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January 26, 2011

Value Pick 4 : Agre Developers Ltd

Note : SOLD ALL Holding  at loss of 30% . Buying it was was mistake


Happy Republic Day!

                  I occasionally go through mutual fund holdings to check something new interesting pick from Mutual Funds. Agre Developers Ltd caught my eye but I ignored it , because I thought it might be a another plain real estate stock and right now I am not bullish on real estates stocks . Then I saw Agre Developers Ltd in couple of more mutual funds portfolio. Then, my curiosity toward Agre Developers Ltd increased . I verified, how many MFs are holding Agre Developers Ltd ? I was surprise to see that around 49 MF schemes holding Agre Developers Ltd and it is having market cap of merely 57 crores . How is that possible ? I had never heard about this company . So first of all I started to see history of Agre Developers Ltd.
History : 
               Agre Developers Ltd  is future group of company , which came in to existence 3 weeks back when Agre Developers Ltd was demerged from Pantaloon Retail (India) Ltd. Agre Developers Limited (ADL) was originally incorporated on March 10, 2008 with the name Future Mall Management Limited . So Agre Developers Ltd  is having very short history. Agre Developers Limited is a Future Group company that will provide a comprehensive mall/property management and services in India including positioning, finance management and mall advisory services.Agre Developers currently operates six shopping malls: Orchid City Centre and Milan Mall in Mumbai; Cosmos and Lido Malls in Bengaluru; Ahmedabad City Centre in Ahmedabad and Cosmos Mall in Siliguri. 

Reason for Value Buy (CMP Rs 51) :
              First of all brand name, Future Group. Agre Developers Ltd has shown loss of 1 cr on consolidated account for six months from 1 April 2010 to 30 Sep 2010, then also I believe, it should get reasonable valuation . Current market cap is merely 57 Crores for well reputed future group is quite low. Pursuant to the Scheme, the Mall Management Undertaking and Project Management undertaking of Pantaloon Retail (India) Limited (PRIL) got demerged and vested in Agre Developers Limited (ADL) (Formerly: Future Mall Management Limited) and inconsideration ADL has allotted 1,11,70,966 equity shares to the shareholders of the PRIL in the ratio of 1 fully paid equity share of Rs.10/- each of ADL for every 20 equity shares of Rs.2/- each held in PRIL.
             First of all we will do layman's maths . Pantaloon Retail (India) Limited has market cap of 7000 crores and shareholder of PRIL got a share of Agre Developers Ltd in the ratio of 20:1 . So if we do basic maths then we will divide 7000 by 20 that should be market cap of Agre Developers Ltd if we ignore other details like cash , debt and assets on the book. This comes to 350 cr and current market cap of Agre Developers Ltd is merely 57 crores.

             Now have a look at balance sheet of Agre Developers Ltd.
            
            Agre Developers Ltd has investment worth 254.79 crores at book value in Subsidiary Company Agre Properties & Services Ltd .

             If we see consolidated balance sheet for the period from april 1, 2010 to September 30, 2010 Agre Developers Ltd has Net Current Asset of 114 crores and investment of 16 crores (Gupta Infrastructure (India) Private Limited 7.68 cr ) and debt of 86 crores . So we are getting company which is having current liquidation value of 44 crores  against market cap of 57 crores.So in the balance 13 crores we are getting all the fixed assets , goodwill etc.


Particulars
As at September 30, 2010 (crores)
Share Capital
11.17
Reserves & Surplus
254.49
Unsecured loans
85.69
Investments
16.32
Inventories
3
Sundry Debtors
33.36
Cash and Bank balances
2.1
Loans and Advances
105.4
Current liabilities & Provisions
29.44
Net Current Assets
114.4


Catalyst to achieve intrinsic value :
               Most of retail investor are not aware about this company . As & when investor will aware about Agre Developers Ltd and it belongs to future group then it will start to get premium valuation . Same time I feel most of the MF and FI will exit from this stock and retail investor will enter in it. Agre Developers currently operates six shopping malls . Agre Developers Ltd is engaged in setting up of over 24 shopping malls and consumption centers, all of which will be operational by 2011. That will boost financial performance of this stock.
Downside Risk :
               Downside risk is quite limited but same time we should have to understand that it can not immune from real estate sector risk. Company had amendment to the ‘main objects clause’ of the Memorandum of Association of the Company which would enable the Company to undertake construction and development activities.
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HAVE A NICE DAY ..............



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4 comments:

  1. As per latest shareholding settlement of a company, Rekha Rakesh Jhunjhunwala holds 143,323 shares or 1.28% interest in Agre developers final quarter. Does Rakesh Jhunjhunwala's stake going to benefit Agre Developers ?

    ReplyDelete
  2. Hi Prakash,
    Rekha / Rakesh Jhunjhunwala was already holding Pantaloon Retail (India) Limited . So I believe Rakesh Jhunjhunwala might have got all the share after demerger. Rakesh Jhunjhunwala is holding Agre Developers Ltd so lot of mutual funds as well.Most of these mutual fund existed Agre Developers Ltd as it was expected . Rakesh Jhunjhunwala's holding will help price of Agre Developers Ltd in very short term . If Rakesh Jhunjhunwala increases his stake then it will help immensely to Agre Developers Ltd. I believe he will give time to company to perform , once company started to perform Rakesh Jhunjhunwala will not hesitate to increase his stake . As we all know Rakesh Jhunjhunwala like India's consumer story and Agre Developers Ltd fits in that criteria .Of course , there will be lot of factors Rakesh Jhunjhunwala will consider before increasing his stake in Agre Developers Ltd .

    But one thing is sure small cap Agre Developers Ltd will be on radar of lot of investors. Ashish Chugh has already declare Agre Developers Ltd as possible multi bagger. I believe, it will became multi bagger if company controls balance sheet well.

    ReplyDelete
  3. surely this will be a multi"Beggar"

    ReplyDelete
  4. its 7 rupees now. and never ever seen any up rise since inception !!!

    ReplyDelete

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