Overseas Realty (Ceylon) PLC (OSEA) – Buy ⭐⭐⭐
Current Price: Rs. 38.10 P/E Ratio: ~6.3× (below peer and sector averages)
PEG Ratio: ~0.28 (signals undervaluation)
Dividend Yield: ~3.7%
Investment Thesis
OSEA is an undervalued asset play anchored by two landmark Colombo properties — the World Trade Center and Havelock City. With the Havelock City Mall now 94% occupied and Mireka Tower steadily leasing (~42% as of end-2024), rental income is ramping sharply. In the first 9 months of 2024, Mireka Tower generated Rs. 707M in rent (vs. Rs. 412M YoY), while Havelock City Mall brought in Rs. 939M. This shift into the “collect rent” phase creates visible, recurring cash flow growth.
Growth Story Projections (2–6 Year Horizon)
Conservative Scenario: If Sri Lanka’s economy muddles through, OSEA could lease Mireka Tower up to ~80% over 3 years while clearing apartment inventory. EPS growth ~15% annually.
Optimistic Scenario: With stronger recovery, Mireka Tower reaches 95%+ occupancy within 2 years at premium rents. The new property trading division delivers profits. EPS growth 25%+ annually.
Base Case Valuation:
- 1–2 Years: Rs. 42–45 as NAV discount narrows to ~20%.
- 3–5 Years: Rs. 55–60, assuming full lease-up and NAV expansion to Rs. 65–70 per share.
Bottom Line
At Rs. 38.10, OSEA trades at a deep discount to asset value with strong leasing momentum, low debt, and growing dividends. Even after doubling in the past year, the stock offers 25–30% annual return potential with clear upside from rent collections and NAV growth.
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Disclaimer
The user kalindu has a position in COSE:OSEA.N0000. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.