Friday 18 December 2009

Pick of the Week
Tulsyan NEC Ltd:
BSE Code: 513629
CMP: Rs.56.35
Book Value: Rs.109.97
Dividend Yield: 3.55%
Market Cap: Rs.28.18 Cr
Introduction: Incorporated in 1974 as National Engineering Cmopany, Tulsyan NEC Ltd (TNEC) manufactures rolled steel products. It tapped the capital market in 1994 for implementing a modernization-cum-expansion project. Its steel products include finished steel (84,000 TPA), MS Ingots (36,000 TPA) and MS billets (72,000 TPA). The company later on diversified into manufacturing packaging products such as HDPE/PP woven sacks & flexible intermediate bulk containers, the capacity of which at present stands enhanced to 28,000 TPA.
The company’s steel and TMT bars find application in housing & construction, power, Defense & Railways. Its bulk containers are used for packing cement, sugar, chemicals & fertilizers etc.
It is the Largest Multi-Location Steel Manufactures in South India, for TMT Steel Rebars. It has a wide spread manufacturing capacity, with the latest state-of-the-art technology. It has manufacturing facilities at Gumdipundi & Ambattur in Chennai, Bangalore, Coimbatore and Goa. It uses quality Billets which is manufactured in-house, conforming to IS: 2830/1992.
Its area of service covers the four Southern States including South Maharastra and Union Territories of Goa and Pondicherry. It supplies, in sections 8-40 mm dia & in grades of Fe-415, Fe-500, Fe-500 CRS (Corrosion Resistant Steel), all conforming to BIS Standards.

Shareholding Pattern: The promoters hold 65.59% while the general public holds 34.41%. The promoters have slightly increased their stake in Q2FY10, speaking Q-o-Q figures.

Financials: On a standalone basis, the total income of the company for Q2FY10 came out to be Rs.152.3 Cr as against Rs.217.7 Cr in the same period previous year. The net profit of the company for Q2FY10 came out to be Rs.1.5 Cr as against Rs.3.2 Cr in the same period previous year.
On a consolidated basis, the total income of the company for Q2FY10 came out to be Rs.153.77 Cr as against Rs.220.89 Cr in the same period previous year. The Net Profit after Mino Inter & Share of P & L came out to be Rs.1.77 Cr as against Rs.4.43 Cr in the same period previous year. However, the EPS of the company in Q2FY10, is alone on consolidated basis is Rs.3.54, which is good. The company is expected to clock an EPS of Rs.10—11 on FY10 on consolidated basis. For FY09, the consolidated EPS of the company was a whooping Rs.23.17.
Triggers:
(i) The Company's products are TMT Bars, Billets and Ingots in the steel division and in synthetic division it is PP Woven Sacks, FIBC and Woven Fabric. During FY09 with the completion of the enhanced capacity, the company has commenced the manufacture of ground cover and ventilated fabric. TMT Bars are used in the Construction Sector and the plastic products cater to the packaging needs of various industries such as Cement, Fertilizers, Food grains, Sugar, etc.
(ii) Tulsyan NEC Ltd has signed a Memorandum of Understanding for purchasing 100% shares of M/s. Chitrakoot Steel & Power P Ltd, Gummidipoondi, Tamil Nadu, a Sponge Iron manufacturing plant having capacity of 30,000 M.T per annum. The Company will be enhancing the Sponge Iron capacity and adding waste heat recovery Power Plant.
(iii) With the government stepping up expenditure on development of infrastructure like roads, ports, power, etc, the demand for steel is bound to increase. In anticipation of this demand increase, the company: (a) will have in place additional rolling capacity of 15 0000 mt/pa, during the current year, (b) Increase dealership network to over 200 dealers with more focus on rural sector, (c) Install a power plant of 35 MW at Gummudipondi for captive consumption, (d) Carry out backward integration by taking over the sponge unit in Gummudipondi. These expansions will not only make the company as the largest producer of TMT bars in South India among Secondary Producers but will also give it a competitive edge, by facilitating reduction of power and raw material costs.
(iv) The Cost of Steel Scrap and power are major costs incurred for producing Steel Rods. Volatility in the price of scrap affects the company's margin. To tide over the power requirement the company would be installing a 35 MW power plant at Gummudipoondi, as mentioned earlier.
(v) With globalization and liberalization the demand gap is ever increasing. With almost 3 decades of presence in the industry the company has earned a good name for its commitment to quality and timely supply. With the enhancement in production capacities the company is well poised to cater to a bigger market.
(vi) The raw materials for Steel Making are M.S. scrap, Sponge and for TMT Bars is Billets. PP granules are used for manufacture of plastic packaging products. This raw material is available in abundance within the country and can also be freely imported. Being in the commodity market the company continuously makes efforts for reducing the cost of production to sustain its margins.
(vii) The year 2008-09 witnessed an unprecedented economic crisis world over resulting in slowdown in almost all the sectors. While India hasn't witnessed the kind of major turmoil witnessed in some advanced economies it has certainly been impacted adversely. In the back drop of this crisis the working of this company has also been affected to some extent. FY09 saw shortage of power in Tamil Nadu and this affected the working of the Company. In the current year the power cut has been relaxed from 40% to 20% and it is expected to be relaxed further.
(viii) During Q2FY10, Wind farms of the Company have generated 1453368 units of Electricity and also the capacity of the Rolling Divisions at Gummudipoondi, in Tamil Nadu, has been increased by 150000 MT of TMT Bars and commercial production has also been started same period. The full benefit of this effect will however arise in the financial year 2010-11.
(ix)It has also signed a MoU with Suhayl Abdul Mohsin AL-Shoaibi & Sons Holding Company, Saudi Arabia for a proposed steel plant of 5,00,000 TPA in Saudi Arabia.
(x) In the plastics division, TNEC plans to install new capacity of about 2,000 TPA in its new facility at Kurnool (AP), which is expected to go on stream very soon.

Conclusion and Chart Check: Considering all the points mentioned above it have been found that the stock is a very good buy (on dips) for the medium to long term perspective. This essentially means that scrip would generate good returns for the shareholders over a period of 9 to 12 months time frame. Even at the current market price of Rs.56.35, the dividend yield of 3.55% is quite attractive. From the charts it has been found that some of the parameters are in buy mode. However, the stock has made a very strong bottom around Rs.51.5 which will be difficult to break on the downside and hence a little safe bet. The stock should be accumulated on all dips for the short term (3 months) target of Rs.XX (This portion is only for the Paid Groups). However, in the medium to long term the targets could be as high as Rs.XX (This portion is only for the Paid Groups).
Note: The Stock was recommended to the Paid Groups in the last week's Sunday Report.
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Scrips which needs to be accumulatd at the Current Market Prices:
Government's recent move related to broadcast of Satellite Television Signals could be positive for Kohinoor Broadcasting Corporation Ltd and Sanguine Media Services Ltd.
Energy Development Ltd/NEPC India Ltd/Indowind Energy Ltd, will get positively affected because the government will give 50 paise as incentive for a unit of electricity generated by Wind Power Producers for 4-10 years.
Kohinoor Broadcasting Corporation Ltd (Book Value: Rs.11.78, EPS: Rs.1.39, P/E: 3.97 against industry P/E of 33.32, Market Cap: Rs.60.83 Cr only, while the value of Tagore Theatres alone is around Rs.100 Cr. So the business of the company and other assets are free for the shareholders at this price) should be accumulated at the CMP of Rs.5.52 for good appreciation in the next few months. The company could launch the channels in the next 3 to 4 months time frame, according to the sources close to me. It is also planning to show its channels in US and UK, which is a great news for the shareholders.
Now, if we go through its shareholding pattern we would see some very important developments: The Foreign Institutional Investors (FIIs) hold 17.95% stake in the company, while the corporate bodies hold 14.25% of the shares of the company as of 30th September, 2009. This shareholding figure of FIIs have been constant considering Y-o-Y figures. What I mean to say is that even after such massive unwindings of FIIs from many counters, their holding in Kohinoor Broadcasting Corporation Ltd, has remained constant in the last one year, which is very encouraging developments for the shareholders.
Moreover, the holdings of the corporate bodies has increaesd from 13.24% to 14.25%, considering Y-o-Y figures--this is also another positive development of the company.
Let us take a look who are holding shares of Kohinoor Broadcasting Corporation Ltd:Sophia Growth (9.34%), Shriram Credit Company Ltd(4.74%), Religare Securities Ltd (1.30%), Mavi Investments (3.39%), etc.
Besides this, according to charts, the stock is in the highly oversold territories and a normal bounce is expected, which is confirmed by Bollinger bands and daily RSI. Any cross-over could take the scrip to around Rs.XXX (for Paid Groups) ranges, by the 1st week of January, 2010. A must buy at the CMP of Rs.5.52.
Accumulate Enery Developments Company Ltd (BSE Code: 532219) at the CMP of Rs.57.5, as the company is doing excellently well. Energy Development Company Limited (EDCL) was incorporated in the year 1995 to participate in the country's renewable energy development program for sustainable sevelopment.
The Company simultaneously generates clean, green electricity from water and wind in its own power plants as well as develops energy and infrastructure projects for other developers. The Company has targets to develop and own around 500 MW of new Hydro Electric Power Projects at an approximate capital outlay of Rs.7000-8000 crores in the next 5-7 years.
The company has successfully deployed its expertise and technology to develop energy and infrastructure projects for other developers. It has created a niche for itself in providing total hydropower solutions for small hydro as well as large hydropower plants. Its services include feasibility studies, project management services, engineering, procurement and construction services and turnkey delivery.
It also provides services related to third party operation and maintenance of hydropower plants and rehabilitation, renovation, modernisation and uprating of older plants. The company is forward-looking and technology-driven with rich experience and expertise across all disciplines of power engineering, consulting, management and operational services.
The company is doing the following:
  • Harangi Project
  • Ullunkal HEP
  • Harangi Stage- II HEP
  • Karikkayam HEP
  • Arunachal Projects
  • Hassan Wind Project
  • Chitradurga Wind Project
  • Engineering, Consultancy & Project Management
  • EPC Contracts
  • O & M Services
  • Rehabilitation & RM & U
  • Bagasse Cogeneration (Eligible for Carbon Credits)
The Company demonstrated modest growth in overall business in FY09. It has commissioned new projects and acquired subsidiaries. The total turnover for the year is Rs. 117.2 Crores (Previous Yr. – Rs.65.7 Crores) The Company has two segments, namely Generation Division and Contract Division.
Generation Division:
Until FY08, the Company had only one 9 MW Harangi Hydro Electric Project in the State of Karnataka and a Wind Mill having a capacity of 1.5 MW at Hassan District. During the year, your company has successfully commissioned 7MW, Ullankal Hydro Electric Project, in the State of Kerala and also a 1.5 MW Wind Mill at Chitradurga in the state of Karnataka.
Saleable electricity generated from –(a) Hydel Power Plants were 28.036 million units (Previous Yr. – 29.03 million units) (b) Wind Mills were 4.393 million units (Previous Yr. – 1.18 million units).
Contract Division: In view of the huge spending in infrastructure in the country, your Company is targeting the growth, by participating in the infrastructure related projects such as roads, power plants, buildings etc by using the capabilities developed in house, over the years. Hence, the Contract Division was launched, which is steadily growing. This division has earned revenue of Rs. 106.23 crores (Previous Year Rs. 54.74 crores).
This scrip is a must buy especially in view of the improving fundamentals, considering the recent sequential quarterly numbers. The Q3FY10, numbers are also expected to be good, besides this lot of inter-company mergers would add more teeth to the fundamentals of the company. A must buy at the CMP of Rs.57.5 for some superb targets. From the absurd current market price of Rs.57.5, this is to give very good returns to the shareholders, believe me.
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Monday 23 November 2009

PICK OF THE WEEK:

Alchemist Realty Ltd

BSE Code: 532114

Face Value: Rs.2

CMP: Rs.14.54

Market Cap: Rs.107.74 Cr

EPS: Re.0.11

Introduction: Formerly known as Pan Packaging Industries Ltd, the Company’s principal activity at present is to develop real estate property. Pan Packaging Industries Private Ltd. was originally incorporated as Private Limited company on 03 March 1983 to manufacture and supply Corrugated Boxes. The name and style of the company was changed as Pan Packaging Industries Limited on 25th April 1995. The company started its commercial production in 13-03-1984 which was its first phase of operations with an installed capacity of 900 TPA. Alchemist Realty is now widely recognized as one of the growing innovative real estate companies in India.

The Company now engages in the acquisition and development of real estate and infrastructure facilities in India. It real estate development projects include housing projects, cottages, recreation clubs, and other infrastructure projects. The company which was formerly known as Pan Packaging Industries Limited changed its name to Alchemist Realty Limited in 2006. Alchemist Realty Limited is based in Mumbai, India.

Shareholding Pattern: The promoters hold 42.3 % while the general public holds 57.70% according to the latest data available.

Shareholding belonging to the category
"Public" and holding more than 1% of the Total No. of Shares

Sl. No.

Name of the Shareholder

No. of Shares

Shares as % of Total No. of Shares

1

Endogram Leasing & Trading C

8,605,580

11.61

2

Basic Soft Solutions Pvt Ltd

4,878,500

6.58

3

Manbhavan Buildwell Pvt

2,442,285

3.30

4

Basics Soft Solutions Pvt Ltd

1,917,750

2.59

5

Amandeep

2,635,200

3.56

6

Archna Singh

1,560,000

2.11

7

Sunil Talwar

1,052,695

1.42

8

Varinder Pal Singh

912,730

1.23

9

HS FII Investments Ltd

7,115,000

9.60

10

CLSA Mauritius Ltd

7,112,000

9.60

11

Somerset Emerging Opport

1,143,944

1.54

Total

39,375,684

53.14

Financials: In FY09, though the net sales of the company increased but the net profit declined due to higher investments in Land Plots & Constructed Properties. The net income of the company for FY09 came out to be Rs.101.55 Cr as against Rs.82.87 Cr in the same period previous year. The net profit of the company came out to be Rs.1.03 Cr in FY09 as against Rs.4.54 Cr in the same period previous year. In Q2FY10, the total income of the company came out to be Rs.28.071 Cr as against Rs.5.7 Cr in the same period previous year. The net profit of the company for Q2FY10 came out to be Rs.24.62 lakhs as against Rs.12.43 lakhs in the same period previous year. During the quarter ended September, 2009, the company declared a divided of 5%, i.e.Re.0.10 per equity share of Rs.2 each for the year FY09.

Triggers:

  • During the year, the Company acquired lands at various locations all over the country and is in the process of launching many projects in Real Estate Development which includes housing projects, cottages, recreation clubs and other infrastructure projects. The Company has also finalized Joint Venture agreements with various Companies for launch of prestigious projects.
  • In the last fiscal the Company issued 7040100 equity shares of the face value of Rs.10 each as bonus shares to the shareholders in the ratio of 1:1 i.e. One bonus share for every one scare held by the shareholders as on record date i.e. 7th February, 2008. This somewhat proves that it is in investor friendly.
  • Alchemist Realty Limited is a real estate company, for which land is a key asset. The Company believes in acquiring lower cost land in suburban area and transforming them into modem and utilizes land. With this philosophy intact, the Company has continued to develop its land bank. This is quite evident in FY09 results, when the company invested more in assets as compared to the same value in previous year. Needless to say in FY08 and FY09, the Company acquired newer land parcels in various parts of North India.
  • Alchemist Realty Limited is focused on developing itself as a premium brand that enjoys a strong sense of trust amongst its stakeholders. There has been a constant endeavor to focus on creating a brand that embodies all the Company’s strategic goals and corporate values. In the real estate space, the Alchemist Realty Limited stands for: (a) Ability to identify and procure land in strategic locations, (b) Experience in executing large projects, c) Superior design, construction and development.
  • The company is exploring various opportunities in the real estate business and has also finalized Joint Venture agreements with various other players in the Real Estate for launch of prestigious projects. With the continuous trend of shifting population from rural areas to urban areas, increase in the size of population, the demand of both residential and commercial properties is showing an upward trend. Moreover, it is now widely believed that the US Fed will happily risk inflation in order to avoid deflation, Because the US Fed is far more worried about the possibility of deflation (systematically falling prices) caused by a double-dip recession. Japan in the 1990s suffered economic stagnation for a decade because of deflation, and the US is determined to avoid that path. So, it will keep interest rates at virtually zero for the foreseeable future. So this is expected to increases money supply by over a trillion dollars in the world and that too at virtually zero interest. The dollar is an international currency whose impact is felt across the world. Investors and speculators everywhere know that growth prospects are much better in emerging markets than in the West. So they are borrowing hundreds of billions of dollars at dirt-cheap rates to buy stocks, real estate and commodities in emerging markets. Hence, asset values are getting inflated not just in India but in all emerging markets. This is expected to push the investors to real estate stocks and pure real estates in future. The company stands to gain from this move as it has a sizable land bank.
  • The last year there was news in a section of the media that Alchemist Realty Ltd will invest over Rs.5, 000 Cr in the next 7-10 years for developing a land bank of 10,600 acres. The company’s land bank in CY08, stood at 10,600 acres across the country, mainly in the northern states.
  • Alchemist Realty proposes to open a chain of specialty restaurants in northern India under ‘Red Cap’ brand. At first, the company would open only 20 (twenty) restaurants by the end of FY11 in northern states. The size of the outlets would vary from 3,200 sq ft to 6,500 sq ft. The company would also develop over 1,000 high-end housing units by 2011. The company would construct luxury villas on nine acres of land in Shimla and an IT park at Chandigarh.

Conclusion: Considering all the factors mentioned above it will be prudent to invest in the shares of Alchemist Realty Ltd for medium to long term perspective, though some short term gains till Rs.21 cannot be ruled out.

From the weekly charts it is found that the stock has a strong support at Rs.13.5; the higher bottom being made at Rs.14.20. The fast Stochastic and Bollinger bands are in buy mode. One can buy the scrip at the CMP of Rs.14.54 for a target of Rs.21 in the short term. In the medium to long term, the scrip can rise to Rs.55-Rs.60. Hence buy this scrip in all declines.

Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on these recommendations or after reading the report.

The calls made herein are for informational purposes and are not recommendations to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness are not guaranteed. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness.

The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family

members may or may not have positions in the Scrips mentioned in this column or may be buying or selling the above mentioned scrips during the preparation of this report or may be actively trading (buying and selling) in the scrips during the preparation of this report. I expressly disclaim any and all liabilities that may arise from information, errors or omissions in this connection. This document is not to be considered as an offer to sell or a solicitation to buy any securities. Investors should take their own decisions while buying and selling the shares/securities. This document is for private circulation and cannot be printed or published in any form, without the written permission of the author.

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Thursday 19 November 2009

US Markets and its economic-dilemma:
Wall Street today watched a blood bath in action, as stronger dollar, weak economic data spooked the investors (in New York Stock Exchange/ Nasdaq).
A strong dollar makes U.S. goods and services more expensive, and theoretically harder to sell, overseas. And U.S. companies that do business abroad make less money when their earnings are translated from other countries' currencies into dollars.
Moreover, a strong dollar makes commodities more expensive to foreign buyers, and companies that produce the commodities make less money from them. However a strong dollar could see a rally in the Indian Technology counters tomorrow. It could also fuel a rally in the OMCs (Oil marketing companies), Infrastructure/Real estate and pure Petrochem Companies.
Now the US consumers need to be greedier or go in for more consumerism, helping their economy and the stock markets world-wide. Or else "Obama-nomics" based on some obscure socialistic concepts, will lead us to doom and gloom. Once, Mignon McLaughlin said, "Be glad that you're greedy; the national economy would collapse if you weren't."
However, what the US Treasury Secretary Timothy Geithner said during a trip to Beijing this spring was equally shocking “Purchases of U.S. consumers cannot be as dominant a driver of growth as they have been in the past.” These are some of the ills of much debated "Obamanomics."
On the other hand, there’s a growing group of market professionals who see that the much-advertised Chinese economic miracle is nothing but a “Paper Dragon”. In fact, they argue that the Chinese have precariously overheated their economy, building malls, luxury stores and infrastructure for which there is almost NO demand, and that the entire system is approaching toward a total collapse. A Chinese collapse, of course, would have profound effects on the United States, limiting China’s ability to buy U.S. debt and provoking unknown political changes inside the Chinese regime.
The billionaire hedge fund investor Jim Chanos, the founder of the investment firm Kynikos Associates also holds this view. He is known as a famous short seller — an investor who scrutinizes companies looking for hidden flaws and then bets against those firms in the market. His most famous call came in 2001, when he was the one of the first person, to figure out that the accounting numbers presented in the pubic domain by Enron were pure fiction. The rest is history as the mighty Enron Ltd was blown to pieces within some months.
Here it is to be noted that Chinese economy like the Indian economy is under performing in-spite of mighty stimulus packages amounting to more than $900 billion to boost its $4.3 trillion economy. Another point which is tormenting the Chinese economy post Olympics is the dreaded word, overcapacity. For example the spare capacity in the cement sector according to a recent estimate is 340 million tonnes, which according to a research house is more than the combined consumption in India, US and Japan.
Hereto, the US has been driving the Chinese economy as China is still one of the major supplier of goods to the US. Inspite of ban in some of Chinese products, the China continues to be, US's biggest trade partners.
So, the Chinese factories ran on the US blood as this new found “Chinese-Socialism" devoured the US consumers.
The Chinese on the other hand, with their unbridled capitalistic expansion propelled by a system they still refer to as “socialism with Chinese characteristics or Chinese-Socialism,” are still thriving, though, with annual gross domestic product growth of 8.9 percent in the third quarter and a domestic consumer market just starting to flex its enormous muscles; while the US is still limping back to normalcy.
But it seems there is an oasis in the midst of desert: "The $787 billion stimulus is meeting its goal of creating jobs, even if problems with reporting prevent the government from knowing exactly how well it’s working", government watchdogs said today. In the US about $173 billion of the $787 billion package was spent as of September, 30, with $47 billion subject to the job-reporting requirements.
The rest of the money went for tax cuts and benefits such as unemployment insurance payments. “There are some signs that jobs are finally being created, both as a direct and indirect result of Recovery Act spending,” said the committee chairman, Democratic New York Representative Edolphus Towns.
Now if "OBAMANOMICS" works then the biggest beneficiary would be the US government as it is the “big-daddy” who digested the toxic assets of US’s misadventure with its economy.
It remains to be seen if the US can rise like a Phoenix from the debris of economic downturn. Also, it is felt that the US-China honeymoon will bring in goodies for the world economy inspite of all those occasional mud-throwing.
Someone said, "We had gay burglars the other night. They broke in but rearranged the furniture…..."
Thanks for reading my long article/column......
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Tuesday 10 November 2009

Pick of the Week

Geodesic Ltd

BSE Code: 503699

CMP: Rs.99.55

Face Value: Rs.2

52-Week High/Low: Rs.158.65/ Rs.38.50

Price/Book: 1.50

P/E: 4.99

EPS: Rs.19.94

Dividend Yield: 1.61%

Introduction: Geodesic Ltd established inthe year 1999, operates in a niche area of developing various innovative products in the information, communication and entertainment space. Geodesic's product t-list is versatile and all-encompassing when it comes to offering choice of communication and collaboration solutions to its users, whether it is the inherently simple hand-held Simputer to web-based mobile & wireless applications to the intricately complex Spyder applications.

Geodesic's mix of innovative products and high performance solutions has driven the company to profit right from its first year. Focusing its inventive capabilities across all aspects of communication and collaboration the company is widely recognized for its pioneering universal instant messaging system.

Geodesic is all set to contribute significantly to the wave of Convergence by launching innovative world class products such as the Geodesic IP phone that operates across different platforms of landlines, mobile phones & desktops/laptops that will work on all prevailing internet connections and will help users save 75-80 % on long distance calls.

Geodesic's talented staff of more than 400 employees ensures innovation, utility and ease of use. The combination of a highly competent team and state-of-the-art tools enhance the development of future-proof, useful business solutions.

Geodesic has offices in UK, Sweden, Mauritius, Germany and Hong Kong. It provides solutions and services to the following segments:

  • Enterprise---SMB, BFSI, Large Business, System Integrators, Govt. etc.
  • Portals and Publishers
  • Handset manufacturers and Telecom Operators
  • Retail Business.

Its products include a communication stack (Email/IM/ VOIP/ SMS), Customer Alignment and Relationship management and the entertainment stack including Internet Radio. Geodesic Ltd also builds E-governance solutions based on its GeoAmida (Geodesic’s Hand held Computer).

Shareholding Pattern: The promoters hold 22.74 % while the general public holds 77.26% of the shares of the company.

Shareholding belonging to the category
"Public" and holding more than 1% of the Total No.of Shares

Sl. No.

Name of the Shareholder

No. of Shares

Shares as % of Total No. of Shares

1

Sloane Robinson Llp A/C Sr Global (Mauritius Class C -International)

6,941,726

7.53

2

Genesis Indian Investment Company Ltd General Sub Fund

5,636,742

6.11

3

Tree Line Asia Master Fund (Singapore) Pte Ltd

5,576,957

6.05

4

Deutsche Secuririies Mauritius Ltd

3,838,171

4.16

5

Morgan Stanley Investment Management Inc A/C Morgan Stanley India Investment Fund Inc

955,459

1.04

6

Indea Capital PTE Ltd A/C Indea Absolute Return Fund

1,000,000

1.08

7

Carlson Fund Equity - Asian Small Cap

3,050,000

3.31

8

Genesis Asset Managers Llp A/C Smaller Companies Portfolio Of The Genesis Emerging Markets Opportunities Fund Ltd.

2,431,603

2.64

9

Sloane Robinson Llp A/C Sr Global (Mauritius) Ltd (Class B Asia)

2,493,168

2.70

10

College Retirement Equities Fund - Global Equity Account

1,971,502

2.14

11

Banque Degroof Laxembourg Sa A/C Asia Pacific Performance Sicav

1,436,595

1.56

12

Shinsei Uti India Fund (Mauritius) Ltd

1,746,892

1.89

13

Ward Ferry Management Limited A/C Wf Asian Smaller Companies Fund Ltd.

2,457,000

2.66

14

College Retirement Equities Fund - Stock Account

1,312,500

1.42

15

Ward Ferry Management Limited A/C Wf India Reconnaissance Fund Ltd

1,183,000

1.28

16

Fidelity Funds - Pacific Fund

924,441

1.00

17

Payash Securities Pvt Ltd

1,194,727

1.30

Total

44,150,483

47.88

Financials: Geodesic Ltd reported revenue of Rs.154.4 Cr in Q2FY10, which is flat as compared to the same quarter previous year. It has managed to report a marginal rise in revenues despite revising its licensing prices downwards for the enterprise segment. Geodesic issued fewer licenses of Mundu IM and Radio to the OEM/ODM segment owing to the drop in smart phone shipments.

Its net profit for the 2nd quarter, FY10 declined by 24% at Rs.57.03 Cr as compared to the quarter ended Sept 30, 2008. The EPS for Q2FY10 came out to be Rs.6.18 as against Rs.8.12 in the same period previous year. Dividend at 40% (Re.0.80 per share) on the face value of equity share is declared by the shareholders in the AGM held on 29-09-09 and paid on 20-10-09.

Triggers:

  • Geodesic's mix of innovative products and high performance solutions has driven the company to profit right from its first year. Company was awarded the Inaugural Red Herring Small Cap 100 award and is one of the only Indian companies to be included in the Red Herring Small Cap 100 list. Geodesic is a traded on India's major Stock Exchanges, the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
  • The Company is focusing its inventive capabilities across all aspects of communication and collaboration. Their areas of specialty include RDBMS, networking applications, web technologies (including interface designing and Interactivity) and security protocols. Company is widely recognized for its pioneering universal instant messaging system (www.mundu.com). The Mundu products successfully combine AIM, Google Talk, ICQ, MSN, Mundu and Yahoo with deep content collaboration across the Internet, wireless devices and platforms.
  • All Geodesic products are complimentary to each other. Each product can be used independently but also seamlessly integrates with all other products. Geodesic customers can begin with a single product that fulfills their requirements and as their requirements change or increase; additional products from the Geodesic suite can easily be incorporated. Geodesic was the first in the world to introduce an 'Information Slider' that changed the way people shared and collaborated information.
  • The Mundu SMS launched its International SMS Service in India, Australia, Singapore, Philippines, South Africa, UAE, and UK. Mundu SMS will reach out to more than 100 countries during the financial year.
  • It announced plans to launch Filmorbit—a portal dedicated to the India Entertainment and Media industry in India. The portal would use Mundu Entertainment stake as a means to deliver deep interlinked content. Moreover, Mundu Radio has been rated as one of the top 10 popular applications on the Nokia OVI store.
  • Forbes Magazine listed Geodesic in the top 200 under a billion companies. The company signed a deal with Entel PCS, Chile’s largest mobile operator to provide windows live instant messaging service to its mobile subscribers.
  • A UK based Financial Service Company acting as an exchange for C2C, C2B and B2B multi-currency transaction signed a trial order for the company’s GeoAmida hand held device.
  • The company signed deals with Orissa Capital Bank B S C, Bahrain, Business India Group and a major Korean Investment Bank to provide financial service solutions including CRM and integrated communications over web.
  • During the last quarter the Chandamama launched interactive children friendly portals in Kannada, Marathi, Telegu, Tamil and Hindi, with a host of features, making browsing exciting and enjoyable for readers.

Valuation and Chart Check:

The Geodesic Ltd’s business model is based on a recurring revenue stream. The nature of the products and the business promotes returning customers and all Geodesic products are created with this model in mind.

The charts however are not giving an immediate buy signal, but the same cannot be denied in the middle of the week. Both the slow and fast oscillators are highly oversold and a bounce can be expected at any time. A bounce from the temporary bottom formed should be used to accumulate. A short term target of Rs.XXXX, cannot be ruled out in the next 3 to 4 months time frame. The medium to long term investors should buy the scrip with a SL of Rs.XX.

Note: The stock was recommended to the Paid Groups (Premium and Quickie) on the last Sunday (8th November, 2009).

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Pick of the Week:

Kernex Microsystems India Ltd: Basking on Huge land Holdings:

BSE Code: 532686
CMP: Rs.82.6

Book Value: Rs.105.43

Market Cap: Rs.103.25 Cr

 

Introduction: Established in 1991 and registered as 100% Export Oriented Unit with Software Technology Parks of India, Department of Electronics, Govt. of India, New Delhi, it is a ISO 9001:2000 certified company with expertise in Software, Hardware development and Systems Integration. It is presently engaged in the business of manufacturing, installing and maintaining of anti-collision systems as well as conceptualizing, designing, and developing certain railway safety and signal systems for Konkan Railways Corporation Ltd. These safety and signal systems are suitable for medium to low speed & density railway tracks like in India and other developing countries.

The company entered into a technology partnership with Konkan Railway Corporation Ltd, Navi Mumbai for design, engineering and development of anti-collision systems which provides safety to trains in Railways. It holds exclusive license for manufacturing, installation, commissioning and maintenance of anti-collision systems in India. It also has an outsourced facility for the Konkan Railways Corporation Ltd for manufacture and supply of ACDs and related accessories. It is also a technology partner for the development and implementation of ADDs for Metro Sky-Bus Urban Transportation System, Advanced Railway Signal Systems and other safety systems. It holds exclusive marketing rights of ACD systems all over the world except India.

Based on the concept and domain knowledge provided by Konkan Railway Corporation Ltd, it has developed the networked Anti-Collision Devices, using Global Positioning System, Radio Data Communication, Application Logics and Inter facing these with an Auto Breaking System developed by KRCL. With operations in USA and planned operations in Far East, Africa and Middle East, Kernex is truly a global player in the offing.

 

Shareholding Pattern: The promoters hold 55.74% while the general public holds 44.26%. Moreover FII hold 1.55%, while mutual funds/UTI holds 1.11%.

 

Shareholding belonging to the category
"Public" and holding more than 1% of the Total No.of Shares

 

Sl. No.

Name of the Shareholder

No. of Shares

Shares as % of Total No. of Shares

1

SMS Holdings Pvt Ltd

273,181 

2.19 

2

Somerset Emerging Opportunities Ltd

193,217 

1.55 

3

Enam Investment Services Pvt Ltd

137,500 

1.10 

4

UTI Mid Cap Fund

139,156 

1.11 

5

Vinaya Kumar Gavini

160,267 

1.28 

6

Challa Subrahmanay Sarma

186,212 

1.49 

 

 Total

1,089,533 

8.72 

 

 

Financials: For Q1FY10, the company came out with flat topline and a slightly subdued bottomline. The total income of the company for Q1FY10 came out to be Rs.5.82 Cr as against Rs.5.97 Cr in the same period previous year. The net profit of the company for Q1FY10 dipped due to higher interest and tax component to Rs.52.3 lakhs as against Rs.1.07 Cr in the same period previous year.

 

Triggers:

  1. The company would benefit from the Indian Railway’s move to focus more on signal modernization and increased usage of automated signaling systems. Kernex Microsystems (India), the Hyderabad-based railway safety product manufacturer is the only player in anti-collision devices for the Railways and is set to capitalize on the public sector transporter’s thrust on ‘safety’.
  2.  Kernex Microsystem last year announced to foray into infrastructure projects and power sector, the two most happening sectors of today.
  3. The company has redrawn its plans to carry on the expansion programme, wherever required, as against plans mentioned in the prospectus dated December 6, 2005 in regard to scheduled time of completion. However, establishment of new manufacturing centre for ACID, ADDS and Advanced Signal Systems, construction of various buildings, including machinery & external services, electrical supply, roads, sewage &  compound  walls, gates  and  other related security arrangements and also training centre, cafeteria and transit accommodation for trainees, R&D Block, administration and  manufacturing  facility is nearing completion.
  4. The Phase-1 of development of ACD systems has been completed and pilot project commissioned in the Q1FY10. Railways have accepted the ACD system for deployment in all the Railways. Orders are expected through Konkan Railways Corporation for Southern, South Central and South Western Railways in the near future.
  5. Honourable Railway Minister during the Railway Budget speech on 26th February, 2008, stated that ACD is found working satisfactory and therefore, proposed to be deployed in South Central and South Western and Southern Railways.  According to Railways Corporate Safety Plan, ACD deployment is to be completed all over Indian Railways by 2013-2014. This is music to the investors in Kernex Micro Systems.
  6. The Company has signed a contract in November, 2008 with Egyptian National Railways, Egypt for development and supply of 136 Semi-Automatic Level crossing Gates. The Contract is under execution.
  7. Its unique product, Multi-Section Digital Axle Counter has been developed under technical collaboration on schedule time and is under cross approval by RDSO, Lucknow, Indian Railways. It is to be noted that the company earlier dropped the product called TAWD, consequent to the dropping of the same by the Indian Railways, in view of anticipated huge demand for the product called 'Digital Axle Counter’.
  8. Its R&D Division has done number of improvements and changes in the application software and hardware as required by the Konkan Railway Corporation. This includes AMSS, upgradation of ACD Reporting System & ACD survey automation system.
  9. The company’s International Marketing division continued marketing operation for selling the ACD and related systems in Egypt, South Africa, Brazil, Pakistan, Australia and South Asian countries. Consequently the ACD System is short listed as one of the viable system for Egyptian Railways. South African Railways is also examining the possibility of integrating the ACD system with OBC system already installed in South African Railways, spoornet.
  10. The company has also been working on development of 'Multi Section Digital Axle Counter’ in collaboration with M/s Altpro, Zerob, Croatia.  Complete test data, technical details, company details and Safety case has been submitted to RDSO, Indian Railways. Discussions with Altpro, to jointly manufacturing the product and KMIL to Market the product to Indian Railways is in progress. Meanwhile M/s Altpro, Croatia has appointed Kernex as their Sole technology partner  / Altpro Agent / Joint Venture partner in Indian subcontinent  for their  product  range like Digital Axle Counter,  Train  detection  System, ATPS, SIFA, incident recorder and for other safety system.
  11. The company has entered into technology partnership with Tiffien Batch, Germany for providing Automatic & Semi Automatic Level crossing system, up to Sit 3 levels. This  should  help  Kernex  to  enter  into International markets in semi developed and under developed countries  like Africa  and South Fast Asia and Australia for the supply a  Level  Crossing Systems.
  12. The  company  has so far purchased over 243 Acres of land at  the  Warangal highway  near  Yadagirigutta and has also acquired over 157 Acres  land  at Amanagul,  Mehboobnagar  district and acquisition of further Land,  in  the area  is planned.  All equipments required for this project have been fully acquired. In case of SPAD, planning is in progress and the project is expected to be completed by Dec, 2009 as against the revised scheduled month of June, 2008. This is due to delay in finalization of specifications and requirements by Indian Railways.
  13. The development of Hot Box and Wheel Vibration Detection systems is in progress and is expected to be completed by 31st Dec, 2009 as against the revised scheduled month of Nov, 2008. This is due to delay in finalization of specifications. Another opportunity waiting in the wings is the provision of ATP system for Metro Trains that are planned in major cities of the country.  With technological collaboration, the company can become one of the important players in this field too.
  14. New Offices of the company are being established in Delhi, Chennai.  Guntakal and Hubli based on the release of new orders and also central survey centre at Hyderabad. Other  locations  will  be  taken up  in  phased  manner  as  per  the commencement of work ordered by Indian Railways. Kernex Microsystems (India) set up a 100% subsidiary in the US in September 2000 to implement software products of the company in that country. It is now engaged in developing and implementing software for the US corporate hospitals.

 

Concerns:

  • The biggest threat the company faces is from Multi Nationals, who want to sell their equipment in India. To gel over this competition, the Company is upgrading the technology at a fast pace.
  • Any delay in decision making, administrative and departmental procedures could delay the receipt of orders, making its facilities idle and under productive.

 

 

Chart Check and Conclusion: Considering the points mentioned above the stock could be purchased at the CMP of Rs.82.6 for 6 months to 9 months time frame for at least 50% appreciation from the current price. Moreover, an encouraging fact is that the promoters are technocrats and have wide experience in electronics/software industries, both in India and abroad and hence they possess a deep understanding of the business of the company. Another point which is worth noting is that the stock is trading below its book value of Rs.105.43

Now from the charts it has been found that the stock is in highly oversold territory and a small bounce cannot be ruled out in the short term. Though Bollinger bands are in buy mode however, other momentum parameters are still not giving an immediate buy for the scrip. Also, though the MACD is not giving an immediate buy signal but it could slowly drift towards the buy mode. The stock needs to close above Rs.85 on closing basis, to start rising again. If it crosses Rs.95 which looks probable the stock could touch as high as Rs.130. Please keep a SL of Rs.67 for any short term trade.

Pick of the week

DECCAN CHRONICLE HOLDINGS LIMITED

BSE Code: 532608

Face Value: Rs.2

CMP: Rs.37.85

EPS: Rs.5.5

P/E: 6.88

Dividend: 150%

Book Value: Rs.43.58

Market Cap: Rs.926.86 Cr

52-Week High/Low: Rs.224/Rs.36.15

 

Introduction: Deccan Chronicle Holdings Ltd, erstwhile Deccan Chronicle was formerly engaged in weekly and daily journals in Andhra Pradesh. The company acquired a news paper publishing business in December 2002; post which it established a strong foothold in the state. The company aims to be the leading publishing house in the country.

Deccan Chronicle, the flagship newspaper of the company is the leading English daily in Hyderabad and Andhra Pradesh. It publishes seven editions of the Deccan Chronicle in Andhra Pradesh from their printing presses located at Hyderabad/Secunderabad, Vijayawada, Rajahmundry, Vishakapatnam, Anantapur, Karimnagar and Nellore. It is the fourth largest circulated and read English daily in India. Besides Deccan Chronicle, the Company also publishes Andhra Bhoomi in Telugu (daily, weekly and monthly).

Deccan Chronicle covers latest local, regional, national and international news. The newspaper also provides business, sports, weather, city culture, beauty, and health related news and information through its online portal.

 

Shareholding Pattern: The promoters hold 63% while the general public’s holding is 37%. Among the non-promoters are a number of Mutual Fund houses which holds substantial stake in the company.

Shareholding belonging to the category
"Public" and holding more than 1% of the Total No.of Shares

 

Sl. No.

Name of the Shareholder

No. of Shares

Shares as % of Total No. of Shares

1

 EQ Advisors Trust - EQ/VQN Kqmpen Emerging Markets

2,715,990 

1.11 

2

 Deutsche India Equity Fund

3,166,001 

1.29 

3

 Merrill Lynch India Equities Fund Mauritius Ltd

3,542,473 

1.45 

4

 Ward Ferry Management Ltd A/C WF Asian Smaller

4,268,064 

1.74 

5

 Morgan Stanley Investment Management Inc A/c Morgan

3,888,224 

1.59 

6

 Life Insurance Corporation of India

3,429,892 

1.40 

7

 Franklin Templeton Mutual Fund A/c Franklin India

3,200,000 

1.31 

8

 Morgan Stanley Mutual Fund A/c Morgan Stanley Growth

3,675,000 

1.50 

 

 Total

27,885,644 

11.39 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Financials: For Q3FY09, the company came out with almost flat topline and subdued bottomline, due to general downturn in the world economy.

The total income of the company for Q3FY09 rose to Rs.228.3 Cr as against Rs.226.5 Cr in the same period previous year. Deccan Chronicle Holdings’ third quarter net profit fell 75% to Rs25.67 crore over the corresponding period a year ago. The net profit of the company for Q3FY09 came out to be Rs.25.7 Cr as against Rs.102.94 Cr in the same period previous year. For the nine-month period ended 31 December, Deccan Chronicle posted a net profit of Rs131.92 crore, a 51% decline from Rs269.29 crore last year.

The operating and net profit margins of the company decreased considerably Y-o-Y. The net profit suffered due to high raw material price (Rs.129.04 Cr in Q3FY09 as against Rs.82 Cr], higher staff cost (Rs.13.53 Cr in Q3FY09 as against Rs.6.53 Cr), and almost doubling of other expenditure (Rs.17.73 Cr as against Rs.9.8Cr). However with the government expected to come out with special package for the media sector, the company’s top and bottomline could change dramatically on the positive side.

 

Investment Rationale:

  • Advertisement, the main growth driver: Advertisement is the key revenue driver in the Indian newspaper giant. DCHL’s advertisement revenue accounts for nearly 80%-90% of the total revenue. The media industry, both print and electronic, is facing the impact of the global financial crisis in the form of decline in advertisement revenue. However, representatives of the print media had already approached the I & B ministry seeking an upward revision in rates of government advertisements. The government has almost assured to some stimulus package to the media industry and to tide over the situation.
  • Foray into new business: The Deccan Chronicle group has floated an international cargo airline company “Flyington Freighters Ltd”. The new company, which will start services from July this year, has placed orders for purchase of six A330-200F cargo planes from Airbus at a cost of $175 million each. While the aircraft delivery is slated for 2009-2010, Airbus has agreed to lease two aircraft to the company in the mean time.
  • Launching New Editions: In the middle of last year, Deccan Chronicle Holdings Ltd launched its Mumbai Edition of "Financial Chronicle" in association with the "International Herald Tribune". During the year, 2008, DCHL entered the Business daily market by launching its newest print offering, Financial Chronicle simultaneously from Hyderabad and Chennai and extended its presence in Bangalore and Mumbai recently. Also, it announced a tie up with International Herald Tribune for launching its branded 'World Business Section' inside Financial Chronicle. The Mumbai edition of the Financial Chronicle would have four pages of IHT's World Business Section and its logo would be put on the front page of the daily. But one should remain cautiously optimistic on DCHL's foray into this space as it is already crowded with several offerings by other big Print Media houses. During May 2008, the company finally launched its much awaited Bangalore edition of Deccan Chronicle.
  • Strengthening its base in Southern India: The company had already launched the Bangalore edition of Deccan Chronicle and approved an initial investment of Rs.25 Cr in addition to the use of existing assets in other locations.
  • Inorganic expansion: The company is expanding its reach through inorganic expansions. It had acquired control of Asian age Holdings, which publishes newspaper “The Asian Age” in five cities. The acquisition will help strengthen the brand image of Asian Age at the back of increasing print run. The company had also acquired Odyssey India Ltd (Odyssey) for Rs.61.2 crore, in a cash deal. Odyssey is a growing leisure retail chain, is engaged in sale of books, music, toys, greeting cards and FMCG products. This move was intended to notch advertisement from FMCG giants.
  • Buy Back of Equity Shares: The Board approved the proposal for buy back of equity shares of Rs.2 each of the fully paid up equity share capital of the Company, at a price not exceeding Rs.100 per equity share aggregating to Rs.180 Cr from equity shareholders other than the Promoters and persons in control of the Company. The maximum number of shares to be bought back through the Stock Exchanges shall not exceed 3, 50, and 00,000 Equity Shares of Rs.2 each which represents 14.29% of the paid up capital of the Company. However the Promoter Holding in the Company shall not exceed 75% of the Paid up capital of the Company post buy back. The minimum number of Equity Shares (minimum buy back shares) to be bought back is 1,00,00,000 Equity Shares of Rs.2 each.
  • Stimulus Package for the Media Sector to boost growth: Taking note of the difficulties faced by the media industry due to the financial crisis, the government last week said it will shortly announce a stimulus package for the sector. The I & B ministry has already sent certain recommendations about the package to the Finance ministry and the government is expected announce it soon. Moreover, the good point is that the said package is mostly concerning the print media and hence the scrip is expected to be positively effected more than those in the electronic media.  
  • Indian Premier League (IPL)--Profitable in the first year itself: Deccan Chronicle had bagged the rights for the IPL team of Hyderabad for US $107mn payable over the next 10 years. The IPL Hyderabad rights would be a part of Sieger Solutions. DCHL named the team Deccan Chargers and spent around $5.9mn in annual fees to recruit players. While there is every chance that the venture would achieve breakeven only after a couple of years, management has indicated that the IPL venture turned profitable for the company in the first year itself. DCHL clocked around Rs107.5cr revenue and incurred expenses to the tune of Rs88cr during its first year of operations. Hence, it made a neat profit of Rs19.5cr from the venture. Also Deccan Chronicle Holdings Ltd will not sell its Indian Premier League cricket team, Deccan Chargers, as there were no buyers in the market, a top official said. Deccan will review the decision to sell Deccan Chargers in three years from now as this downturn cycle was likely to be extended till 2012. It is to be noted that, Deccan Chronicle had in 2008 paid $107.01 million for the Hyderabad team for Indian cricket board’s Twenty20 series for 10 years.
  • Sieger Solutions – Potential unlocking on the cards: Sieger Solutions, a wholly owned subsidiary of DCHL, was formed in July 2006 to handle media space selling for DCHL for a pre-defined commission. However, Sieger has stopped clocking revenues from this model and now houses all the internet portals – Deccanchronicle.com, Papyrusclubs.com and Mydigitalfce.com. For FY2008, Sieger Solutions registered revenues of Rs.72 Cr and PAT of Rs.35 Cr primarily driven by a subscription based model from a website called Papyrusclubs.com (student community forums) under which it has tied up with several institutes to publish and share campus news over the Internet. Recently, DCHL also entered into an outsourcing agreement with New York Times (NYT) to manage their internet properties out of India as well as some of the development activities connecting to the digital space. Sieger Solutions is expected to rake in incremental revenues of Rs.150 Cr from this arrangement in FY2009. DCHL is also in talks to sell 5% equity stake in Sieger Solutions to NYT.

 

Conclusion:  During FY2008-10, we can expect DCHL to post a CAGR growth of 16% in Revenue aided by 18% CAGR growth in advertising revenues and 8% CAGR in circulation revenues. On the Earnings front, we can expect DCHL to report a CAGR of 15% largely boosted by a decline in interest costs

However, on the operating front, the DCHL is expected to post a subdued growth owing to a sharp decline in Operating Margins on account of stiff competition in Chennai, initial losses on account of the Bangalore edition and the Financial Chronicle launch, and higher newsprint prices. Hence, we can expect DCHL to post a CAGR growth of 9% in EBITDA during FY2009-10.

However, there are valid concerned on DCHL owing to its poor quality of growth (funding working capital requirements through Balance Sheet), scalability issues (too much dependence on single region), poor corporate governance (management not delivering on promises made – buyback, un-locking in subsidiaries) and unsustainable Margins (60% OPM as against peer average of 20%). While management has addressed some of these concerns – reduced debtor days to 90 days by securitization with ICICI for a 12% discount, and initiated talks with NYT to unlock value in Sieger, still some more clarity on the same is expected. Moreover, depreciating rupee is negative for the company as it imports newsprints.

Growing awareness among the common mass is leading to the rise in the circulation of newspaper. The growth was triggered mainly by India and china. DHCL occupies second position in the print industry and caters to the most part of the Southern India. Its paper Deccan Chronicle is the most read newspaper in Andhra Pradesh, Chennai and Hyderabad. The company is also eying a substantial share in Bangalore and is expanding to newer geographies which include Mumbai and Pune. Revenues of the company will also be triggered, by the upcoming expansion plans of Odyssey.

At the CMP of Rs.37.85, the stock is trading at dirt-cheap valuations considering its future upsides from the Sieger Solutions deal with NYT and IPL’s good performance. The valuation can also be corroborated by the growing advertisement revenues and increasing subscription.

Note: This Report is from the Yesterday's (08-02-09) Sunday Report which was sent to the Paid Groups, Yesterday (8th February, 2009

Is Satyam Computers Services Ltd, a buy at Rs.39.95 ??!!

To understand this fact, let us consider the following points, a little meticulously .........

                         Satyam Computer Services Ltd

 

Scrip Code :  500376

Quarter ending :  September 2008

 

Shareholding belonging to the category
"Public" and holding more than 1% of the Total No.of Shares

 

Sl. No.

Name of the Shareholder

No. of Shares

Shares as % of Total No. of Shares

1

 Aberdeen Asset Managers Ltd A/C Aberdeeninternational India Opportunities Fund ( Mauritius ) Ltd

23,800,000 

3.53 

2

 Fidelity Management & Research Company A/C Fidelity Investment Trust - Fidelity Diversified International-Fund

23,000,000 

3.42 

3

 ICICI Prudential Life Insurance Company Ltd

16,621,682 

2.47 

4

 Lazard Asset Management LLC A/c Lazard Emerging Markets Portfolio

14,490,567 

2.15 

5

 Aberdeen Asset Managers Ltd A/C Aberdeen Global Asia Pacific Fund

10,680,500 

1.59 

6

 Life Insurance Corportion of India

9,959,281 

1.48 

7

 Citigroup Global Markets Mauritius Pvt

8,203,186 

1.22 

8

 JP Morgan Asset Management Europe SARL A/c Flagship Indian Investment Co Maurities Ltd

8,179,448 

1.21 

9

 LIC of India Money Plus

7,941,345 

1.18 

10

 Swiss Finance Corporation Mauritius Ltd

7,515,806 

1.12 

11

 Government of Singapore

7,128,885 

1.06 

12

 Morgan Stanley Mauritius Company Ltd

7,096,342 

1.05 

 

 Total

144,617,042 

21.47 

 

The following Fund Houses sold shares yesterday in the open market due to too much panic created  by the "Media Terrorists":

 

1. SWISS FINANCE CORP MAURITIUS LTD===> Sold 7786759 shares at Rs.74.61
2. ABERDEEN INTERNATIONAL INDIA OPPORTUNITIES FUND MAURITIUS LTD===>Sold 9830811 shares of the company at Rs.43.41
3. ABERDEEN ASSET MANAGERS LTD ABERDEEN GLOBAL ASIA PACIFIC FUND===>Sold 4179064 shares at Rs.43.41 

 

Hence it can be concluded from the above data that Majority of Fund Houses feel that Satyam Computers Ltd will be able to come out of the mess created by its Founder Chairman Mr. B Ramalinga Raju??!!

Moreover, Sukumar Rajah, chief investment officer (CIO) of equity in India at Franklin Templeton Investments, which manages $4 billion of assets in the country, said in an e-mail, “This unfortunate development will be a short-term negative for market sentiment,”. Still, by forcing regulators to improve oversight, the incident “should be a Long Term Positive,” Rajah said.

 

According to a well known and reputed financial web-site, developing-nation stocks are trading near their cheapest levels in a decade after the global economic slowdown and a slump in commodity prices sent the MSCI Emerging Markets Index down 54 percent in 2008. In comparison, the MSCI World Index dropped 42 percent. Shares in the MSCI emerging-markets index trade at 8.8 times reported earnings, while developed shares fetch 11.5 times profit. Sensex companies trade at 9.5 times earnings.

Aberdeen Asset Management Asia Ltd., Satyam’s largest institutional investor as of September, said its investment outlook for India hasn’t changed. Funds run by Aberdeen own at least 5.12 percent of Satyam, according the Hyderabad-based company’s filings for the quarter ended Sept. 31.

“People will grow a bit more dispassionate, but you can say the same for the U.S. and elsewhere,” said Hugh Young, managing director at Aberdeen’s Asian unit, which manages $37.3 billion. “India has great companies that do the right things. Hopefully this is a one off.” He declined to say how many Satyam shares Aberdeen holds, or whether any were sold recently.

India’s $1.2 trillion economy may grow 7 percent in the year ending March 31, the slowest pace since 2003, according to government forecasts. The economy may expand at close to that rate in the next fiscal year as the global recession cuts exports and domestic demand wanes, Junior Industry Minister Ashwani Kumar said in New Delhi yesterday.

To understand the mammoth-ness of Satyam Computers Services Ltd let us take note of the following facts: Satyam Computer Services Ltd, employs 53,000 people, operates in 65 countries and serves almost 700 companies, including 185 Fortune 500 companies. More than half of its revenue comes from the United States.

The most encouraging news came from www.cnn.com which writes: "Analysts say Satyam is ripe for a takeover, and the government is expected to submit a formal report on the matter Thursday".

Therefore, can we construe that those highly skilled stock market professionals, who have purchased some shares of Satyam Computers Ltd will have a field day in the next few months??!!

However, the most horrifying part of this event is that that cash balance that was non-existent got certified by one of most reputed auditors in the world map, PricewaterhouseCoopers LLP.  This reputed auditor of Satyam Computers Ltd’s, declined to comment on the scandal, according to an e-mail from the New York- based firm’s public relations adviser, Edelman.

I had earlier discouraged all my  Paid Clients not to enter Satyam Computers Ltd, when it fell to around Rs.179---I was anticipting something like this, from my exprience durring the dotocm boom-bust cycle in the 1990s and early 2000. But is it time to buy this stock at the CMP of Rs.39.95, for the short term gains??!!

 

Prajay Engineers Syndicate Ltd: Accumulate on all declines;

BSE Code: 531746

Face Value: Rs.10

CMP: Rs.17.70

Book Value: Rs.152.34

EPS: Rs.17.87

P/E: 0.99

Dividend: 25%

Market Cap: Rs.70.26 Cr

Buying Price: The scrip should be bought above Rs.18.5

 

Company Background: Prajay Engineers Syndicate Ltd (PESL) was promoted by Mr. Chandra Mohan Reddy. It’s a 25 years old partnership firm converted into a public limited company in the year 1994. It pioneers in construction activities in the twin cities of Hyderabad-Secunderabad. Its Key developments include residential flats, townships, shopping malls, office buildings and group housings.

The company has developed around 6.7 million square feet over the past twenty years across more than 75 projects and a further 10.7 million square feet of land is under various stages of development. Prajay has a significant presence in the hospitality segment also, with three landmark ventures in the city: Prajay's luxury resort, the Celebrity Holiday Retreat and the 30 room Celebrity Boutique Hotel (located 500 metres away from the airport). Prajay has been the leader in identifying new locations that are today of strategic importance, which has given it huge cost advantage.

 

Shareholding Pattern: The promoters hold 16.42% while the general public holds, 83.58%. Among the general public FIIs hold a whooping 58.78% of the shares of the company.

 

 

Shareholding belonging to the category "Public" and holding more than 1% of the Total No.of Shares

 

Sl. No.

Name of the Shareholder

No. of Shares

Shares as % of Total No. of Shares

1

Copthall Maritius Investment Ltd

1,808,085

4.55

2

Goldman Sachs Investment Mauritius Ltd

852,543

2.15

3

Citigroup Global Markets (Mauritius) Pvt Ltd

2,130,796

5.37

4

ABN Amro Bank N.V. London Branch

1,518,952

3.83

5

Merrill Lynch Capital Markets Espana S.A.S.V.

1,487,223

3.75

6

Morgan Stanley Investments Mauritius Ltd

617,200

1.55

7

Swiss Finance Corporation Mauritius Ltd

1,047,459

2.64

8

S Madhuri Reddy

410,000

1.03

9

N Ravinder Reddy

2,020,100

5.09

10

Merlin Securities Ltd

5,336,134

13.44

11

GRA Finance Corprate

457,701

1.15

12

Clsa Mauritius Ltd

1,361,942

3.43

13

ABN Amro Bank N.V. London Branch

424,211

1.07

14

 BSMA Ltd

760,000 

1.91 

15

 Deutsche Securities Mauritius Ltd

2,358,893 

5.94 

 

 Total

22,591,239 

56.91 

 

 

Financials:  Though for Q2FY09, the total income was almost flat the net profit of the company suffered due to higher expenditure and higher depreciation, as can be seen below. The fact that the interest cost was more or less flat comparing Q-o-Q was a good sign. Moreover, the tax component was also less in Q2FY09, as compared to the same quarter previous year. However, due to the downturn, the operating margin and net profit margin took a quantum hit. However, this is going to correct in the next few quarters, due to the fall in the price of raw materials, in the last few quarters and also due to seasonal demand.

 

Standalone Result of Prajay Engineers Syndicate Ltd

 

Type

Un-Audited

Un-Audited

Un-Audited

Un-Audited

Un-Audited

Audited

 

Period Ending

30-Sep-08

30-Jun-08

31-Mar-08

31-Dec-07

30-Sep-07

31-Mar-08

 

No. of Months

3

3

3

3

3

12

 

Description

Amount (Rs. million)

 

Net Sales / Interest Earned / Operating Income

418.44

222.10

907.03

1,369.56

462.46

3,440.19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income

1.92

1.78

6.83

0.96

0.91

9.82

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Income

420.36

223.87

913.86

-

463.37

3,450.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenditure

-270.24

-144.32

-904.12

-

-200.17

-2,061.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest

-27.06

-24.94

-11.61

-27.97

-27.69

-90.87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit Before Depreciation and Tax

123.06

54.61

-1.87

-27.97

235.51

1,297.27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

-9.11

-8.66

-7.89

-

-4.96

-22.52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit before Tax

113.95

45.96

-9.76

705.01

230.55

1,274.75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax

-39.03

-15.92

-41.06

-49.75

-76.58

-246.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Profit

74.92

30.04

-50.82

655.26

153.97

1,028.67

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Capital

396.96

396.96

396.96

275.91

248.57

396.96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPS after Extraordinary items

1.89

0.76

-1.85

25.47

6.58

37.46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS after Extraordinary items

1.89

0.76

-1.85

17.32

4.05

37.46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nos. of Shares - Public

33,178,576.00

33,178,576.00

33,178,576.00

22,473,112.00

20,017,152.00

33,178,576.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percent of Shares-Public

83.58

83.58

83.58

81.45

80.53

83.58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Profit Margin

35.88

35.82

1.07

-

56.91

40.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Profit Margin

17.90

13.53

-5.60

47.84

33.29

29.90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash EPS

2.12

0.97

-1.08

-

6.39

26.48

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes

Notes

Notes

Notes

Notes

Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Detailed

Detailed

Detailed

Detailed

Detailed

Detailed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Highlights:

            The company earns 95% of its revenue from Real Estate and from Hospitality segment.

            In March 2007 the company posted a turnover of over Rs.2,000 million and profits of around Rs.800 million. It achieved Rs.1,000 million turnover in one quarter.

            Last year the company signed a joint venture with Sunway Group, Malaysia for development of residential condominiums projects in Hyderabad.

            Prajay Engineers' Land bank stands at approximately 850 acres 80% of which is in and around Hyderabad

            In the last twenty years of its existence, PESL has delivered 75 projects and developed around 6.7 million square feet.

 

Investment Rationale:

            The increased demand for residential units and commercial, office space for the IT and ITES companies suggest that the spurt will continue for years to come. An estimated inflow of Rs.5,508 billion investments in this sector will usher in development at a remarkable pace.

            Government thrust on infrastructure spending has given a tremendous boost to construction sector in terms of market size resulting in higher demand across the sector.

            Prajay Engineers Syndicate's base in the twin cities of Hyderabad and Secunderabad offers it a myriad of opportunities in the real estate sector. The rapidly growing IT/ITES industry in Hyderabad has its roots in the proactive role of the state government pitching Hyderabad as the 'Hi-Tec' city of India.

            The Government's decision to launch Bio Tech Park and Fab City has further given a boost to technology driven growth in Hyderabad.

            The company currently has around 31 projects underway and plans to construct around 37.6 million square feet in the next four to five years. All projects have credit Rating of A+ by FIs.

            With its visionary approach and contemporary building practices, cutting edge management discipline, Prajay is at the forefront of imparting dynamism to infrastructure development industry.

            The company is foraying into Tier II cities of Andhra Pradesh like Vizag and Vijaywada, by FY10.

            The company want to invest around Rs.500-600 Cr in the coming years to develop the hospitality segment; to create 1000 room capacity by 2009 in the 5 star, 4-star and the 3- star business class categories; and to develop 31 projects including residential, commercial, retail and hospitality projects, aggregating to around 37.57 million square feet over the next five years.

            PESL’s 100% subsidiary Prajay Holdings, has received a commitment of FDI recently, to the tune of rupees equivalent of US $ 36 million for one of its prime projects at Hyderabad wherein a development of around 40 lac square ft has been planned by the company.

            The company is riding high on the real estate and infrastructure boom: it has set a target of reaching Rs.1000 crore turnover by FY10.

            Future Focus: Premium Apartments, Ultra-modern Townships, Development of Golf course, Independent premium bungalows, Development of 3 and 5 star hotels, Infrastructure development, Shopping Malls. These are all high volume and high margin activities.

 

Conclusion:

As the trend of spiraling growth continues, there are miles more to go, and further milestones to achieve. With 31 planned and ongoing projects, which will culminate into construction of around 38 million square feet and the residential segment comprising of about 84 percent of the total area under development, the company is expected to do well in future. The stock at the current market price provides an investment opportunity and one should invest in it taking a call for 12-15 months horizon for at least 50% from the CMP of Rs.17.7.

Chartical Indicators: For the short term, buy the scrip only if it closes above Rs.18.5 on a daily closing basis. The MACD and CCI are in perfect buy mode, while Stochastic, Bollinger Bands, and Williams%R are also in buy mode.

Moreover, in the Candle Stick Chart Pattern, the inverted hammer, formation indicates that a significant decline has taken place in the stock price and the shorts are beginning to cover their positions---a very bullish indicator.

With this Candle Stick Chart Pattern, it is imperative to watch the next day's trading action. If the stock opens strong and remains strong during the day, then a key Reversal is likely in progress—a perfect time to bag the scrip.

 

Note: This stock was recommended to the Paid Groups in the Sunday Report of 30-11-08.