Buy Sobha Developers; tgt Rs 1222: CLSA "FII" feb 5

CLSA has recommended buy rating on Sobha Developers with target price of Rs 1222, in its report dated 04 February, 2008. The report says, "Ongoing and planned projects contribute just 15% of Sobha’s landbank and account for 29% of its NAV value. 72% of its NAV is from unplanned projects, which we have valued at an EV/sft of Rs 366, 55% discount to its existing and planned projects. Lower valuation is on account of lesser clarity on land bank usage pattern & their precise location; and longer time horizon for development of these projects. We have valued Sobha’s contractual business at 5x FY09 EV/EBITDA, giving a value of Rs 57/share. At Rs 747, Sobha is trading at a discount of 49% to its NAV; very attractive considering the lower risks inherent in its ramp up plans and a strong land reserve position."

Report further says, "Our target price of Rs 1,222 is based on equal weightage to 18x FY10 earnings of Rs 62.9/share and 10% discount to its NAV of Rs 1,458. At Rs 747, stock offers 64% upside," says report.