Man Infra IPO subscribed; should you invest?
Man Infraconstruction has opened its 56,25,150 equity shares initial public offering (IPO) for subscription. It plans to raise upto Rs 141.75 crore from this issue at the higher end of price band, which is at Rs 243-252 per share. The issue will close on February 22, 2010.
The issue has been receiving good response, overall subscribed nearly 7 times, as per data available on the NSE web site. Qualified and non-institutional investors supported the issue; their reserved portion subscribed 11.62 times and 9 times, respectively.
Experts and brokerages views were mixed on this IPO. Investment Advisor, SP Tulsian said the issue looked expensive while Manish Bhatt of Prabhudas Lilladher said one could subscribe.
Tulsian said, “Man Infra is basically a realty contracting company, and though it says it provides construction services for port infrastructure, residential, industrial, commercial and road infrastructure projects, its main bread winner is through building residential properties. As at 31st of Dec 2009, 83% of the outstanding order book of the firm of Rs. 3,020 crore was in residential projects, of which about 50% was for slum redevelopment and 10% for commercial and less than 5% was for ports.”
“For FY10, based on the performance till 9MFY10, we can safely estimate that the company would have a topline of Rs 550 crore and PAT of Rs 100 crore, meaning we are looking at an EPS of Rs 22. This means, on the upper price band of Rs 252, it is at a PE of 11 times. Most of the existing companies are currently quoted at a PE of around 7 to 9 times. Man, the company really thinks it’s the cat’s whiskers! The entire effort of the company, post IPO would be wasted on sustaining these existing margins and not about growth. The IPO is way too expensive, both at the upper as well as the lower price band. When realty companies are wooing people with ‘affordable housing’, how can its contractors make handsome profits? Would investors be really interested in a company whose shares are being offered at an unaffordable price?”
Manish Bhatt of Prabhudas Lilladher said retail investors could subscribe to the issue at cut-off price. Thought the issue looks highly priced, one can get listing gains, he says.
Brokerage views
Keynote Capitals Research says, “Earnings estimates, computed on the basis of year-wise execution of order book, stand at Rs 15.97 and Rs 20.64 per share for FY10E and FY11E respectively, giving a p/e multiple of 15.8x and 12.2x for FY10E and FY11E respectively. In comparison, IVRCL Infrastructure trades at 10.1x FY10E and 10.8x FY11E, and Nagarjuna Construction at 20.8x FY10E and 20.9x FY11E. We believe MIL’s valuation is attractive in view of the high EBITDA margins the company enjoys, which are higher than peers.”
Reliance Securities says, “With the construction industry expected to grow at a healthy CAGR of 35% during FY09-13 and Infrastructure spending especially in roads, power, irrigation and urban infrastructure to increase substantially, MIL stands a clear chance to capitalize on with its strong and diverse order book portfolio along with strong clientele base with higher sustainable margins. Moreover, the ports sector is expected to grow threefold to Rs 325 billion over the next 5 years presenting significant growth opportunity for MIL which has a decent track record in port infrastructure construction (better margins than real estate).”
“At the higher price band of Rs 252, the stock quotes at P/BV of 3.8x post dilution and a PE of 14.1x its FY10E annualized EPS of Rs 17.9. Looking at the strong operational efficiency with high growth opportunity in the construction industry, along side its healthy cash flow generation with negligible debt augers well for the company, hence we believe MIL provides a good opportunity for investors and recommend subscribe at a higher band to the issue,” according to Reliance Securities’ report.
Swastika Investmart says, “Man Infraconsruction’s IPO is aimed at funding its capital equipments purchasing requirements and general corporate purpose. The company enjoys expertise for various important construction activities viz. residential, commercial, industrial, port & road construction. Further, company enjoys good order book which is another strong feature. Considering the long-term infrastructure story in the country to continue and MAN’s significant experience in this field we recommend applying for the issue with price target of Rs 400 in medium term. Listing gains of upto 20% can also be seen on stock as IPO seems to be prudently priced.”
Angel Securities says, “MInfra’s main client, DB Realty, has also been successful in raising funds to the tune of Rs 1,500 crore via an IPO, which augurs well for MInfra. We have accordingly factored in MInfra’s Order inflow in our model. On the Operating front however, as mentioned earlier, we have factored in sharp dip in Margins. As a result, we estimate the company to report subdued Bottom-line CAGR of a mere 8% over FY2009-12E.”
“On the valuation front, the IPO is available at a P/E of 11-12x FY2012E Earnings on the lower and upper price bands respectively, which is at a premium to listed players. Moreover, due to the concentrated nature of business and subdued Earnings growth, we believe the stock should trade at a discount to its peers. Hence, we recommend an avoid to the issue,” according to Angel Securities report.
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Category: IPO
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