Here are the Top Analysts Review and Recommendations for the IPO of
REPCO HOME FINANCE Angel Broking Analysts Sourabh Taparia and Vaibhav Agrawal have the following view,
RHFL generated 22.2% RoE in 1HFY2013E and would trade at 1.8x FY2013E ABV (at the upper end of its price band, based on post-issue networth). Closest comparable peer - Gruh HF (mainly western India, rural and semi-urban focus, largely PSL qualifying home loans) appears extremely expensive at valuations of 7.3x FY2013E BV, notwithstanding its ~30% earnings growth trajectory and ~35% ROEs (FY2013E). Other NBFCs like Mahindra Finance and Shriram Transport Finance operating in different priority sector segments to a varying degree and generating similar return ratios, are trading at 2.6x and 2.3x FY2013E ABV, respectively (but they have larger, relatively more seasoned loan books and longer proven track record). Overall, keeping in mind RHFL’s attractive niche loan segment, strong growth prospects and reasonable valuations, we recommend subscribe to the issue at the upper band.
Ambit Capital has the following Review of the Public Issue,
At the upper end of the price band of `165- `172, the IPO is priced at an implied post money March 2013 P/B of 1.6x-1.7x and March 2014 P/B of 1.3x-1.4x. The implied trailing 12-month P/E is 14.0x- 15.0x and FY14 P/E is 9.0x-10.0x. These valuations are at a ~50% discount to
its peers despite its superior RoAs of 2.9% vs the peer group average’s 2.1% over the past five years. Though the company’s average RoEs have been in line with its peers, the company has historically maintained lower leverage vs its peers. We expect Repco’s valuation discount to narrow after the listing.We recommend that investors subscribe to the IPO at current valuations
Religare Equity Research recommendation is as follows,
Even though the company has posted EPS CAGR of 39% in the past five years, the asset quality has witnessed a deteriorating trend, with riskier target segments. Overall, we believe that RHF is too small a player in the housing finance market commanding a higher valuation as compared to its bigger peers. Even though the company operates in a niche segment with decent margins, the small loan book size coupled with vulnerability to the quality of the book, coupled with falling return ratios does not justify the higher valuation that it is seeking. We have done a peer analysis (refer exhibit 5) to further prove our point that at 1.4x FY2014E, Repco Home Finance is expensive. Hence, we recommend an AVOID to the issue
ICICI Direct has the following View
At the IPO price band of | 165-172, the stock is available at multiple of 1.8x-1.9x FY13E ABV (post dilution). Considering high RoA of 2.4%, strong loan growth trajectory owing to lower base and strong margins of ~4%, we recommend SUBSCRIBE at the upper price band
Sushil Finance Analysts said,
Post issue the equity will expand to Rs.62.16 crore from the current Rs.46.44 crore, which will attribute to a 15.5 P/E (at the price of Rs.172). Also the offer is at a P/BV of 2.26 and compares well with leading peers like LIC HF, HDFC, Gruh Finance etc. We believe current valuations leave a fair bit on the upside. Hence, we recommend ‘SUBSCRIBE’ to the IPO.
ShareKhan has the following Recommendation,
At the offer price, the valuation is at a significant premium to the valuations of peers like Canfin Homes and GIC Housing; and marginally lower than that of the larger players like LIC Housing Finance. Though part of the premium to its peers like CanFin Homes and GIC Housing can be justified on the basis of its superior return ratios (return on asset [RoA] of 2.4% and return on equity [RoE] of 22.2% in Q2FY2013), the minimal discount to LIC Housing Finance would leave little scope for any further rerating and limit the gains in the near term
