DLF - Concludes Aman Resorts sale - Edelweiss

DLF has informed the exchanges it has signed a definitive agreement for the sale of Aman Resorts to Mr. Adrian Zecha. The management buyout by Mr. Zecha is for an enterprise value of USD300mn. The deal is a key positive and implies the company is on track to achieve its guidance of reducing debt levels to INR 185bn by FY13 end. We reiterate 'BUY/Sector Performer' with a NAV/TP of INR263/share.

Event: DLF has informed the exchanges that it has signed a definitive agreement for the sale of Aman Resorts to Mr. Adrian Zecha in a management buyout. The deal is to be valued at an enterprise value of USD300mn (~INR16.2bn) and does not include the New Delhi property (Lodhi Hotel), which is to be retained by DLF. The transaction is slated for final closure by February 2013 and is subject to closing conditions.

Analysis: The above mentioned deal is line with the company's FY13-divestment guidance. While news flows had earlier indicated the deal would go through at a higher amount of ~INR18bn, the consummation of the transaction is significantly positive for the stock. We value DLF's hotel assets (including New Delhi property) at INR19.7bn (8X EV to FY14E EBITDA of INR2.5bn).

Our view: Asset monetisation focus positive; 'BUY'

We view this deal to be a positive one as DLF is currently saddled with a huge debt of INR212bn. The debt-reduction becomes crucial for sustained stock performance. The closure of the deal would bring total divestments in FY13 to ~INR47.5bn as against its guidance of ~INR50bn for FY13. Further divestment in wind power business, which is in advance stages of negotiations, is expected to generate another ~INR9bn for the company. We reiterate 'BUY/Sector Performer' on DLF with TP of INR263/share.

Source : Equity Bulls

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