Tuesday 11 May 2010

PICK OF THE WEEK

Info Drive Software Ltd

BSE Code: 530703

CMP: Rs.27.10

EPS: Rs.1.63

Introduction: Info-Drive Software Limited [BSE: INFDS, 530703], is a multi-dimensional Technology and Business Services Company offering:

* Specialized expertise in Applications Deployment and Banking Solutions

* Remote Infrastructure Management

* Biometric Solutions at enterprise level and

*Back-office transaction processing in Healthcare and Benefit Administration domains.

The company serves the high-growth banking in the Middle East and Far East markets segment by providing turnkey systems integration solutions entailing custom software implementation, hardware optimization and data center maintenance. Through a unique synthesis of organic and inorganic growth model on top of highly specialized offerings in the IT, Infrastructure and BPO verticals, it has established a well-balanced portfolio of services catering to the mainstream, uncontested, and emerging markets globally.

With headquarters in Chennai (India), Info-Drive has service delivery centers across India, Kuala Lumpur (Malaysia) and Dubai (UAE) supporting the business development centers in the USA (Sunnyvale and New York), and Singapore. These also support the multiple systems integration centers pan-India.

Its corporate culture is driven by:

* A strong sense of client-centricity

* Empowered decision-making with high accountability

* Sustained investment in domain expertise for continual differentiation in offerings and

* A constant focus on identifying green field opportunities for steady value creation for the company.

These attributes have fuelled Info-Drive’s rapid growth in the chosen markets, helping it become a truly ‘niche’ provider of both scale and specialized services. Partnering on an integrated or discrete engagement model, we are able to unlock measurable savings for clients globally.

Its portfolio of services entails:

* Business Process Outsourcing services

o Healthcare (Data Capture, coding and billing)

o Benefit Administration services (Life cycle of Qualified Pension Plans and IRS filing)

* IT Services

o Lifecycle Development Services

o Product Support and Customization Services

o Platform Porting Services

o Product Migration Services

* IT Infrastructure Management Services

o Remote Infrastructure Management

o Data Center Management

* Biometrics

o Avant Guard-Auto

o Avant Guard-IT

o Avant Guard-Access Control

o Avant Guard- 32 Bit E-Kit

Shareholding Pattern: The promoters hold 18.50% while private corporate bodies hold 16.51%. The non-promoter holding is 81.50%.

Share Holding Pattern as on :

31/03/2010

31/12/2009

30/09/2009

Face Value

10.00

10.00

10.00

No. Of Shares

% Holding

No. Of Shares

% Holding

No. Of Shares

% Holding

PROMOTER'S HOLDING

Indian Promoters

5408456

18.50

5407956

18.50

5372208

18.37

Sub Total

5408456

18.50

5407956

18.50

5372208

18.37

NON PROMOTER'S HOLDING

Institutional Investors

Mutual Funds and UTI

800

0.00

800

0.00

800

0.00

Banks Fin. Inst. and Insurance

7600

0.03

8000

0.03

8000

0.03

FII's

91689

0.31

91689

0.31

91689

0.31

Sub Total

100089

0.34

100489

0.34

100489

0.34

Other Investors

Private Corporate Bodies

4827674

16.51

4836407

16.54

4859177

16.62

NRI's/OCB's/Foreign Others

4015445

13.73

2989783

10.23

3920618

13.41

Others

1026589

3.51

1001917

3.43

1002828

3.43

Sub Total

9869708

33.76

8828107

30.19

9782623

33.46

General Public

13860637

47.40

14902338

50.97

13983570

47.83

GRAND TOTAL

29238890

100.00

29238890

100.00

29238890

100.00

Financials: For FY09, the net sales of the company came out to be Rs.13.65 Cr as against Rs.4.25 Cr in the same period previous year. The other income of the company came out to be Rs.97 lakhs as against Rs.49 lakhs in the same period previous year. The operating profit of the company for FY09 came out to be Rs.4.77 Cr as against Rs.2.64 Cr in the same period previous year. The Gross profit of the company for FY09 came out to be Rs.5.55 Cr as against Rs.2.95 Cr in the same period previous year. The net profit if the company for FY09, came out to be Rs.5.22 Cr as against Rs.2.28 Cr in the same period previous year.

The EPS of the company for FY09 came out to be Rs.1.79 as against Rs.0.78. The net profit in FY09 would have been much higher if the employee expenditure and other expenses have not shot up by so much. The employee expenditure increased to Rs.1.64 Cr in FY09, as against Rs.72 lakhs in the same period previous year. The other expenditure shot up to Rs.7.24 Cr as against Rs.90 lakhs in the same period previous year. The depreciation has also increased significantly during FY09, as against FY08.

For Q3FY10, the total sales of the company came out to be Rs.5.19 Cr as against Rs.6.46 Cr in the same period previous year. The operating profit of the company nearly doubled to Rs.1.84 Cr in Q3FY10 as against Rs.1.03 Cr in the same period previous year. The net profit of the company for Q3FY10 came out to be Rs.1.62 Cr as against Rs.1.01 Cr in the same period previous year. The operating profit margin of the company increased to 35.51% in Q3FY10 as against 15.85 % in the same period previous year. The GPM of the company increased to 32.7% as against 17.57% in the same period previous year. The NPM of the company increased to 30.95% (almost double) in Q3FY10, as against 15.19% in the same period previous year. The EPS of the company for Q3FY10 came out to be Rs.0.55 as against Rs.0.34 in the same period previous year.

For the nine months ending December, 2009, the total sales of the company came out to be Rs.10.69 Cr as against Rs.119.4 Cr in the same period previous year. The net profit of the company during the period came out to be Rs.4.20 Cr as against Rs.3.98 Cr in the same period previous year. The operating profit margin of the company also increased to 43.96% as against 34.77% in the same period previous year. The NPM of the company during the period came out to be 38.81% as against 31.74% in the same period previous year. The EPS of the company for the nine months ending December, 2009, came out to be Rs.1.44 as against Rs.1.36 in the same period previous year.

However, a little concern is given by the fact that during the nine months ending December, 2009, the employee expenditure almost doubled to Rs.2.64 Cr as against Rs.1.19 Cr in the same period previous year. But this is offset by the significant decrease in the other expenses to Rs.3.35 Cr as against Rs.6.6 Cr during the nine months ending December, 2009.

Triggers:

  • There is a big change in the global economy and the Company has been able to adapt well and march along with overall improved performance. Keeping in mind the Company’s future outlook and the avowed objective to reward the Shareholders, the Board shall maintain its policy of returning a portion of its free cash flow to its shareholders at a level it considers prudent in light of the current economic and financial environment. The Board recommended a Dividend of 5% (Rs.0.50 paise) per share for FY 08-09. The Board is confident of ensuring sustainable returns to the Shareholders for now and many years to come.
  • The Company continued to win new engagements and grow existing relationships in the traditional area of Hardware Sales & Maintenance, Systems Integration and has strengthened its presence in areas such as IT Consulting and IT Infrastructure Management services. The broad range of services enables the Company to provide end-to-end solutions to its clients - combined with its geographical spread provided comprehensive and high value added services to its clientele.
  • The Company in FY 08-09 has chalked out a new strategy and has realigned its operating structure and enhanced technology offering. The revised organizational operating structure paves the way for more accountability & performance by casting a P&L responsibility on Heads of Operations. The Company today is much more focused and is executing at a higher efficiency than a year ago.
  • The synergies between the subsidiaries which have been acquired in the past are yielding results in making InfoDrive as a group, provider of end-to-end comprehensive solutions.
  • The Company’s Income from operations in FY09 grew by 221% to Rs.13.65 Cr from Rs.4.25 Cr in 2008, thus making further growth in 2009. The corresponding Total expenditure including depreciation is Rs.9.28 Cr in 2009 from Rs.1.87 Cr in 2008. Correspondingly the Profit after Tax increased by 129% to Rs.5.22 Cr in 2009 as compared to a profit of Rs.2.28 Cr in 2008.. The Company’s Stand alone operations have shown substantial growth. The company seeks long term engagements with clients while addressing their Outsourcing requirements. Its customer centric approach has resulted in high level of client satisfaction. The demand for the Company’s services continues to look robust, and the relentless focus on niche areas within Business Process Outsourcing (BPO) and Information and Communication Technology (ICT) services continues to resonate with target customers.
  • The Company’s chosen target segment in BPO space does not have any exposure to the recession in USA and has not seen any slowdown in demand from its US clients. USA continued to be the largest market for its BPO operations and hence any improvement in the fundamentals of the US is positive for the company. The company derived 75 percent of its BPO revenues from repeat business. The Company continues to believe that, for the nature of services it provides, growth is predicated on superior service delivery execution, ongoing value enhancing workflow and domain competency rather than on vagaries of macroeconomic market forces.
  • The Company’s investments in uncontested market opportunities and innovation have enabled it to conceptualize and undertake a large, end-to-end critical project in Digi-Life segment. As part of this practice initiative, the Company has won several high-value contracts in Information and Communication Technology (ICT). It has rapidly established itself as industry leader in creating a truly unique e-Living Practice that provides automation, digital life-style, and community networking & unified integration of media, telecom and internet for homes and community.
  • The quality of revenue and the annuity nature of its client contracts make its growth plans highly predictable and sustainable over a longer time horizon, relative to its sector peers. The global economic events and the resultant slow- down has created enormous headwind to the growth of services industry in general and offshore outsourcing industry in particular. The Company’s investments in new growth engines like e-living, specialized service offerings in BPO like Benefits Administration Services and value centricity in the large Systems Integration projects have helped convert today’s challenging market environment into opportunities for growth.
  • Even in this difficult environment, the Company continues to make substantial investments in developing its domain expertise and strengthening its technology competencies. The Company is focused on Intellectual Property (IP) led growth strategy in some of the chosen service offerings and as a testimony have built several tools like InsTIL, CampIT, industry pioneering Biometrics solutions and are actively offering these to several blue-chip clients, as an integral part of its service offerings. As a result of these initiatives, the Company is well equipped to benefit when the global economy, especially the US, is revving.
  • Though the current external macroeconomic conditions continue to be uncertain, however it is widely believed that the company’s performance bulwarked by a professional management team will continue to surpass the expectations, as witnessed over the last few years.

· Info-Drive Software Limited (Singapore Branch) was incorporated in November 2007, to expand its business in Hardware Sales & support services business in Singapore. The Company in FY09 has signed a reseller agreement with Hewlett Packard Singapore (Sales) Pte Ltd (HP) for selling the entire line of HPs Products in India.

  • Subsidiaries: The Company today is a global corporation having presence in 5 countries :
 
           Subsidiary                                                                         Country of Incorporation
 
       Info-Drive Software Inc                                                         United States of America
       Info-Drive Systems Sdn Bhd                                                   Malaysia
       Info-Drive Software LLC                                                         United Arab Emirates
       Precision Infomatic (Madras) Pvt Ltd                                       India
       Info-Drive Software Pte Limited                                             Singapore
       Info-Drive Software Limited                                                   Canada
       Precision Techserve Private Limited                                        India
       Precision Galaxy Private Limited                                              India
       Precision Techconet Private Limited                                        India
       Legend Systems Private Limited                                              India
       Technoprism Inc                                                                      United States of America
       Technoprism LLC                                                                     United States of America

During FY09, InfoDrive Dubai has made good progress on its strategy to target multi-year deals with end to end ownership of customer systems and processes. This initiative has helped the Company further its objective of long term partnership with the customers. Within few months of launch of Digi-life practice, InfoDrive Dubai secured its first multiyear million dollar order in ICT space for InfoDrive, India. The scope of work includes providing community datacenter, call-center & e-Living experience. Hardware Platform, Software Drivers & Applications are developed in conjunction with several OEM & technology giants including Microsoft and Cisco. The phase one of the project which includes e-Living thrill ideation, e-Living commerce blueprints, infotainment solution architecture has been successfully delivered in FY09.

  • Info-Drive Software Ltd has informed last month that it is entering into the S A S, and Risk Management Practices. These Practices are advanced and analytical practices in the areas of operational risks, anti -money laundering, fraud analytics, and customized fraud solutions. The company hopes to derive significant revenues from it.
  • Last year, Info-Drive Software LLC, an IT services provider and a subsidiary of Chennai-based Info-Drive Software and Xerox had formed a "go to market" strategic partnership for offering to the customers paperless office products and total document solutions of Xerox in the UAE. In a statement, Info-Drive said the tie up will help medium and large enterprises to conserve cash by eliminating wastes and business-non value -adds at department and organization level while retaining core business value adds. It is one of the few who has become a member of the business partner program of Xerox Solutions & products in the UAE.

Conclusion: Considering the points mentioned above the scrip could be purchased at the CMP of Rs.27.10 for a target of Rs.31-31.5 in the very short term. MACD, Bollinger Bands, Stochastics, etc are in buy mode and cross over could take the scrip upto Rs.35 in the short to medium term, unless the world markets further crashes. The candle stick chart pattern is indicating good upward movements in the days to come. Moreover, volume built-up was seen in the counter in the last trading session. But on the negative side the scrip is still below its 50 and 200 DMA. In case of any market crash please put a Stop Loss at Rs.24.5.


Note: The stock was recommended to the Paid Groups on this Sunday (9th May, 2010) in the Sunday Report.

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. 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. Investors should take their own decisions while buying and selling the shares/securities.

Not

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Sunday 9 May 2010

Pick of the week:

MANJUSHREE TECHNOPACK

BSE Code: 532950

CMP: Rs.42.85

Introduction: Manjushree Technopack Limited is an integrated packaging solution provider, delivering its customers with innovative cutting edge plastic packaging solutions.

Founded in 1997 by Vimal Kedia, Manjushree started as a small umbrella manufacturing unit in Guwahati, Assam and thereafter in 1984 forayed into manufacturing of Plastic Flexible packaging. Manjushree come up with its first IPO in 1995 to diversify into the PET bottles manufacturing unit in Bangalore. Today, Manjushree is the largest converter of PET and Preforms in India with an installed capacity of 30,000 MTPA and caters to the packaging needs of the FMCG fraternity. Besides PET, Manjushree also manufacturers oxygen barrier Retortable Multi layer and Stretch Blow Moulded bottles - both of these were brought into India for the first time by Manjushree.

Manjushree’s sales network consists of 6 marketing offices in all the major metros in India with two manufacturing facilities in Bangalore, with over 30,000 sq. meters of built up area, employing over 500 people and using the best of Japanese and American Technologies. Company produces over 120 million containers per annum, for 5ml-15litre capacities in over 240 designs, shapes and sizes.

Company’s clientele includes multinationals from a wide variety of industry segments: UNI-LEVER GROUP, NESTLE, HEINZ, PEPSICO, GLAXOSMITHKLINE, LOTTE, P&G, COCA-COLA, CADBURYS, RECKITT BENCKISER, WRIGLEYS, PERFETTI VAN MELLE AND ARYA VAIDYASALA to name just a few.

Shareholding Pattern: The promoters hold 57.15% while the general public holds 42.85%. The promoters have been steadily increasing their stake since the last few quarters.

Triggers:

  • Overall installed capacity of plant has gone upto 21,740 MTPA in view of expansion cum diversification project completed during the year, as compared to 9120 MTPA as at previous year end. The major capacity additions have been for the manufacture of PET Preforms to the tune of 11100 MTPA and the balance capacities have been added for the containers. The actual production of containers and performs during the FY09 amounted to 6722 MT (2008 - 4410 MT) excluding conversion jobs of 1757 MT (2008 - Nil) resulting in a capacity utilization of 39% of year-end installed capacity on absolute basis, which is due to the fact that the major capacity additions have been made only towards the fag end of the year. The turnover of manufactured items was 6657 MT (2008 - 4200 MT).
  • The company has now embarked upon further expansion of PET / Monolayer containers / Preforms manufacturing capacity during current and next year at an estimated capital outlay of Rs.30 Cr to be fully financed out of internal accruals--as a result of which the overall plant capacity is likely to increase by 7000 MTPA by the end of FY 2011.
  • The Company continues to have a strong focus on innovation, research and development for sustained growth while enjoying a preferred supplier status with most of its MNC clientele in FMCG, Parma and allied sectors. It has a dedicated team of technically qualified / trained personnel and professionals manning different operational segments in a decentralized environment.
  • The company is completely focused on its niche of rigid plastic packaging where the growth opportunities are tremendous. It is confident of seeing a 30% CAGR in its business, for the next 5 years. What is important to note is that capital Expenditure has been doubling every year from last 3 years--from Rs.8 Cr to Rs.16 Cr, to Rs.32 Cr in FY09. The company has announced a Rs.64 Cr Term Loan for acquisitions of fixed assets in the current year.
  • Manjushree has an equity base of just Rs.13.55 Cr that is supported by huge reserves of around Rs.45.91 Cr leading to a share book value of Rs.43.9. The promoters hold 57.15%, non-promoter corporate bodies hold 16.41% while the investing public holds 25.45% stake in the company. For Q3FY10, it recorded net sales of Rs.39.35 Cr with net profit of Rs.2.63 Cr against net sales of Rs.27.48 Cr with net profit of Rs.1.98 Cr in Q3FY09. For the first 9 months of FY10, it recorded net sales of Rs.108.64 Cr with net profit skyrocketing 42% to Rs.7.60 Cr against net sales of Rs.82.59 Cr with net profit of just Rs.5.50 Cr in the corresponding period previous year. The quarterly EPS was Rs.1.94 while the 9 monthly EPS was Rs.5.61. At the current level, the stock is available at a forward P/E multiple of just 6. MTL paid 10% dividend for FY09.

Conclusion: The stock has been trading between Rs.42-47 for quite sometime, taking Rs.42 as the support. It is unlikely that this support zone would be broken unless there is a crash in the markets. Investors can buy this stock with a stop loss of Rs.42. On the upper side, the stock can zoom up to Rs.55-56 levels in the short-term and Rs.67-69 level in the medium-term.

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. 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. Investors should take their own decisions while buying and selling the shares/securities.

Note: The stock was recommended to the Paid Groups, last week, on Sunday (02-05-10).
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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.