The common factor in Bombay Dyeing and Century is that both are owning land at Worli. Century owns 40 acres of land with its staff colony on 10 acres and mill on 30 acres. Land of Century is better placed than that of Bombay Dyeing as it is towards Worli side where cost of premises is higher by about Rs 10,000 per sq. ft.
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Century Textiles closed its textile mill at Worli, paid off all the labours, and obtained the closure permission from Labour Commissioner and Government of Maharashtra. Hence, property is all set for development on the lines of Bombay Dyeing
It is learnt that all the plans are in place and suitable announcement of development would be made by Century, soon.
Century is first planning to develop its Mill property of 30 acres which would result in a developable area of about 40 lakh sq. ft., saleable area, into I.T. Parks, Hotels, Commercial and Retail. Development of staff colony on 10 acres would be taken up afterwards as about 990 workmen are staying in the colony. Even after giving alternate accommodation to these workers, free of cost of about 350 sq. ft. to each worker, this colony shall give saleable area of about 10 lakh sq. ft.
Going by the valuation parameters, construction and development of 40 lakh sq. feet would cost about Rs 1,500 crores, while same would have realization of over Rs 14,000 crores. The company is not planning to sale any significant portion but is planning to lease it. The whole development can be completed in the next 3 – 4 years. The whole property can give an annual rent of close to Rs 1,000 crores to the company.
The present market capitalization of Century is close to Rs 7,500 crores, which is close to its net present value of realty project alone. In addition to Worli property, Century owns Century Bhavan at Prabhadevi, having area available for development of close to 2 lakh sq. ft. and about 1.5 lakh sq. ft. at Shivaji Park known as Century Flats. Both these properties have present value of close to Rs 2,000 crores and would see development very soon in the near future.
Apart from these realty, which supports its market price of Rs 780 per share, the company is a leading player for manufacturing cement, paper and chemicals. The cement capacity of 6.6 million TPA is being expanded to 8.0 million TPA while paper plant capacity of 2 lakh TPA is being raised to 4 lakh TPA.
The company is setting up 500 TPA Multilayer Packaging Board Plant with 40 MW steam turbine with total outlay of Rs 775 crores which would be completed by Sept. 09. The company is also setting up a 450 TPA papergrade pulp plant with an outlay of Rs 495 crores, to be operational by September 09. This plant would meet pulp requirement of existing and new paper plant.
For 9 months ending 31-12-07, the total income of the company was at Rs 2,500 crores with EBITDA of Rs 535 crores, PBT of Rs 350 crores and PAT of Rs 252 crores, giving an EPS of Rs 27 for the period. This is after providing Rs 58 crores being payment under VRS and Rs 13.60 crores being depreciation of earlier years. This otherwise would have raised EPS by Rs 8 for the period.
Margin of cement division of the company is quite robust comparable with industry leaders as EBIT is at 27.8% for 9 months ending 31-12-07. Similar is the case with its paper division where EBIT is at 15.50% for the period. Margins of paper division would improve further, post starting papergrade pulp plant.
The big positive for the company would be commencing development work of Worli property which can take share price to move to Rs 1,200 levels. The value of cement and paper plants are at close to Rs 10,000 crores which is less than the present market capitalization and enterprise value of the company.
Valuation of its textile plant in M.P. and Chemical Division at Kalyan near Mumbai has not been considered. Chemical division at Kalyan is on land of over 600 acres which has its valuation of over Rs 1,200 crores. The company is having huge value in the form of earning assets and realty, which would start yielding annuity income in the next 2 – 3 years.
Share at Rs 824 is virtually available at half of its real value. Share has potential to move to Rs 1,200 levels very soon. The Board of the company is meeting on 4th May 08 to finalise FY 08 results.
A safe and excellent bet at Rs.824, which is capable to give 50% return in a year.