Redington India has posted positive growth on strong iPhone and Samsung sales but its results are short of overall consensus estimates
Redington India announced a net income of Rs81.9 crore for the December quarter which was in line with Nomura’s estimate of Rs80.2 crore but short of market consensus estimates of Rs83 crore. The drivers of increased income were sales from iPhones and increased contribution from non-IT business. Even Samsung gadgets performed well, too.
According to Nomura, EBITDA after other income (a preferred metric as other income includes discount that company receives from vendors) was 4% above their expectation of Rs168.2 crore, while margins were at 2.86%, or 14 basis points higher than estimates. The report said, “Sales in US dollar terms grew at roughly 1.8% year-on-year as Samsung sales picked up substantially. This, we expect, is on account of improved profitability in Arena (Turkey) and incremental contribution from Samsung.”
Nomura thinks the company is a Buy on account of better performance from Turkey, one of its subsidiaries and improved sales of Samsung gadgets, as Nomura expects Samsung to perform better relative to Apple. It would seem apparent that Samsung is indeed tightening the screws on Apple, which could make Redington perform well as it is engaged in distribution of both the brands.
Apart from this, the macro-economic variable favours the Indian demographic. According to Nomura, the next 10 years will be crucial as the Indian middle-class will rise to occasion and double in numbers, which will fuel demand for consumer electronics and gadgets. As per Nomura, one of the big benefits of Redington is its end-to-end supply chain connectivity and good history of inventory and risk management. Nomura, speaking of Redington’s valuation, said, “The current valuation at 7.7x FY14F EPS is a 34% discount to its discount to its six-year average of 11.7x and is an attractive entry point, in our view.”
Redington India, one of the largest supply chain companies in India has 41 subsidiaries, all spread out at home as well as abroad in South Asia, Middle East, Turkey and Africa, and operate mainly in distribution business, supply chain business, after-sales services of IT and other products and financial services.
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Exploiting the anxiety of missing out that the phrase ‘first come first served’ generates in the minds of buyers, the Lodha Group claims that it received tremendous response for its Worli property. However, two-three years ago, the developer had to seek help from local agents for selling flats in its Lodha Aqua project after failing in a similar mode of selling
Mumbai-based Lodha Group is again trying its luck at selling luxury apartments at its Worli property by creating demand through the “applications through exclusive invitation” route. But last time, when the developer tried this method for its “Lodha Aqua” project near Dahisar—on the outskirts of Mumbai—the move boomeranged. In fact, in May 2010 Lodha Group had to seek help from around 150 local real estate agents to sell properties in the project at reduced rates.
Whether the same thing would happen this time is not known, but Lodha has claimed ‘tremendous’ response for its “Blue Moon” project, similar to the Aqua project. The Lodha Group said it has received 1,300 applications from prospective buyers for an upcoming realty project, which is more than double the number of units up for sale.
“We sold over 1,300 applications for the Blue Moon residential project at Worli in central Mumbai, representing a sale value of nearly Rs6,000 crore. Nearly 30% of the applications came from non-resident Indians (NRIs) and persons of Indian origin (PIOs) while an equal proportion came in from cities like Delhi, Ahmedabad, Kolkata, Hyderabad and Bangalore,” the company said in a statement.
The project with over 600 units, costs Rs3.2 crore onwards per unit. According to Shiv Kumar (name changed), who was one of the invitees, their (Lodha’s) marketing agents launched a blitzkrieg to sell the apartments. “Few days back I met an executive of one of their marketing agencies. They are trying to market the apartments akin to a private placement of shares and are trying to whip up a sentiment that it will be a matter of chance to get a choice flat as demand is huge and applications are open only for few specified days and later allotment will be made by the developers to the lucky ones,” he said.
Creating anxiety in the minds of buyers that they will miss out on a great deal if they don’t act now is an old trick that has been played by businessmen. In the financial markets, it was seen in a host of public issues in the 1990s, the maiden mutual fund offer by Morgan Stanley in 1994 and the public issue of Reliance Power in 2008.
Another interesting gimmick used by the Lodha sales team is the price rise. The pre-launch consisted of two projects, codenamed Alpha and Gamma and house two, three and four bedroom apartments with starting prices between Rs3.2 crore and Rs6.66 crore, excluding 9% infrastructure (additional) charges. Following the pre-launch, Lodha has also announced that the launch price for the project will be at least 20% higher that the “pre-launch offer”.
This is surprising, as just a few days ago, Liases Foras Real Estate Rating & Research Pvt Ltd, in its third quarter review of the residential market, had said the price of new launches was 24% lower than that of the existing supply across India, indicating signs of correction and increase in affordable housing. The price level in the Mumbai Metropolitan Region (MMR) dropped 1% on a quarterly basis indicating the long-due correction in sight. The correction though small in magnitude, is likely to be welcomed by buyers, it said. (Read here Residential market: New launches outpace sales in third quarter)
Lodha said each applicant had to mandatorily state minimum of two preference codes and would have to accept any unit of the said configuration located anywhere in the relevant floor band. This means, the buyer can only choose type of apartment and floor and not the actual flat. Here are the options for the buyer...
Coming to payments, the developer said, the applicant needs to pay Rs9 lakh with his application in the name of Jawala Real Estate Pvt Ltd (a company it bought from DLF). The developer then selects the chosen ones and sends them the “allotment letter”.
If chosen, then the applicant would have to pay 10% of the total value within 21 days, excluding Rs9 lakh paid with the application. In case, the applicant does not want to buy the allotted apartment, he/she would have to inform the decision only through an email within 72 hours of receiving an email of allotment. In case, the applicant has been allotted the apartment as per his “preference code” and wants to cancel, he would have to forgo Rs3 lakh as cancellation charges and wait for the rest Rs6 lakh till 31 March 2013. In case, the applicant is allotted an apartment other than his preference code and wants to cancel, then he would get full amount on or before 31st March. The developer would refund the amounts without any interest.
The chosen ones would then have to pay the rest of the amount in instalments. Most interestingly, the developer would collect about 20% plus 9% (infrastructure charges) of the total value in just 75 days before commencing the project. In case the project starts on time, then the buyer would have to pay 10.1% for the foundation level and 6% and 5% for RCC work, 5% each for partition walls and external facade work and windows and 3% for possession for fit-outs. Here is the payment schedule....
Lodha has promised to give possession of the apartments by December 2017 with a grace period of 12 months. What is surprising is while the buyer would have to pay the money without fail or pay 18% interest, there is no such obligation on the developer. “Project will take four years with one year grace period without any penalty, while the buyers will be charged 18% interest p.a. for every day of delay in payment. This also means a full lock-in for five years or even more till the project is completed,” said Mr Kumar. (Read More controversy over Lodha's Aqua project)
The Lodha Group in August 2012 bought the land parcel from DLF’s unit Jawala Real Estate at Rs2,727 crore, including Rs1,200 for equity and debentures of the company and Rs1,500 crore towards liabilities of Jawala since buying the property from NTC in 2005. The valuation of DLF’s land was, however, lower compared with the Indiabulls’ deal in 2010 for 8.39 acre of NTC land for Rs1,580 crore.
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