 1,816.6 5,734.9 5,564.6 7,489.5Work-in-progress 2,504.2 3,462.7 592.5 3,703.5 6,960.0Investments 16.2 90.4 110.6 110.6 110.6Inventory 628.8 954.6 950.9 959.2 1,375.5Debtors 1,556.9 2,068.8 2,154.8 1,115.2 1,168.6Cash and Bank Balance 260.0 127.9 381.2 2,762.2 1,523.4Other Current Assets 35.5 41.4 13.0 4.6 6.6Loans and Advances 627.3 919.6 1,699.9 913.5 1,310.0Total Current Assets 3,108.4 4,112.3 5,199.8 5,754.6 5,384.1Current Liabilities 613.7 1,279.4 1,458.9 1,244.1 1,699.8Provision 433.0 382.5 363.0 319.7 458.5Total Current Liabilities 1,046.7 1,661.9 1,821.9 1,563.8 2,158.3Net Current Assets 2,061.7 2,450.4 3,377.9 4,190.8 3,225.8Miscellaneous expenditure - - - - -Total Assets 6,389.7 7,820.1 9,821.3 13,574.9 17,791.3 (Rs mn)Four-S Research 7
    • Company Report: Atlanta Limited June „12Cash Flow Statement FY10 FY11 FY12 FY13E FY14ENet Profit/(Loss) before Tax 510.4 645.9 (194.0) 615.2 1,489.2 Depreciation & Amortization 141.3 141.7 131.2 392.7 408.8 Interest Expense 296.6 285.5 539.1 922.6 835.2 Interest income (6.5) (15.2) - - -Other Adjustments (1.4) (8.2) 156.7 - -Operating Cashflow before Wcap 940.4 1,049.7 633.0 1,930.5 2,733.2(Increase)/Decrease in Trade/OtherReceivables 217.7 (511.9) (86.0) 1,039.6 (53.5)(Increase)/Decrease in Inventories (415.8) (325.7) 3.6 (8.2) (416.4)Increase(Decrease) in Trade/Other Payables (305.3) 652.7 179.5 (214.8) 455.7Other Current Assets 266.7 (437.8) (786.3) 751.6 (259.7) (45.0) (48.5) (2.8)Cash Generated from Operations 658.7 378.5 (58.9) 3,498.7 2,459.4Direct Taxes Paid (87.7) (123.6) (32.5) (264.3) (508.9)Operating Cashflow- A 571.0 254.9 (85.4) 3,234.4 1,950.5Purchase/Sale of Fixed Assets (net) (773.9) (1,118.8) (1,179.3) (3,333.4) (5,590.2)Purchase of Investments (0.5) (0.6) (20.2) - -Sale of Asset/investment 36.9 8.2 - - -Interest Income 6.5 15.2 - - -Cash from Investing activities- B (731.0) (1,096.0) (1,199.5) (3,333.4) (5,590.2)Proceeds from long term borrowings (Banks) 417.8 352.2 - - -Proceeds from long term borrowings(Contracting Authority) (54.5) (44.0) 2,083.4 3,402.6 3,236.0Proceeds from short term borrowings 53.4 713.8 - - -Grant from NHAI 123.3 - - - -Dividend paid - (27.4) - - -Interest Expenses (296.6) (285.5) (539.1) (922.6) (835.2)Cash from Financing activities- C 243.4 709.1 1,544.3 2,480.0 2,400.9Change in Cash= A+B+C 83.3 (132.0) 253.4 2,381.0 (1,238.9)Opening Balance 176.5 259.9 127.9 381.2 2,762.2Closing Balance 259.9 127.9 381 2,762 1,523 (Rs mn)Four-S Research 8
    • Company Report: Atlanta Limited June „12Ratios FY10 FY11 FY12 FY13E FY14EPer share ratiosEPS (Rs) 5.0 5.4 NM 4.3 12.0Book Value/Share 33.6 38.7 37.4 41.7 53.7CEPS 6.7 7.1 0.8 9.1 17.0Profitability RatiosEBITDA Margin 38.7% 31.9% 22.6% 30.0% 31.6%PAT Margin 20.0% 15.5% -3.6% 6.3% 12.6%ROAE 18.1% 14.9% -2.3% 10.9% 25.2%ROACE 11.3% 10.7% 3.6% 11.1% 13.2%Growth ratesSales Growth 4.0% 40.6% -31.4% 186.2% 39.7%EBITDA Growth 36.3% 15.7% -51.4% 280.0% 47.3%PAT Growth 108.6% 8.9% -115.9% -600.7% 179.3%EPS Growth 108.6% 8.9% -115.9% -602.5% 179.3%D/E 1.3 1.4 2.2 2.9 3.0Current Ratio 3.0 2.5 2.9 3.7 2.5Quick Ratio 2.4 1.9 2.3 3.1 1.9Interest Cover 0.8 0.7 0.6 1.4 2.5Cash Ratio 0.4 0.1 0.3 2.2 0.9Valuation RatiosP/E 11.7 10.7 NM 14.3 5.1Price/Book 1.7 1.5 1.6 1.5 1.1EV/Net Sales 4.3 3.0 4.6 1.6 1.1EV/EBITDA 11.0 9.5 20.2 5.3 3.6Mcap/Sales 2.3 1.7 2.6 0.9 0.6Activity/turnover ratiosAsset Turnover 0.8 1.1 0.3 0.8 0.8Inventory Turnover 3.2 3.0 2.0 5.8 5.7Average Debtors turnover 1.3 1.4 0.9 5.0 6.7Average Payables turnover 3.3 2.2 1.3 4.5 4.6Net Working Cap turnover(excl cash) 1.1 1.2 0.7 3.9 4.6NWC Days 325 298 561 94 80Four-S Research 9
    • Company Report: Atlanta Limited June „12About Four-S ServicesFounded in 2002, Four-S Services is a financial boutique providing Research, FinancialConsulting and Investment Banking services. We have executed more than 100+ mandatesacross diverse range of industries for Indian as well as global companies, investment firmsand private equity and venture capital firms.Our clients value our focused, actionable advice which is based on deep domain expertise inEducation, Financial Services, Media & Entertainment, Healthcare, Consumer Goods,Automotive, Energy, Logistics and Manufacturing. For further information on the companyplease visit www.four-s.comDisclaimerThe information contained herein has been obtained from sources believed to be reliable butis not necessarily complete and its accuracy cannot be guaranteed. No representation,warranty, guarantee or undertaking, express or implied, is made as to the fairness,accuracy or completeness of any information, projections or opinions contained in thisdocument. Four-S Services Pvt. Ltd. will not accept any liability whatsoever, with respect tothe use of this document or its contents. This Company Commissioned document has beendistributed for information purposes only and does not constitute or form part of any offeror solicitation of any offer to buy or sell any securities. This document shall not form thebasis of and should not be relied upon in connection with any contract or commitmentwhatsoever. This document is not to be reported or copied or made available to others.Four-S may from time to time solicit from, or perform consulting or other services for anycompany mentioned in this document.For further details/clarifications please contact:Pooja Dokania Ajay Jindalpooja.dokania@four-s.com ajay.jindal@four-s.comFour-S offices:Delhi Office: 214, Udyog Vihar Phase I, Gurgaon – 122016. Tel: +91-124- 425 1442Mumbai office: 101, Nirman Kendra, Opposite Star TV, Off Dr E Moses Road, Mahalaxmi,Mumbai – 400011 Tel: 022 - 42153659Four-S Research 10
    • Company Report: Atlanta Limited June „12NotesFour-S Research 11