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Ashiana Housing - A Shareholder friendly Real Estate Business Model
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Ashiana Housing - A Shareholder Friendly Real Estate Business Model

Jan 22, 2015

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Ashiana Housing is one of the best Real Estate stocks
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  • 1. Ashiana Housing- A Shareholder friendly Real Estate Business Model

2. Content Index Ashiana Housing Investment Snapshot :- Slide #3 Industry Opportunity An Overview :- Slide #5 Ashiana Housing Business Overview :- Slide #10 Investment Rationale :- Slide #17 Ashiana Housing Financials :- Slide #25 Concerns & Reasoning :- Slide #28 Conclusion :- Slide #30 Ashiana Housing Investment Snapshot :- Slide #3 Industry Opportunity An Overview :- Slide #5 Ashiana Housing Business Overview :- Slide #10 Investment Rationale :- Slide #17 Ashiana Housing Financials :- Slide #25 Concerns & Reasoning :- Slide #28 Conclusion :- Slide #30 Specialists in discovering Multibagger stocks 3. Ashiana Housing Investment Snapshot(as on August 29, 2012)Recommendation :- BUYAccumulation Range :- 120-150 Invest 60% of Investment allocation at thecurrent Price. Have enough Cash to average down over thenext 6 Months Time-frame.Current Market Price Rs. 156Bloomberg / Reuters Code ASFI IN/ AHFN.BOBSE / NSE Code 523716 / ASHIANAMkt Cap (INR BN / USD Mn) 2.28 / 41.01[1 USD Rs. 55.60]Total Equity Shares [Mn] 18.6Face Value Rs. 1052 Week High / Low Rs. 185 / Rs. 123Promoters Holding 69.02 %Institutional Holding 0.01 %Ashiana Housing has been established in the Real Estatedevelopment Industry for the past 26 years, starting from1986. It has been a North-Indian developer with majorprojects in the state of Rajasthan.When the Industry slowed down in 2009 and otherdevelopers extended their development schedule, Ashianapumped in Capital and made sure that all its projects weredelivered on time which shows the commitment of theManagement and the Brand credibility which has been built.Ashiana Housing pioneered into retirement housing bylaunching a retirement resort in Bhiwadi in 2004. Theproject was successfully completed and delivered in 2007which has made the company to look for similaropportunities elsewhere in the country.Ashiana Housing has received several accolades over theseyears. It has been chosen as the Forbes-Best under a Billioncompany for 2 times in a row. Company has also baggedseveral awards as the Best Real Estate Project for its Aanganand Woodlands Project.Recommendation :- BUYAccumulation Range :- 120-150 Invest 60% of Investment allocation at thecurrent Price. Have enough Cash to average down over thenext 6 Months Time-frame.Current Market Price Rs. 156Bloomberg / Reuters Code ASFI IN/ AHFN.BOBSE / NSE Code 523716 / ASHIANAMkt Cap (INR BN / USD Mn) 2.28 / 41.01[1 USD Rs. 55.60]Total Equity Shares [Mn] 18.6Face Value Rs. 1052 Week High / Low Rs. 185 / Rs. 123Promoters Holding 69.02 %Institutional Holding 0.01 %Ashiana Housing has been established in the Real Estatedevelopment Industry for the past 26 years, starting from1986. It has been a North-Indian developer with majorprojects in the state of Rajasthan.When the Industry slowed down in 2009 and otherdevelopers extended their development schedule, Ashianapumped in Capital and made sure that all its projects weredelivered on time which shows the commitment of theManagement and the Brand credibility which has been built.Ashiana Housing pioneered into retirement housing bylaunching a retirement resort in Bhiwadi in 2004. Theproject was successfully completed and delivered in 2007which has made the company to look for similaropportunities elsewhere in the country.Ashiana Housing has received several accolades over theseyears. It has been chosen as the Forbes-Best under a Billioncompany for 2 times in a row. Company has also baggedseveral awards as the Best Real Estate Project for its Aanganand Woodlands Project. Specialists in discovering Multibagger stocks 4. Key Investment HighlightsRobust Business Model Ashiana Housing has a good asset light business model. Company doesnt buy andstore land for future development purposes. It gets into tie-up with Land owners (or) creates a JV with themto develop and sell the land in the next 3 years. Even in places where it buys Lands, it would be with a visionto develop it within the next 5-7 years. Company also with its inherent strengths continues to generate thebest Margins across the industry.Huge Growth Opportunity Ashiana Housing focuses on Mid-Income Housing projects in Tier-2 & 3 townswhere there is real Housing demand and the number of quality developers is lower. With Ashianasexperience and brand name, the opportunity to grow is Huge. It can be seen from the companys growth inthe past 10 Years. Companys revenue and PAT has grown by over 11X and 19X in the past 10 years.Healthy Accounting Practices Being in a sector which is mired by Corporate Governance issues, AshianaHousing has good accounting policies and strong disclosures which helps Investors to gauge its operationalperformance much better. Company has also changed its accounting methodology from Percentage ofcompletion basis to Contract Completion which is a much more straight forward way of accounting. Thisgives us tremendous confidence in the intentions of the company where we are Minority Shareholders.Strong Financial Management In a sector which went irrational and bought land at exorbitant prices,Ashiana Housings management has been prudent in managing its finances well. It can be seen from theDebt free balance sheet which it has, compared with a Highly leveraged balance sheet of its peers. Also allthe projects are expected to maintain positive cash flow and the company has a very strong advances fromcustomers which helps in managing its finances well. It also has one of the shortest construction cycle andworking capital cycle in the Industry which helps it in having better margins.Attractive Valuations Ashiana Housing is currently quoting at a Market Capitalization of around 300 Cr Rswhile its Cash flow from operations over the past year has been over 100 Cr Rs. Even in terms of its Price/Book value, the stock is quoting at just over 1.2X which we think is very cheap considering business quality.Robust Business Model Ashiana Housing has a good asset light business model. Company doesnt buy andstore land for future development purposes. It gets into tie-up with Land owners (or) creates a JV with themto develop and sell the land in the next 3 years. Even in places where it buys Lands, it would be with a visionto develop it within the next 5-7 years. Company also with its inherent strengths continues to generate thebest Margins across the industry.Huge Growth Opportunity Ashiana Housing focuses on Mid-Income Housing projects in Tier-2 & 3 townswhere there is real Housing demand and the number of quality developers is lower. With Ashianasexperience and brand name, the opportunity to grow is Huge. It can be seen from the companys growth inthe past 10 Years. Companys revenue and PAT has grown by over 11X and 19X in the past 10 years.Healthy Accounting Practices Being in a sector which is mired by Corporate Governance issues, AshianaHousing has good accounting policies and strong disclosures which helps Investors to gauge its operationalperformance much better. Company has also changed its accounting methodology from Percentage ofcompletion basis to Contract Completion which is a much more straight forward way of accounting. Thisgives us tremendous confidence in the intentions of the company where we are Minority Shareholders.Strong Financial Management In a sector which went irrational and bought land at exorbitant prices,Ashiana Housings management has been prudent in managing its finances well. It can be seen from theDebt free balance sheet which it has, compared with a Highly leveraged balance sheet of its peers. Also allthe projects are expected to maintain positive cash flow and the company has a very strong advances fromcustomers which helps in managing its finances well. It also has one of the shortest construction cycle andworking capital cycle in the Industry which helps it in having better margins.Attractive Valuations Ashiana Housing is currently quoting at a Market Capitalization of around 300 Cr Rswhile its Cash flow from operations over the past year has been over 100 Cr Rs. Even in terms of its Price/Book value, the stock is quoting at just over 1.2X which we think is very cheap considering business quality. Specialists in discovering Multibagger stocks 5. Industry Opportunity & Potential- An OverviewIndustry Opportunity & Potential- An Overview Specialists in discovering Multibagger stocks 6. Demand for Housing India is terribly short of Quality housing units. There is strong pent-up demand for Housing because of thesheer lack of availability of good residential units in the country. In addition to the real end user demand for Housing, there is also a good Investment demand consideringthe continuous price appreciation over the past decade. Hence Investors think of Housing as a very stableform of Investment where they can park their surplus money. There are very strong Structural trends which are driving the demand for Quality Housing units. A few ofthe trends would be increasing Urbanization, Nuclearization of Families, Improved Affordability, EasierFinancing, Organized Real Estate Industry etc. The Biggest demand for Housing is coming from the Bottom of the Pyramid which has been denied of aQuality living space. There is a shortage of over 3 Cr Homes in this space.Housing Shortage MillionUnitsEconomically WeakerSection21.78Low Income Group 2.89Middle Income Group 0.04High Income Group 0.01Nuclearization India is terribly short of Quality housing units. There is strong pent-up demand for Housing because of thesheer lack of availability of good residential units in the country. In addition to the real end user demand for Housing, there is also a good Investment demand consideringthe continuous price appreciation over the past decade. Hence Investors think of Housing as a very stableform of Investment where they can park their surplus money. There are very strong Structural trends which are driving the demand for Quality Housing units. A few ofthe trends would be increasing Urbanization, Nuclearization of Families, Improved Affordability, EasierFinancing, Organized Real Estate Industry etc. The Biggest demand for Housing is coming from the Bottom of the Pyramid which has been denied of aQuality living space. There is a shortage of over 3 Cr Homes in this space. Specialists in discovering Multibagger stocks 7. Mid-Income Housing Opportunity Indias increasing urbanization is happening in an unorganized manner rapidly, which is leading to terribleHousing conditions for the Urban Poor and Middle class. With over 50% of Indias population expected to live in Cities over the next 2 decades, the Quantum of newHousing required is humongous. Especially there is a strong need for Housing projects in the Middle-Incomesegment in the Tier-2 and 3 cities of India. During the Real estate boom, most developers where focusing on the top end of the market which hadhigher margins and sales were easy. But presently in a dull Macro-economic environment, developers havestarted focusing on the lower segment where there is real user demand. Just the transfer from Slums and other bad Housing conditions to a decent living space itself is a hugeopportunity for the Real estate developers. Specialists in discovering Multibagger stocks Indias increasing urbanization is happening in an unorganized manner rapidly, which is leading to terribleHousing conditions for the Urban Poor and Middle class. With over 50% of Indias population expected to live in Cities over the next 2 decades, the Quantum of newHousing required is humongous. Especially there is a strong need for Housing projects in the Middle-Incomesegment in the Tier-2 and 3 cities of India. During the Real estate boom, most developers where focusing on the top end of the market which hadhigher margins and sales were easy. But presently in a dull Macro-economic environment, developers havestarted focusing on the lower segment where there is real user demand. Just the transfer from Slums and other bad Housing conditions to a decent living space itself is a hugeopportunity for the Real estate developers. 8. Increasing Affordability Affordability of Housing has improved tremendously with the strong growth in Annual Income ofcustomers. Affordability measured with Property cost and Annual Income is actually the best in 2012 whencompared with the previous 17 Years. Along with the Income growth, other major reason driving sales of Housing units is the Improvedfinancing for new Homes. There is attractive tax incentives behind Home loans and they are one of thecheapest sources of retail credit in India. This is benefiting Housing sales to a large extent. Even in the improved scenario, the scope for higher Mortgage penetration is higher. India is still ranks lowerin Mortgage/ GDP ratio. With Interest rates expected to come down structurally over a period of time, thequantum of Home loans disbursed will continue to inch higher. Affordability of Housing has improved tremendously with the strong growth in Annual Income ofcustomers. Affordability measured with Property cost and Annual Income is actually the best in 2012 whencompared with the previous 17 Years. Along with the Income growth, other major reason driving sales of Housing units is the Improvedfinancing for new Homes. There is attractive tax incentives behind Home loans and they are one of thecheapest sources of retail credit in India. This is benefiting Housing sales to a large extent. Even in the improved scenario, the scope for higher Mortgage penetration is higher. India is still ranks lowerin Mortgage/ GDP ratio. With Interest rates expected to come down structurally over a period of time, thequantum of Home loans disbursed will continue to inch higher. Specialists in discovering Multibagger stocks 9. Real Estate Industry Problems Indian Real estate industry has been hit hard over the past 4 years, since the Global economic downturn.Their Share prices have been hit harder in the bourses which can be seen from the Graphs. All the majorReal estate shares have corrected by over 80% since their 2008 highs. Indian Real estate companies had a boom time during the 2004-07 period when their profitability was hugeand they were the darlings of the stock markets. One of the major reason for high profitability had beenleveraged land buys which they were able to sell off at even higher levels. But once the market started its downturn, most of these companies got hit because they had diversifiedinto several businesses, leveraged Balance sheets, exorbitant land buys, poor reputation etc. All these hada severe destruction effect on their share prices. Most of the companies have reported losses, Working capital crunch etc. Even now, most continue tosuffer from High construction costs, increased cost of capital etc. Specialists in discovering Multibagger stocks Indian Real estate industry has been hit hard over the past 4 years, since the Global economic downturn.Their Share prices have been hit harder in the bourses which can be seen from the Graphs. All the majorReal estate shares have corrected by over 80% since their 2008 highs. Indian Real estate companies had a boom time during the 2004-07 period when their profitability was hugeand they were the darlings of the stock markets. One of the major reason for high profitability had beenleveraged land buys which they were able to sell off at even higher levels. But once the market started its downturn, most of these companies got hit because they had diversifiedinto several businesses, leveraged Balance sheets, exorbitant land buys, poor reputation etc. All these hada severe destruction effect on their share prices. Most of the companies have reported losses, Working capital crunch etc. Even now, most continue tosuffer from High construction costs, increased cost of capital etc. 10. Ashiana Housing Business Overview Specialists in discovering Multibagger stocks 11. Key HighlightsAshiana Housing has demonstratedstrong project execution with EquivalentArea constructed growing at a 22% CAGRfor the past 10 years. Ashiana Housingconstructed over 14.5 Lakh Sq.ft in FY-12.Execution CapabilitiesAshiana Housing has grown its networth by 22X in the past 10 yearswhich is >36% CAGR.With Ashiana Housing expected tobe present in 9 Cities by 2015, weexpect a strong growth rate.Robust GrowthAshiana Housing has a goodManagement with 3-Familymembers from the next generationaiming to take the business to newerheights in the coming years.Ashiana Housing also aims toinculcate the best practices in theIndustry while growing its PAT.Management QualityAshianaHousingAshiana Housing has grown its networth by 22X in the past 10 yearswhich is >36% CAGR.With Ashiana Housing expected tobe present in 9 Cities by 2015, weexpect a strong growth rate.Ashiana Housing has a very strong Productoriented development approach whichhelps it to satisfy its customersrequirements and aspirations.Ashiana Housing also has been a pioneerand gained a lot of experience in theconcept of Retirement Housing which hasa huge potential.Niche Product ProfileWith Strong In-House capabilities andgood Financial management, AshianaHousing continues to generate over 38%EBIDTA margins and >20% PAT margins.This High Margin structure supportedwith Solid Business Fundamentals alsoenables it to deploy Capital at attractivereturn ratios.Strong Return RatiosAshiana Housing has a goodManagement with 3-Familymembers from the next generationaiming to take the business to newerheights in the coming years.Ashiana Housing also aims toinculcate the best practices in theIndustry while growing its PAT.AshianaHousing Specialists in discovering Multibagger stocks 12. Differentiated Business Model Ashiana Housing has adifferentiated Businessmodel which is theprime differentiator ofthe company. They differ in theprocesses, right fromland buying to postsales management. All these can be easilyseen from the strongnumbers which thecompany continues topost when comparedto the losses which itspeers are posting. Management hasbeen sticking to thisBusiness model in boththe Good and Badtimes which gives ustremendousconfidence . Specialists in discovering Multibagger stocks Ashiana Housing has adifferentiated Businessmodel which is theprime differentiator ofthe company. They differ in theprocesses, right fromland buying to postsales management. All these can be easilyseen from the strongnumbers which thecompany continues topost when comparedto the losses which itspeers are posting. Management hasbeen sticking to thisBusiness model in boththe Good and Badtimes which gives ustremendousconfidence . 13. Niche Product Range Ashiana Housing is a pioneer in Retirement Housing (or) Active Senior living project development. Theseprojects which essentially are modeled on providing good living conditions for Old people, has a hugeBusiness potential in the coming years. Ashianas experience in this space will help it to scale up this business pan-India. With the increasingnumber of Old people and social change in treating them, Ashiana Housing definitely has a business whichcan be scaled up aggressively and also generates high margins with strong cash flows. Ashiana Housings main project development business happens in the Middle Income group where thecompany has a strong understanding of the customers demand. More specifically it concentrates on Tier-2and 3 towns to launch these projects. Company also has a very product focused development model where they tweak the project according tovarying customers expectations. As most of its customers are real end users, Ashiana focuses more onsatisfying their needs and building a trustable relationship. Ashiana Housing is a pioneer in Retirement Housing (or) Active Senior living project development. Theseprojects which essentially are modeled on providing good living conditions for Old people, has a hugeBusiness potential in the coming years. Ashianas experience in this space will help it to scale up this business pan-India. With the increasingnumber of Old people and social change in treating them, Ashiana Housing definitely has a business whichcan be scaled up aggressively and also generates high margins with strong cash flows. Ashiana Housings main project development business happens in the Middle Income group where thecompany has a strong understanding of the customers demand. More specifically it concentrates on Tier-2and 3 towns to launch these projects. Company also has a very product focused development model where they tweak the project according tovarying customers expectations. As most of its customers are real end users, Ashiana focuses more onsatisfying their needs and building a trustable relationship. Specialists in discovering Multibagger stocks 14. Strong Customer Orientation Specialists in discovering Multibagger stocks This strong customer orientation can be basically validated from two numbers. One is the very high referralbusiness which has been increasing consistently for Ashiana Housing. Other, Ashiana Housing has been one of the star performers in a bad housing market. This can be seenfrom the consistent increase in Bookings of Ashiana Housing. All the other companies have shown a slidingtrend in order bookings as few customers trusted them during the downturn. Ashiana Housing also makes sure that the company has a strong Facilities management in the apartmentsthey have built. Though its not a highly attractive business, it makes sure that Ashiana Housing generatesgoodwill amongst its customers and creates a brand for itself. 15. In-House Capabilities Ashiana Housing has very strongin-house capabilities inconstruction, sales and after salesservice of Housing projects. Building In-house capabilities is amajor part of its Business model togenerate higher margins whencompared to its peers. Company has continuouslystrengthened its team to deliverbetter than expected results. Westrongly believe that out-sourcingthese would lead to lower brandvalue and less control on quality. Company also makes sure that they tweak the various processes according to the location, product and thetarget customer profile. They continue to gauge the market demand and respond to it immediately as theycontrol the entire process. Ashiana Housing has continued to grow its Equivalent Area Constructed (EAC) over the past several yearswhich gives a good measurement of the companys capabilities. Company continues to deliver projects ontime which is a big positive for all its stakeholders. Specialists in discovering Multibagger stocks Ashiana Housing has very strongin-house capabilities inconstruction, sales and after salesservice of Housing projects. Building In-house capabilities is amajor part of its Business model togenerate higher margins whencompared to its peers. Company has continuouslystrengthened its team to deliverbetter than expected results. Westrongly believe that out-sourcingthese would lead to lower brandvalue and less control on quality. 16. Growing Brand Value Ashiana Housing has continued to grow its Brand value consistently by delivering on all its promises tovarious stakeholders. It has delivered over 117 Lakhs.Sq.ft of Housing on schedule which is commendable. During the 2008 downturn when other developers were not sticking to their schedules and delayedpossession due to Internal problems, Ashiana housing made sure that all its customers receive their homeson time, which speaks volumes about the Management quality. Ashiana Housing has been listed in Forbes Asias best under a Billion 200 list of companies in twoconsecutive years which shows the growth potential of the company. With strong brand value and processes, we believe Ashiana Housing will be able to make a mark in thenew cities which it plans to enter over the next few years. In all its previous entries, company has made asolid mark in terms of its performance. In established markets like Jodhpur, Ashiana Housing is able to realize at least 30% higher value than itspeers which shows the respect the brand commands.Referral BookingsAwards & AccoladesReach Specialists in discovering Multibagger stocks Ashiana Housing has continued to grow its Brand value consistently by delivering on all its promises tovarious stakeholders. It has delivered over 117 Lakhs.Sq.ft of Housing on schedule which is commendable. During the 2008 downturn when other developers were not sticking to their schedules and delayedpossession due to Internal problems, Ashiana housing made sure that all its customers receive their homeson time, which speaks volumes about the Management quality. Ashiana Housing has been listed in Forbes Asias best under a Billion 200 list of companies in twoconsecutive years which shows the growth potential of the company. With strong brand value and processes, we believe Ashiana Housing will be able to make a mark in thenew cities which it plans to enter over the next few years. In all its previous entries, company has made asolid mark in terms of its performance. In established markets like Jodhpur, Ashiana Housing is able to realize at least 30% higher value than itspeers which shows the respect the brand commands. 17. Investment Rationale Specialists in discovering Multibagger stocks 18. Historical Performance Best analysis of anycompany is derived fromthe Business snapshot ofthe company during thebest and worst phases ofIndustry cycle. 2005-06 to 2011-12 hasbeen a roller coaster ridefor the Real estateindustry with huge boomand bust periods in-between the frame. But none of thevolatility can be seenfrom the Revenues orProfits of Ashiana Housingwhich seems to be risingconsistently over theyears. This is the bestvalidation of Ashianasbusiness quality. Specialists in discovering Multibagger stocks Best analysis of anycompany is derived fromthe Business snapshot ofthe company during thebest and worst phases ofIndustry cycle. 2005-06 to 2011-12 hasbeen a roller coaster ridefor the Real estateindustry with huge boomand bust periods in-between the frame. But none of thevolatility can be seenfrom the Revenues orProfits of Ashiana Housingwhich seems to be risingconsistently over theyears. This is the bestvalidation of Ashianasbusiness quality. 19. Superior Financials It can be seen form the chart that AshianaHousing has the best Return on Equity (ROE)when compared with all other Real Estatecompanies which is a huge positive. Ashiana Housing has grown consistently inthe past 10 years which is seen from the 22Xincrease in Net worth over the decade. Ashiana Housing superior financials is aresult of its differentiated business modelwhich is capital light and ensures higherCapital asset turnover. Other important reasons for higher ROEinclude better Margins, Zero debt balancesheet, good capital allocation to high ROICprojects in Tier-2 towns. Ashiana Housing is one of the few companieswhich manages its Working capital cyclebetter by generating strong cash advancesfrom customers which it uses for currentWork-In-Progress which ensures lower debtand efficient Capital management. Specialists in discovering Multibagger stocks It can be seen form the chart that AshianaHousing has the best Return on Equity (ROE)when compared with all other Real Estatecompanies which is a huge positive. Ashiana Housing has grown consistently inthe past 10 years which is seen from the 22Xincrease in Net worth over the decade. Ashiana Housing superior financials is aresult of its differentiated business modelwhich is capital light and ensures higherCapital asset turnover. Other important reasons for higher ROEinclude better Margins, Zero debt balancesheet, good capital allocation to high ROICprojects in Tier-2 towns. Ashiana Housing is one of the few companieswhich manages its Working capital cyclebetter by generating strong cash advancesfrom customers which it uses for currentWork-In-Progress which ensures lower debtand efficient Capital management. 20. Strong Expected Growth Specialists in discovering Multibagger stocks Ashiana Housing has one of the shortest project cycles in the Real estate sector. Company wants tocompress it further from 30 months currently to 21 months which will ensure better returns. Company also has decent Inventory in its existing projects which will get realized at a better value in thecoming months leading to better revenues and good operating cash flow. 21. Good Project Pipeline Ashiana Housing has a solidproject pipeline which gives itstrong revenue visibility for thenext 3-5 years. Delays because of regulatoryhurdles in launching newprojects has resulted in slightlylower Area Booked and AreaConstructed projections fromthe company. Still we believe that AshianaHousing will continue togenerate very strong cash fromoperations in FY-13 from itsProjects because of Valueincrease in its Housing projects. Companys management has agood track record of achievingits targets and guidance. Specialists in discovering Multibagger stocks Ashiana Housing also has invested in building good developable land properties in the past two years.These investments will start bearing results over the next 3 years as projects get launched. Ashiana Housing has a solidproject pipeline which gives itstrong revenue visibility for thenext 3-5 years. Delays because of regulatoryhurdles in launching newprojects has resulted in slightlylower Area Booked and AreaConstructed projections fromthe company. Still we believe that AshianaHousing will continue togenerate very strong cash fromoperations in FY-13 from itsProjects because of Valueincrease in its Housing projects. Companys management has agood track record of achievingits targets and guidance. 22. Good Corporate Governance Ashiana has one of thecleanest CorporateGovernance records in theReal estate industry. This can easily be ascertainedfrom the clean accountingpolicies which the companyhas implemented. We find that disclosures andcommunication withShareholders are at par withany other MNC company. A few reporting parameterslike EAC, Area Booked, Referralbusiness also helps Investorsjudge the Quality of business. Companys cash flowstatement gives us a clearindication on the businessperformance. Company hasgenerated strong cash flows inFY-12 which is unnoticed. Specialists in discovering Multibagger stocks Ashiana has one of thecleanest CorporateGovernance records in theReal estate industry. This can easily be ascertainedfrom the clean accountingpolicies which the companyhas implemented. We find that disclosures andcommunication withShareholders are at par withany other MNC company. A few reporting parameterslike EAC, Area Booked, Referralbusiness also helps Investorsjudge the Quality of business. Companys cash flowstatement gives us a clearindication on the businessperformance. Company hasgenerated strong cash flows inFY-12 which is unnoticed. 23. Management Profile Ashiana Housing has acompetent, ambitious andclean management which isvery important for goodShareholder performance inthe Long-Run. Companys 3-brothers are allwell educated and have a veryclear vision to take thecompany to newer heights inthe next 5 years.Ashiana Housing has welldefined roles for all itspromoters which is importantto grow without tussles in afamily business. Company while spreading its wings across the nation, needs to attract talent regularly. Good team alongwith strong base set over the past 26 years will make sure that the company grows consistently. Company has also been building a strong second line of management which is crucial to take the companyto the next league of operations. Specialists in discovering Multibagger stocks Ashiana Housing has acompetent, ambitious andclean management which isvery important for goodShareholder performance inthe Long-Run. Companys 3-brothers are allwell educated and have a veryclear vision to take thecompany to newer heights inthe next 5 years.Ashiana Housing has welldefined roles for all itspromoters which is importantto grow without tussles in afamily business. 24. Accounting Change & Attractive Valuations Specialists in discovering Multibagger stocks Ashiana Housing has done an accounting change which makes it more answerable to its stated businessmodel of not hoarding large Inventory or land bank. This will ensure that Ashiana Housing continues todeliver projects on time and generate good cash flows from its projects. Ashiana Housing quotes at attractive valuations when compared with its historic valuations. Moreover wefeel that the company deserves a premium to the valuations which other real estate players command inmarket and hence there would be re-rating over the next few quarters. 25. Financials Specialists in discovering Multibagger stocks 26. Earnings ProjectionIncome Statement (INR Cr) FY 11 FY 12 FY 13E FY 14EOperating Income 139.6 241.7 137.0 152.0EBIDTA 44.1 82.6 52.5 57.0Depreciation 2.0 2.5 2.6 2.7Interest Expenses 0.7 2.9 2.5 0.8Profit Before Tax (PBT) 41.4 77.3 47.4 53.5Other Income 14.5 7.1 9.0 11.5Tax Provision 13.0 14.9 14.1 16.4Profit After Tax (PAT) 43.9 69.6 42.3 48.6 The accounting policy changeby Ashiana Housing will lead tolower revenues and Profits inthe next 2 years, but nothingchanges substantially in the Cashflows of the organization. The significant change in theBalance sheet on the WorkingCapital side (Inventory &Creditor days ) is also for thesame reason. Companys ROIC continues tobe robust and with lumpyrevenues, we expect the averageROIC to be > 45% consistently. Steady growth in the Networth and Book Value is also aindicator of good capitalallocation and this will continueto rise over the next 5 Years .Profit After Tax (PAT) 43.9 69.6 42.3 48.6Inventory Days 327 313 740 670Creditor Days 210 142 448 805Earnings Per Share (EPS) 23.1 37.4 22.9 26.1Book Value 94 128.8 149.5 173.6Return on Invested Capital 82.6% 65% 30.9% 49%Net worth 175.0 239.7 278.4 323.2 The accounting policy changeby Ashiana Housing will lead tolower revenues and Profits inthe next 2 years, but nothingchanges substantially in the Cashflows of the organization. The significant change in theBalance sheet on the WorkingCapital side (Inventory &Creditor days ) is also for thesame reason. Companys ROIC continues tobe robust and with lumpyrevenues, we expect the averageROIC to be > 45% consistently. Steady growth in the Networth and Book Value is also aindicator of good capitalallocation and this will continueto rise over the next 5 Years .Specialists in discovering Multibagger stocks 27. Concerns & Reasoning1.) Regulatory Hurdles in Project Execution :The biggest concern for Ashiana Housing in the past 12 months has been the regulatory hurdles with respectto project execution. There has been an issue with the changing regulations in converting a Agriculture landto developing housing in Rajasthan. This delay has resulted in lower construction and saleable area in FY-13.Though the new regulations have come in place, we believe any future changes will affect the companysprogress. Also regulatory overhang on its Lavasa project is a concern on future profitability.2.) Macro-Economic Headwinds :Sustained Macro-Economic problems can lead to decreased Return Ratios on its new Projects. If Interestrates continue to be high and Affordability starts to decrease, we can see a downtick in demand for Housingwhich will lead to lower profitability for Ashiana Housing.3.) Managements Execution Capability in New Markets :Ashiana Housing is expanding to several new Markets across India. Execution capability in unknown marketswill be watched closely. But Ashianas model of partnering with local players will help it to perform better.We feel with no Brand strength and experience in these markets, Ashiana will have to settle for lowerMargins in these markets and hence lower returns.4.) Steep Increase in Land Prices :Ashiana Housing has a big advantage over other real estate players, when there is no secular rise in landprices as it doesnt hoard land like its peers. But a steep increase in Land prices will benefit its peers whichwill provide them competitive advantages over Ashiana. This might not affect the profitability of Ashiana,but it will take some sheen off the business model of Ashiana in stock markets. Specialists in discovering Multibagger stocks 1.) Regulatory Hurdles in Project Execution :The biggest concern for Ashiana Housing in the past 12 months has been the regulatory hurdles with respectto project execution. There has been an issue with the changing regulations in converting a Agriculture landto developing housing in Rajasthan. This delay has resulted in lower construction and saleable area in FY-13.Though the new regulations have come in place, we believe any future changes will affect the companysprogress. Also regulatory overhang on its Lavasa project is a concern on future profitability.2.) Macro-Economic Headwinds :Sustained Macro-Economic problems can lead to decreased Return Ratios on its new Projects. If Interestrates continue to be high and Affordability starts to decrease, we can see a downtick in demand for Housingwhich will lead to lower profitability for Ashiana Housing.3.) Managements Execution Capability in New Markets :Ashiana Housing is expanding to several new Markets across India. Execution capability in unknown marketswill be watched closely. But Ashianas model of partnering with local players will help it to perform better.We feel with no Brand strength and experience in these markets, Ashiana will have to settle for lowerMargins in these markets and hence lower returns.4.) Steep Increase in Land Prices :Ashiana Housing has a big advantage over other real estate players, when there is no secular rise in landprices as it doesnt hoard land like its peers. But a steep increase in Land prices will benefit its peers whichwill provide them competitive advantages over Ashiana. This might not affect the profitability of Ashiana,but it will take some sheen off the business model of Ashiana in stock markets. 28. Conclusion Specialists in discovering Multibagger stocks 29. Price Chart Ashiana Housing is one of the few real estate stocks whichhas bounced back sharply from its 2009 lows and tradingat less discount to their 2007 highs. Institutional Investors dont have any interest in thisSmall-Cap stock and if the company does well, their entrywill be a huge Trigger for the Stock. We believe Ashiana Housing has technically made a goodbottom and is ready to scale new Highs. With improvingMacro scenario and sales data, Ashiana Housing will beable to make it to the big league and get re-rated to HigherValuations in the next 3 Years.ShareHolding %June2012Mar2012Dec2011Sept2011Ashiana Housing 5-Yr Chart Ashiana Housing is one of the few real estate stocks whichhas bounced back sharply from its 2009 lows and tradingat less discount to their 2007 highs. Institutional Investors dont have any interest in thisSmall-Cap stock and if the company does well, their entrywill be a huge Trigger for the Stock. We believe Ashiana Housing has technically made a goodbottom and is ready to scale new Highs. With improvingMacro scenario and sales data, Ashiana Housing will beable to make it to the big league and get re-rated to HigherValuations in the next 3 Years. Specialists in discovering Multibagger stocks ShareHolding %June2012Mar2012Dec2011Sept2011Promoters 66.12 66.12 66.12 66.12FII 0.56 0.37 0.19 0.19DII 0 0 0 0 30. ConclusionReal Estate stocks have come a full circle over the past 6 years. From being the darlings of the Markets inthe previous Bull Run (2003-07) to being beaten down relentlessly (2008-12) and losing over 80% of theirMarket Capitalization. Sentiments about Investing in this sector is worst in the current scenario. But wethink, there are some Good Diamonds in this Coal Field which Markets are ignoring and if picked properlywill create Huge wealth. Just after the IT Bubble bust, a handful of companies emerged out which helpedInvestors multiply their wealth in a short time span.Ashiana Housing is certainly one of the best managed Real Estate company which has a differentiatedBusiness model to generate good Shareholder returns. Ashiana Housing also scores well in its ambitions togrow as a Pan-Indian housing developer with good execution capabilities. In a sector which is mired withcorporate governance and accounting issues, Ashiana stands out as a star in transparency and openness. Inspite of the High Interest rates, General Economic slowdown and High Land prices, Ashiana has been able toperform well operationally. Hence we are confident that, it would only get better in the future.Important Long term investment arguments include the high Return on Equity (>25%) which thecompany has been able to generate consistently. With good capital allocation skills and strong growthopportunity, Ashiana Housing can generate High un-diluted growth for its shareholders. This high growthalong with a possible P/E expansion will generate strong returns for Investors going forward.Ashiana Housing with its robust business model, High ROCE of >30%, Long term orientation, PrudentManagement and Clean corporate governance is quoting at a valuation of less than 1.2X its book valueand lower than 3X its operating Cash Flow in FY-12. We believe this is a good opportunity to buy a Qualitybusiness at attractive valuations which will help Investors to generate Wealth. Ashiana Housing as a stockhas the potential to grow from a Small Cap stock to a Large Cap stock in the coming decade.Real Estate stocks have come a full circle over the past 6 years. From being the darlings of the Markets inthe previous Bull Run (2003-07) to being beaten down relentlessly (2008-12) and losing over 80% of theirMarket Capitalization. Sentiments about Investing in this sector is worst in the current scenario. But wethink, there are some Good Diamonds in this Coal Field which Markets are ignoring and if picked properlywill create Huge wealth. Just after the IT Bubble bust, a handful of companies emerged out which helpedInvestors multiply their wealth in a short time span.Ashiana Housing is certainly one of the best managed Real Estate company which has a differentiatedBusiness model to generate good Shareholder returns. Ashiana Housing also scores well in its ambitions togrow as a Pan-Indian housing developer with good execution capabilities. In a sector which is mired withcorporate governance and accounting issues, Ashiana stands out as a star in transparency and openness. Inspite of the High Interest rates, General Economic slowdown and High Land prices, Ashiana has been able toperform well operationally. Hence we are confident that, it would only get better in the future.Important Long term investment arguments include the high Return on Equity (>25%) which thecompany has been able to generate consistently. With good capital allocation skills and strong growthopportunity, Ashiana Housing can generate High un-diluted growth for its shareholders. This high growthalong with a possible P/E expansion will generate strong returns for Investors going forward.Ashiana Housing with its robust business model, High ROCE of >30%, Long term orientation, PrudentManagement and Clean corporate governance is quoting at a valuation of less than 1.2X its book valueand lower than 3X its operating Cash Flow in FY-12. We believe this is a good opportunity to buy a Qualitybusiness at attractive valuations which will help Investors to generate Wealth. Ashiana Housing as a stockhas the potential to grow from a Small Cap stock to a Large Cap stock in the coming decade. Specialists in discovering Multibagger stocks 31. Unable to Manage you Equity Portfolio effectively ??Subscribe to the Best Offline PMS Service,The Millionaire Portfolio today !!TMP Your model Portfolio for wealth creationSpend no more than 30 Minutes/ Month tokeep your Portfolio healthy.Grow your Wealth by compounding yourInvestments at a Healthy Rate consistently 32. TMPs 12 High Conviction Portfolio BetsStrong Secular Multibagger Stocks1 I****S*F***** Niche & Growing NBFC This stock has recently come out with astounding Quarterlyresults and we feel that the Market is still not valuing thecompany properly with the potential for further upsides.2 P******C*** Medical Consumables withStrong Product Line-UpCompany has been growing at a rapid pace and with bettermargins, we expect the companys profits to grow tremendouslyin this Fiscal Year.3 D*****F* Fastest Growing HousingFinance CompanyThis company has been growing its Loan book at more than 35%CAGR and has been continuously growing for the past 40 Quarterssequentially with High quality Loan assets.4 G***C***N Best Capital Goods Stock This is a Stock which would Interest even the Worlds BestInvestor, Mr. Warren Buffet. 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A company whose stock hasmultiplied over 100X in the past few years.7 C****W**** Highest ROE Bathroomsolutions companyThe stock has performed brilliantly well and with theManagement commentary, we are sure of even betterperformance going forward.TMP Your model Portfolio for wealth creation 33. 8 A**Y**I***L Indias best Integrated LogisticsSolutions providerThis company is pioneering one of the Highly successful Logisticsconcepts in India and has been very successful in building theInitial traction for this high potential business.9 K**B**K Most Efficient Mid-Cap BankingstockThe Banking stock which is known for its consistency andOperational excellence, is quoting at very attractive valuations.Smart Money is slowly accumulating the stock.10 A**L Low Assets, High ROCE, StrongPromoters in a Auto AncillarycompanyThis company is quoting at an attractive dividend yield of over4.3% and with the expected growth in CV segment, we expect thebusiness to grow well .11 *I**C**N Asias Largest Bio-PharmacompanyThis company has been in the news recently for a wrong reason.But this has allowed us to add more of this stock at attractiveprices. With several possible triggers in the next few quarters, weexpect a positive surprise.TMPs 12 High Conviction Portfolio BetsMPS Subscribers can start maintaining their Portfolio with our TMP Service,For more details, Contact +91 9886736791 (or) [email protected] company has been in the news recently for a wrong reason.But this has allowed us to add more of this stock at attractiveprices. With several possible triggers in the next few quarters, weexpect a positive surprise.12 H*I*** Market Leader and HighGrowth, Building Materialscompany led by a Dynamic &Honest ManagementThis company is by-far the best Proxy company for the growth ofIndian Consumption. Whether you drink a Cool drink, beer orconstruct your Home, the companys product will get used. Thecompany has very High Pricing power.For more Info on performance, http://www.hbjcapital.com/p/millionaire.html 34. THANK YOU Specialists in discovering Multibagger stocks