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FINANCIAL CHRONICLE™ » EXPERT CHRONICLE™ » Prime Residencies IPO. Over Priced?

Prime Residencies IPO. Over Priced?

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God Father


Manager - Equity Analytics
Manager - Equity Analytics
We have carried out a detailed analysis of the business operations of PLR to arrive at an average of the Discounted Cashflow based valuation method and P/E multiples based method on trailing 12 months’ earnings and forward earnings, and the results have been summarized below.

Prime Residencies IPO. Over Priced? - Page 3 Prime10

We estimate the Ordinary Voting Shares of PLR to have an average fair value per share of LKR 17.39, given the Company’s operational and strategic dynamics and industry dynamics of the residential real estate industry in Sri Lanka.
Considering your intention to offer an upside to potential investors and the healthy marketability of shares, we recommend an Issue Price of LKR 10.40 per share at an Earnings Multiple of 8.01x, 34% discount to the DCF based value, 36% discount to the trailing P/E based method and 48% discount to the forward P/E based method.

Prime Residencies IPO. Over Priced? - Page 3 Screen43

8.0 VALUATION RESULTS
The following section illustrates key valuation assumptions and the resultant equity valuations as at 31 January 2021 for the Company based on the methods discussed in this Research Report.
8.1 Discounted Cash Flow Methodology
Free Cash Flow to Firm formula has been used in calculating the fair value of Ordinary Voting Shares of Prime Lands Residencies Ltd.
8.1.1 Cost of Equity
▪ Risk free rate: eight year treasury bond rate of 7.07% as of 15 September 2020 (source: Central Bank of Sri Lanka) has been used as the base risk free rate and the risk free rate has been assumed to increase up to 9.99% by FYE 31 March 2024 and remain constant thereafter.
▪ Market risk premium of 5% has been assumed.
▪ An alpha of 5% has been assumed in order to accommodate unsystematic risk factors pertaining to the
valuation.
8.1.2 Cost of Debt
▪ Pre tax cost of debt of the Company has been assumed to be at 8% in FYE 31 March 2021 and assumed to increase gradually up to 12% by FYE 31 March 2024. Thereafter, the pre tax cost of debt is assumed to remain constant at FYE 31 March 2024 level during the explicit forecast period.
▪ Corporate income tax rates as elaborated in Section 6.8 above has been used in calculating the post tax cost of debt.
8.1.3 Capital Structure and Weighted Average Cost of Capital (WACC)
A variable gearing ratio methodology over the explicit forecast period and a optimal gearing ratio of 11.80% in the terminal period have been used in arriving at the weighted average cost of capital for the Company.
8.1.4 Terminal Growth Rate
A terminal growth rate of 2% has been used in arriving at the terminal value of the Company.

Prime Residencies IPO. Over Priced? - Page 3 Screen44
Prime Residencies IPO. Over Priced? - Page 3 Screen45
Prime Residencies IPO. Over Priced? - Page 3 Screen46
Prime Residencies IPO. Over Priced? - Page 3 Screen47

Unrealistic Assumptions and forecasts to justify over pricing.

6.2 Cost of Sales
The average gross profit margin (excluding project finance expenses) of completed projects as at 30 September 2020 is 29.23%.
The average gross profit margin (excluding project finance expenses) of projects which are under construction as at 30 September 2020 is 26.25%.
Furthermore, the gross profit margin of future projects which are to be initiated during the explicit forecast period has been assumed as 25%.
In addition to the above, project overhead cost of 0.30% of the total net revenue and costs on repurchases of 0.50% of the total net revenue has been assumed under cost of sales of Prime Lands Residencies Ltd during the explicit forecast period.

Prime Residencies IPO. Over Priced? - Page 3 Screen48
Prime Residencies IPO. Over Priced? - Page 3 Screen49


https://cdn.cse.lk/pdf/upcoming_listing/prime-pros6-23-04-2021.pdf

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Post Thu Jun 10, 2021 6:14 am by Harry82

Rs 8.00 is the best price.

Post Thu Jun 10, 2021 11:55 am by Good bad

What’s happening to prime residencies?
Price Gradually decreasing day by day !

Post Thu Jun 10, 2021 12:00 pm by SAGA

Yes Harry I think it will come down to 8/= - 8.50/=

Post Thu Jun 10, 2021 12:23 pm by Good bad

Seems like damage is recovering now!! Price is slowly going up

Wolf86

Post Thu Jun 10, 2021 12:27 pm by Wolf86

10. 80 to 11.50 best buy.. It will fly soon

avatar

Post Thu Jun 10, 2021 12:56 pm by madukp

Wonder why ppl are selling this low? See the negativity spreading in the forum. The same is happening around everywhere. Someone could argue over certain financials, but the general truth is PLR IPO is not overpriced. 10.40 was a reasonable price and still who don't realize it and driven by negativity will sell their portions. That's the only true reason for the downtrend. When these panickers stopped, the share will be settled at a reasonable price and start moving upward. No one could say they don't give dividends. There will be a dividend around the corner. It's a good buy-around current price.

avatar

Post Thu Jun 10, 2021 1:06 pm by ChooBoy

Accounting Fraud?

@ChooBoy wrote:Prime Residencies IPO. Over Priced? - Page 3 Screen34

Wonderful Financial Forecast. LKR 15bn cash lying in the basement of Prime Residencies in year 2025.
HIKZZZZ....

Prime Residencies is heavily exposed to execution risks in certain real estate projects: During FY2017, the Company had launched a new larger scale tier-01 apartment project in Colombo-07 (with the total sales value of LKR 30 Bn), targeting the premium market in the country. This project is a 100% residential apartment project, unlike other mixed development projects in the City. PRIMER has currently completed ~60% of this project and is expected to complete it in CY 2021.

After adjusting for the debts taken up for the project, this project has currently reached the breakeven sales levels. Going forward, the Company intends to fund the completion of this project from the pending cash collections (of the presales customers) as well as new sales without significant debt facilities. ICRA Lanka would continue to monitor the progress of this project and the ability of the management to successfully achieve its sale and cost targets within the envisaged time-lines would remain as a sensitivity to the assigned rating.

avatar

Post Thu Jun 10, 2021 2:53 pm by SAGA

Pls find below link for todays trading summery.

https://www.youtube.com/watch?v=6l3Ue9ZNH7Q

avatar

Post Thu Jun 10, 2021 8:58 pm by Swissinvest

Based on trade sum Anyone who had bought below 11.5 will realize good gain by next week. Over 80% of trade value above 11.50 only 20% below 11.50. Usually first 2-4 days of an IPO a drop is normal. Also the total trade values are still very low. And given the affordability of this stock at the current lowest price it is bound to rise with a small push there could be a rally above 15 in the short run.

madukp likes this post

reyaz

Post Thu Jun 10, 2021 10:19 pm by reyaz

Corporate people dont go around drawing fake books & slandering (putting down) people that matter, Prime Lands is certainly backed by the best team in the industry. I feel guilty yet happy I managed to get shares at special discount. I am sure I am not alone. If Gamestop showed us anything, it is that countrymen and women who have to be mindful and revolve wherever necessary. I am willing to bet on this team, the question is, are you?

As always, I recommend to take your decision and stand strong!

deli likes this post

deli

Post Thu Jun 10, 2021 10:36 pm by deli

I come from a marketing background, my father is a licensed Realtor in Colombo. I think this slandering is not limited to the developers, you are (at least indirectly) intimidating Realtors and basically all levels of staff involved in the realestate industry. I know for a fact that there is a lot of work where companies like Prime Residencies is concerned. Clearing the project, gaining popularity to ensure sales, feasibility study and more importantly getting the correct people on board! Even this sugarcoated version sounds exhausting doesn't it?

Imagine the real work!

Atleast now do you realize that this is a well oiled machine? I know it will be when the funds are being utilized properly.

Stay sharp whatever happens

avatar

Post Thu Jun 10, 2021 11:29 pm by God Father

Prime Residencies IPO. Over Priced? - Page 3 Screen52
Prime Residencies IPO. Over Priced? - Page 3 Screen57
Prime Residencies IPO. Over Priced? - Page 3 Screen58

Calculate the Book Value per share of PLR.
You will be surprised to see the amount of premium IPO subscribers have paid..
Evil or Very Mad

https://ipo.primeresidencies.lk/pdf/Audited-Financial-Statements-31st-Jan-2021.pdf

High-flyer

Post Fri Jun 11, 2021 12:25 am by High-flyer

@God Father wrote:Prime Residencies IPO. Over Priced? - Page 3 Screen52
Prime Residencies IPO. Over Priced? - Page 3 Screen57
Prime Residencies IPO. Over Priced? - Page 3 Screen58

Calculate the Book Value per share of PLR.
You will be surprised to see the amount of premium IPO subscribers have paid..
Evil or Very Mad

https://ipo.primeresidencies.lk/pdf/Audited-Financial-Statements-31st-Jan-2021.pdf

What is the BV of CTC, LLUB

avatar

Post Fri Jun 11, 2021 12:52 am by ChooBoy

දම්මිකයි, ඉෂාරයි Share split දුන්නේ IPO වලින් පස්සේ. මුන් මුනටම SPLIT දීගගෙන IPO එකට එන්න කලින්.
අනේ මෙහමත් මගඩි.

Prime Residencies IPO. Over Priced? - Page 3 Screen35

avatar

Post Fri Jun 11, 2021 1:21 am by God Father

@High-flyer wrote:
@God Father wrote:Prime Residencies IPO. Over Priced? - Page 3 Screen52
Prime Residencies IPO. Over Priced? - Page 3 Screen57
Prime Residencies IPO. Over Priced? - Page 3 Screen58

Calculate the Book Value per share of PLR.
You will be surprised to see the amount of premium IPO subscribers have paid..
Evil or Very Mad

https://ipo.primeresidencies.lk/pdf/Audited-Financial-Statements-31st-Jan-2021.pdf

What is the BV of CTC, LLUB

Prime Land Residencies IPO
The IPO was aimed at raising Rs. 1.9 billion, with 100 million shares at Rs. 10.40 raising Rs. 1 billion as the first tranche, with an option to issue a further 87.5 million at the same price bringing the total to Rs. 1.9 billion. The stake offered was 20%. https://www.ft.lk/front-page/Prime-Lands-Residencies-Rs-1-9-b-IPO-fully-oversubscribed/44-717821

Share Capital
Shares in issue Before IPO = 750mn shares (150mn shares were split into 750mn shares in January 2021)
Shares issued through IPO = 187.5 mn shares
Total Shares after IPO = 937.5 mn shares

Net Asset Value
Net Asset Value (NAV) Before IPO = LKR 3,184mn
Amount raised rom IPO = LKR 1,900mn
Total Net Asset Vale (BV) after IPO = LKR 5,084mn
Total Issed Shares after IPO = 937.5mn shares
NAV or BV per Share = LKR 5.42

Fair Value per share
NAV or BV per Share = LKR 5.42
Sector Price/BV (High) = 1.50X
LKR 5.42 X 1.5 Times

Fair Value =LKR 8.13 Per Share

soileconomy

Post Fri Jun 11, 2021 3:49 am by soileconomy

@God Father wrote:
@High-flyer wrote:
@God Father wrote:Prime Residencies IPO. Over Priced? - Page 3 Screen52
Prime Residencies IPO. Over Priced? - Page 3 Screen57
Prime Residencies IPO. Over Priced? - Page 3 Screen58

Calculate the Book Value per share of PLR.
You will be surprised to see the amount of premium IPO subscribers have paid..
Evil or Very Mad

https://ipo.primeresidencies.lk/pdf/Audited-Financial-Statements-31st-Jan-2021.pdf

What is the BV of CTC, LLUB

Prime Land Residencies IPO
The IPO was aimed at raising Rs. 1.9 billion, with 100 million shares at Rs. 10.40 raising Rs. 1 billion as the first tranche, with an option to issue a further 87.5 million at the same price bringing the total to Rs. 1.9 billion. The stake offered was 20%. https://www.ft.lk/front-page/Prime-Lands-Residencies-Rs-1-9-b-IPO-fully-oversubscribed/44-717821

Share Capital
Shares in issue Before IPO = 750mn shares (150mn shares were split into 750mn shares in January 2021)
Shares issued through IPO = 187.5 mn shares
Total Shares after IPO = 937.5 mn shares

Net Asset Value
Net Asset Value (NAV) Before IPO = LKR 3,184mn
Amount raised rom IPO = LKR 1,900mn
Total Net Asset Vale (BV) after IPO = LKR 5,084mn
Total Issed Shares after IPO = 937.5mn shares
NAV or BV per Share = LKR 5.42

Fair Value per share
NAV or BV per Share = LKR 5.42
Sector Price/BV (High) = 1.50X
LKR 5.42 X 1.5 Times

Fair Value =LKR 8.13 Per Share
Very reasonable calculation.

deli

Post Fri Jun 11, 2021 8:30 am by deli

@soileconomy wrote:
@God Father wrote:
@High-flyer wrote:
@God Father wrote:Prime Residencies IPO. Over Priced? - Page 3 Screen52
Prime Residencies IPO. Over Priced? - Page 3 Screen57
Prime Residencies IPO. Over Priced? - Page 3 Screen58

Calculate the Book Value per share of PLR.
You will be surprised to see the amount of premium IPO subscribers have paid..
Evil or Very Mad

https://ipo.primeresidencies.lk/pdf/Audited-Financial-Statements-31st-Jan-2021.pdf

What is the BV of CTC, LLUB

Prime Land Residencies IPO
The IPO was aimed at raising Rs. 1.9 billion, with 100 million shares at Rs. 10.40 raising Rs. 1 billion as the first tranche, with an option to issue a further 87.5 million at the same price bringing the total to Rs. 1.9 billion. The stake offered was 20%. https://www.ft.lk/front-page/Prime-Lands-Residencies-Rs-1-9-b-IPO-fully-oversubscribed/44-717821

Share Capital
Shares in issue Before IPO = 750mn shares (150mn shares were split into 750mn shares in January 2021)
Shares issued through IPO = 187.5 mn shares
Total Shares after IPO = 937.5 mn shares

Net Asset Value
Net Asset Value (NAV) Before IPO = LKR 3,184mn
Amount raised rom IPO = LKR 1,900mn
Total Net Asset Vale (BV) after IPO = LKR 5,084mn
Total Issed Shares after IPO = 937.5mn shares
NAV or BV per Share = LKR 5.42

Fair Value per share
NAV or BV per Share = LKR 5.42
Sector Price/BV (High) = 1.50X
LKR 5.42 X 1.5 Times

Fair Value =LKR 8.13 Per Share
Very reasonable calculation.
The "Sector" deals with Assets that always apreciates in value, faster than Gems and jewellery Industry and similar products I might add.

High-flyer

Post Fri Jun 11, 2021 9:40 am by High-flyer

@deli wrote:
@soileconomy wrote:
@God Father wrote:
@High-flyer wrote:
@God Father wrote:Prime Residencies IPO. Over Priced? - Page 3 Screen52
Prime Residencies IPO. Over Priced? - Page 3 Screen57
Prime Residencies IPO. Over Priced? - Page 3 Screen58

Calculate the Book Value per share of PLR.
You will be surprised to see the amount of premium IPO subscribers have paid..
Evil or Very Mad

https://ipo.primeresidencies.lk/pdf/Audited-Financial-Statements-31st-Jan-2021.pdf

What is the BV of CTC, LLUB

Prime Land Residencies IPO
The IPO was aimed at raising Rs. 1.9 billion, with 100 million shares at Rs. 10.40 raising Rs. 1 billion as the first tranche, with an option to issue a further 87.5 million at the same price bringing the total to Rs. 1.9 billion. The stake offered was 20%. https://www.ft.lk/front-page/Prime-Lands-Residencies-Rs-1-9-b-IPO-fully-oversubscribed/44-717821

Share Capital
Shares in issue Before IPO = 750mn shares (150mn shares were split into 750mn shares in January 2021)
Shares issued through IPO = 187.5 mn shares
Total Shares after IPO = 937.5 mn shares

Net Asset Value
Net Asset Value (NAV) Before IPO = LKR 3,184mn
Amount raised rom IPO = LKR 1,900mn
Total Net Asset Vale (BV) after IPO = LKR 5,084mn
Total Issed Shares after IPO = 937.5mn shares
NAV or BV per Share = LKR 5.42

Fair Value per share
NAV or BV per Share = LKR 5.42
Sector Price/BV (High) = 1.50X
LKR 5.42 X 1.5 Times

Fair Value =LKR 8.13 Per Share
Very reasonable calculation.
The "Sector" deals with Assets that always apreciates in value, faster than Gems and jewellery Industry and similar products I might add.

Companies like OSEA & CLND has investment properties which revalue over the years. Due to that their NAV is high. 

But PLR, they acquire lands, develop and transfer. so there is no sizeable Long term assets in PLR b/s. So the NAV is less.

avatar

Post Fri Jun 11, 2021 3:04 pm by SAGA

Pls find below link for todays trading summery.



https://www.youtube.com/watch?v=lT_Mez70b0w

avatar

Post Sat Jun 12, 2021 11:28 am by Swissinvest

VolumeValueVolumeValue
Below 1223,181,222263,772,72336%33%
Above 1240,969,161526,447,75264%67%
64,150,383790,220,475100%100%

VolumeValueVolumeValue
Below 11.514,945,225166,058,89023%21%
Above 11.549,205,158624,161,58577%79%
64,150,383790,220,475100%100%

TRADE SUM TO DATE - BOUND TO REBOUND

madukp likes this post

avatar

Post Sat Jun 12, 2021 11:39 am by Swissinvest

FUTURE POSITIVE
Prime Residencies IPO. Over Priced? - Page 3 Untitl10

avatar

Post Sat Jun 12, 2021 4:50 pm by Vasyan

Better to re-enter with this if it comes to 10/= or 10.50. I sold my IPO 2nd day.

High-flyer

Post Sat Jun 12, 2021 5:21 pm by High-flyer

@Vasyan wrote:Better to re-enter with this if it comes to 10/= or 10.50. I sold my IPO 2nd day.

10.70/10.80 proved to be hard to break. if volume is there for another 3/4 days. Will have upward movement.

Management talked abt Dividend too at IPO stage. 

15 - 22% gain is much expected from here.

madukp likes this post

avatar

Post Fri Jun 18, 2021 12:37 am by madukp

The current grounds,



Despite the mass negative marketing in social media, PLR, selling pressure is slowing down. There is considerable investors holding the share at IPO price. Still, we can see some influences are trying to break 10.40 and bring it down to grounds. It's too early to predict, but gradually this will turn another side and start picking up slowly. Hopefully, the dividend announcement will be the kickstart.



It's good news that PLR directors are supporting the share at current levels. Most of the criticisms regarding PLR baseless. PLR has a proven business model. These businesses are running on loans, that is the nature of the business. Personally, I believe it's a good time to collect the share at current levels.

Disclaimer, I own PLR shares from IPO and holding, and collecting slowly. This is not a promotion of the share and it's my personal view. no recommendation of buying or selling.

CHRONICLE™ and sheildskye like this post

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