scorecardresearchBrokerages bullish on Embassy REIT stock as outlook for office leasing set to improve

Brokerages bullish on Embassy REIT stock as outlook for office leasing set to improve

Updated: 29 Mar 2022, 12:35 PM IST
TL;DR.

  • Global brokerage firm CLSA has a 'buy' rating on Embassy REIT with a target price of 413. It believes it is well-positioned due to strategic presence in Bengaluru and its strong occupier base.

A strong ramp-up in physical attendance for Embassy REIT is expected from April 2022 while the leasing demand outlook is strong with 35mn sqft of RFPs in the market.

A strong ramp-up in physical attendance for Embassy REIT is expected from April 2022 while the leasing demand outlook is strong with 35mn sqft of RFPs in the market.

Many brokerages have retained buy calls on the stock of Embassy Office Parks REIT after the recently held analyst meet of the company as the outlook for office leasing is likely to improve owing to the weakening pandemic with more companies asking employees to return to the office.

As Mint reported earlier, the company's management told analysts that it is hopeful of a robust recovery in office leasing from FY23 aided by a ramp-up in physical occupancy level.

Strong hiring by global captive centers (GCC) and IT Product companies would drive this demand, the management said.

Embassy Office Parks is India’s first listed REIT (Real Estate Investment Trust) that owns, as per ICICI Securities, eight high-quality office parks and four prime city centre office buildings with 33.6msf of completed leasable area and under construction and development pipeline of 9.0msf.

In addition to the offices, the REIT also owns two operational hotels across 477 keys, an under-construction hotel of 619 keys and a solar park with 100MW of output. It was listed on April 1, 2019. Embassy REIT is sponsored by Embassy Group (Embassy Property Developments Private Limited) and Blackstone Group. Blackstone Group is based out of the US and has been actively investing in the Indian Real estate market since 2010.

The stock has already gained more than 10 percent in the calendar year 2022 so far against a one percent decline in the benchmark Sensex and brokerages think the stock has the potential to rise even further in the medium term. 

Market sentiment on the stock is ‘extremely positive’, according to a MintGenie poll and an average of 28 analysts has a ‘strong buy’ call on the stock.

Global brokerage firm CLSA has a 'buy' rating on Embassy REIT with a target price of 413. It believes it is well-positioned due to its strategic presence in Bengaluru and its strong occupier base.

ICICI Securities has retained a buy call on the stock with a revised target price of 440 (earlier 425).

The brokerage firm found the management commentary optimistic. As per the REIT manager, pan-India RFPs have increased to 30msf, of which Bengaluru has 60 percent market share and it expects a strong rebound in leasing from April 2022. The company has opened the 4 star Hilton Garden Inn (353 keys) at Manyata in March 2022 ahead of the scheduled June 2022 launch while the adjacent 5 star Hilton (266 keys) which also has a convention centre is expected to open in May 2022.

"Considering the reopening of international flights by end of Mar’22 in India and pick up in domestic business travel, the REIT manager is targeting a breakeven for the Hilton Manyata hotels in FY23 itself while the operational 247 keys Hilton at Golflinks and 230 keys Four Seasons in Bengaluru are estimated to generate positive cash flows on the back of a recovery in the business hotels segment," ICICI Securities said.

Brokerage firm Nirmal Bang also has a buy call on the stock with a target price of 463 after the analyst meet organised by Embassy REIT.

"We remain optimistic and our optimism about the company is in sync with the management’s opinion about recovery in demand in the commercial segment on the back of higher offshoring by global captive centres and technology centres," said Nirmal Bang.

Nirmal Bang highlighted that a strong ramp-up in physical attendance for Embassy REIT is expected from April 2022 while the leasing demand outlook is strong with 35mn sqft of RFPs in the market.

New construction is being accelerated to support higher demand from the corporates. The new supply outlook remains favorable, but the quality of their assets is much better than the new supply, as per management. New cities under consideration – examining ROFO of Chennai asset and a strong rebound in the hotel business, driven by the revival of corporate demand are some of the key takeaways of the analyst meet, Nirmal Bang said.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.

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REIT offer exposure to real estate market without a lot of the hassles that usually come with it. 
First Published: 29 Mar 2022, 12:32 PM IST