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UCP is
developing five Indian SEZs and area under lease has risen 56% year
on year. The completed buildings are near 90% let and certain of the
buildings under construction are already pre-let. UCP has an
ambitious development pipeline but is proceeding in a measured way
and currently the balance sheet benefits from net cash. The
individual SEZ developments are ungeared. Lettings are the value
driver. 2.6m sq. ft. were leased at end 2009; 4.0m February 2011 and
5.1m June 2011. This indicates a UCP run rate of c £20m rental
income pa, a profitable, growing base. Rents are 5.5p per share.
That is with only 25% of the full assets being under lease: an
attractive proposition given nil debt and a 20.5p share price.
Our fair value for Unitech Corporate Parks (UCP) is 49p even
using conservative assumptions of 17% WACC, double figure %
capitalisation rates and much reduced rates of incremental lettings.
The profits prospectively dip as UCP takes on debt (at assumed 12.5%
interest cost) to develop the pipeline.
Here is our research note:
Unitech Corporate Parks plc - 56% Rise
in Annual Income
Mike Foster
Hardman & Co
Tel: 020 7929 3399
kim@hardmanandco.com
www.hardmanandco.com |
