Prime Land Residencies (PLR). Most Over Priced?

God Father

God Father

Senior Manager - Equity Analytics

Posts : 435
Join date : 2019-03-23

Extracts from the official valuation given in the prospects
https://cdn.cse.lk/pdf/upcoming_listing/prime-pros6-23-04-2021.pdf

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 Land Residencies (PLR). Most Over Priced? - Page 4 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 Land Residencies (PLR). Most Over Priced? - Page 4 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.

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Prime Land Residencies (PLR). Most Over Priced? - Page 4 Screen45

Prime Land Residencies (PLR). Most Over Priced? - Page 4 Screen46

Prime Land Residencies (PLR). Most Over Priced? - Page 4 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.

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Prime Land Residencies (PLR). Most Over Priced? - Page 4 Screen49

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

Last edited by God Father on Tue Jul 18, 2023 12:47 am; edited 1 time in total

Thu Jul 01, 2021 3:33 pm by 901886683 · Thu Jul 01, 2021 3:33 pm by 901886683

Atleast 0.40 cents dividend is a relief for PLR share holders . Since its mentioned as an interim dividend , we can expect more in future .

Thu Jul 01, 2021 5:22 pm by chandike73 · Thu Jul 01, 2021 5:22 pm by chandike73

PLR is below the IPO price now and as a long term invesment it seems ok. Directors also collected at 10.40-10.70 range.

901886683 likes this post

Tue Jul 06, 2021 5:36 pm by N W · Tue Jul 06, 2021 5:36 pm by N W

What about the fair value of JAT IPO?

Thu Dec 30, 2021 11:43 pm by **madukp** · Thu Dec 30, 2021 11:43 pm by **madukp**

madukp wrote:The current grounds,

https://servimg.com/view/20300809/21

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.

https://servimg.com/view/20300809/22

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.

The above is my post when almost all the feedbacks were against PRIME. We've seen PLR sudden movement y'day then dropped back. This is not the end. PLR has a journey ahead. May be not run as speculative shares, but a fundamentally strong pick if you want to hold in mid-term.

N W likes this post

Fri Dec 31, 2021 6:48 am by blindhog · Fri Dec 31, 2021 6:48 am by blindhog

22B revenue sitting on grand ward place. Who doesn’t like to own Colombo 7 address.

madukp likes this post

Sat Jan 01, 2022 5:38 pm by bkasun · Sat Jan 01, 2022 5:38 pm by bkasun

If you want to diversify your PF to a real estate counter, Its PRIME (PLR). It is best real estate company listed in CSE and no other real estate counter, in similar nature and capacity, in the bourse.

The fact known to all of us is the real estate pricing are skyrocketing in Colombo and suburbs in recent past. Giant real estate players like PLR will massively be benefiting as they have good land and other real estate properties' inventory and those can now be sold with a premium margin.

Smart investors are collecting the shares like PLR before others and within few months, they will reap a handsome harvest. Probably, within few months, PLR will trade in 20 range..

Sat Jan 01, 2022 8:20 pm by **madukp** · Sat Jan 01, 2022 8:20 pm by **madukp**

Vasyan wrote:Prime LAND will be settled at 12/= .IPO shares always good to sell at first half .. don't worry about exceptions like CWL CRISSWORLD

Let's visit this thread after some time Cool

Sat Jan 29, 2022 9:47 pm by RajapaksaDON · Sat Jan 29, 2022 9:47 pm by RajapaksaDON

Demand for apartments is rising rapidly. We could expect good results in the future quarters.

reyaz likes this post

Thu Feb 03, 2022 2:39 pm by **reyaz** · Thu Feb 03, 2022 2:39 pm by **reyaz**

PROPERTY BUSINESS IS BOOMING!!!

Thu Feb 03, 2022 3:50 pm by Swissinvest · Thu Feb 03, 2022 3:50 pm by Swissinvest

Great Performance and good consolidation. Very soon 16+

Mon Aug 22, 2022 1:00 pm by ChooBoy · Mon Aug 22, 2022 1:00 pm by ChooBoy

Apartment Pricing seems to be getting adjusted after the high inflation of raw material.

New VAT is certainly going affect the future apartment prices.

PLR seems to be gaining value in the market after it's recent low of 4.50/=.

today it traded around 8.30/=

Tue Oct 25, 2022 10:35 am by DeepFreakingValue · Tue Oct 25, 2022 10:35 am by DeepFreakingValue

Prime Land Residencies (PLR). Most Over Priced? - Page 4 Ffql2-10

Condominium Property Volume Index which measures the trend of number of new condominium sales, declined by 51 per cent in for 2Q 2022 compared to the corresponding period of 2021.

According to the information collected through the Condominium Market Survey1 conducted by the Central Bank of Sri Lanka, sale of new condominiums has witnessed a sharp decline during Q2, 2022 as shown in the Condominium Property Volume Index2. The index which measures the trend of number of new condominium sales, declined by 51 per cent compared to the corresponding period of 2021, while recording a significant decline of 84 per cent on Quarter-on-Quarter. The notable increase in bank interest rates has hindered the affordability of credit among potential condominium buyers. At the same time, the uncertain economic conditions that loomed during the quarter due to the energy crisis have also played a major role in delaying purchase decisions among buyers.
The growth trend of the Price Index for New Condominiums3 in Colombo district, which measures the trend in the price levels of new condominiums sold by condominium developers, has continued during Q2, 2022. Accordingly, the index recorded a substantial growth of 43 per cent year-on-year (Y-o-Y) basis and a growth of 13 per cent quarter-on- quarter basis. The shortages of raw material in the market as well as the increase in prices of raw materials were the most likely causes of the sharp increase in prices of new condominiums. The noteworthy increases in the price levels of condominiums may have also hindered the demand in the condominium market.

With the increase in price levels of new condominiums, a clear shift towards higher price categories of condominiums could be observed. Most transactions fall under the price category of Rs. 25 Mn - Rs. 50 Mn. Moreover, noteworthy increases in sales could be observed in Single Condominium projects in Gampaha and Kalutara districts category and in the mixed development projects in the Colombo district.t.

https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/statistics/real_estate_market_analysis_2022_q2.pdf