Shreyas Shipping & Logistics posted turn around results for the quarter ended March 2009 on the back of foreign exchange gain of Rs.15.70 crore.

This small-cap stock had underperformed the market over the past one month. The company's current equity is Rs.21.96 crore and face value per share is Rs.10.

Shreyas Shipping & Logistics' net sales declined 2.1% to Rs.283.90 crore in the year ended March 2009 over the year ended March 2008. However, the performance was robust on a standalone basis. The net profit surged 78.9% to Rs.14.99 crore on 14% fall in net sales to Rs.145.82 crore in the year ended March 2009 over the year ended March 2008.
The company posted turn around results for the quarter ended March 2009 on the back of foreign exchange gain of Rs.15.70 crore. The company reported net profit of Rs.13.47 crore in Q4 March 2009 as compared to net loss of Rs.7.36 crore in Q4 March 2008. The company's net sales declined 50.8% to Rs.23.28 crore in Q4 March 2009 over Q4 March 2008.
Shreyas Shipping & Logistics' provides shipping and logistics services. The shipping segment provides charter and feeding services. The logistics segment comprises of shipping part of domestic and liner business.India has a limited number of coastal container ship operators: these include Shreyas Shipping and Logistics Ltd, Shipping Corp. of India Ltd, Seaways Shipping Ltd, Jindal Waterways Ltd, etc. Many freight forwarders and logistics firms who have committed volumes, however little they may be, are now dependent on these few firms to move the cargo.

The catch point here apart from the Railway budget is that, Coastal ships are given a concession of as much as 40% on vessel-related charges, or port calling costs such as port dues, berth hire and pilotage, compared with similar charges for other ships. In September last year, India’s maritime regulator, the Directorate General of Shipping, eased staffing requirements for vessels operating along the country’s coast. The regulator has separately flagged off a plan to exempt certain classes of ships used only in coastal trade from some of the stringent provisions of the Merchant Shipping Act to promote the sector. It has prepared a draft of the proposed conditions, called the Indian Coastal Ship Safety Code, that such vessels will have to comply with in order to avail of the exemption. The new code is awaiting notification.

The Indian government is charging a concessional tariff for coastal ships calling at its 12 ports. Coastal ships are given a concession of as much as 40% on vessel-related charges, or port calling costs such as port dues, berth hire and pilotage, compared with similar charges for other ships.

Besides, a discount of 40% is also extended to coastal cargo and container-related charges such as ship-shore transfer and transfer from berth to storage yard and vice versa.

The shipping ministry is also lobbying for a Rs.500 crore corpus from the government to develop coastal shipping. The arrival of many private container train operators is another big facilitator for coastal shipping. With global recession slowing demand for goods and consequent fall in ship values and rentals, there are plenty of idle container ships in the global market that can be bought or hired at dirt cheap rates to ply along India’s coast. According to one industry estimate, cost of transporting goods from north to south India and vice versa can be reduced by about 50% with a combination of rail and sea.

It was not surprising because coastal shipping accounts for a low share of India’s total domestic cargo moved by different modes of transport. In comparison, developed nations rely heavily on coastal shipping, considered to be eco-friendly, cost-effective and fuel-efficient.

In India, coastal shipping moves just 7% of the local freight despite a coastline of 7,517km dotted with 12 state-owned ports and around 200 smaller harbours. The share is low compared with the European Union, where coastal shipping has a 43% share of the cargo traffic. In the US, it has a 15% share. HENCE A HUGE CHANCE OF GROWTH IN THIS SECTOR---Shreyas Shipping and Logistics Ltd would be likey beneficiary.

Shreyas Shipping & Logistics Limited was incorporated as Private Limited Company in the year 1988, primarily to own and operate vessels for feedering of containers between Indian Ports and Internationally renowned container transshipment ports. It is a part of Transworld Group of Companies, which is promoted by Late R. Sivaswamy and family. The Group has a total of 25 years experience in the shipping industry.

Shreyas Shipping & Logistics Ltd became first Indian Private sector container feeder operator and first Indian shipping company to get ISO 9002 for container ship and feeder service management. The first and only operator on the containersed coastal shipping trade.

The service activity of Shreyas Shipping & Logistics consists of following:

• 
  
  Common Feeder Carrier


• 
  
  Domestic Logistic Service by Sea Mode


• 
  
  Regional Services


• 
  
  Chartering

Alfa Transformers Ltd
BSE Code: Rs.517546
CMP: Rs.34.75
Book Value: Rs.46.6
EPS: Rs.6.53
Price/Book: 0.75
P/E: 5.35
Industry P/E: 9.98
Market Cap: Rs.18.73 Cr

Introduction: Alfa Transformers Ltd’s establishment dates back to 1982. As a start-up unit it started manufacturing transformers in the small to medium range from the year 1988. It produces Electrical Distribution & Power Transformers ranging from 10KVA, 12KV Class to Transformers of 10 MVA, 36 KV Class. The company is now a major supplier to utilities, multinationals and domestic corporates. Since 1997, its certification as an ISO 9001 company has positively strengthened its presence in the international market. Its state of art facilities has eased its effort to match desired production standards. It now exports its products to many countries including Nepal, Bangladesh, Dubai, Nigeria, Suriname, etc.

At the core of its operations, is a team of qualified engineers, who excell in the design and development of quality transformers. Its working ethos values integrity, reliability, commitment and trust, deliverables, which help to it get repeat orders from its customers.
Its list of domestic clients is who’s who of Industry, some of whose names are given below:

• Orissa State Electricity Boards of Bihar, Maharastra, Punjab, Madhya Pradesh,
• Rajasthan, West Bengal, etc.
• Govt. of. Manipur, Electricity Department.
• Department of Atomic Energy.
• Bhaba Atomic Research Centre.
• Central Coalfields Ltd.
• Mahanadi Coalfields Ltd.
• Larsen & Turbo Ltd.
• North Eastern Electric Power Corporation Ltd., Shillong.
• Kirloskar Brothers Ltd.
• Siemens Ltd.
• Crompton Greaves Ltd.
• Steel Authority of India Ltd.
• Indian Metal & Ferro Alloys Ltd.
• Tata Projects Ltd.
• Tata Iron and Steel Company Ltd.
• Various Govt. Undertaking & Corporations, etc.

Its list of overseas clients is:

• Dubai Electricity & Water Authority, Dubai.
• Ministry of Electricity & Water, U.A.E.
• Nepal Electricity Authority, Achham Hydro Power Project.
• Bhairawa Lumbini Ground Water Project, Nepal
• Bangladesh Power Development Board, Dhaka, Bangladesh
• Rural Electrification Board, Dhaka, Bangladesh.
• Dhaka Electric Supply Company Ltd., Dhaka, Bangladesh.
• National Primary Education Commission, Abuja, Nigeria.
• National Electricity & Power Authority, Abuja, Nigeria
• N.V. Energie Bedrijven Suriname, Suiriname

Shareholding Pattern: The promoters hold 38.43 % while the general public’s holding is 61.57%. Among the general public, Strategic Ventures Fund Mauritius Ltd holds 14.93% shares of the company. Also, T J Stock Broking Services Pvt Ltd holds 1.76%, Fortune Equity Brokers India Ltd hold 1.52% while Religare Securities Ltd hold 1.08% shares of the company.
Financials: On a standalone basis the total income of the company for FY09 came out flat at Rs.33.61 Cr as compared to Rs.36.62 Cr in the same period previous year. The operating profit came out be Rs.7.92 Cr in FY09 as against Rs.6.4 Cr in the same period previous year. The Profit Before Depreciation and Tax came out to be Rs.5.81 in FY09 as against Rs.4.54 Cr in the same period previous year. The net profit of the company for FY09 came out to be Rs.3.52 Cr as against Rs..2.7 Cr in the same period previous year. The EPS of the company after extraordinary items increased to Rs.6.57 in FY09 as against Rs.5.41 in the same period previous year. The operating profit margin of the company also increased substantially to 23.96% in FY09 as against 18.98% in FY08. The net profit margin of the company also improved to 10.66% as against 8.05% in the same period previous year. Hence we find that even in the downturn the company was able to maintain good fundamentals.
Triggers:
1. The companies in the power and proxy-power sector is expected to grow in future due to assured growth of power sector. Alfa Transformer is engaged in the production of transformers for power stations, hence will benefit from power projects coming up in the next few years.

2. Promoters/ Promoters Group have bought shares from open market to increase their stake in the company which is a positive trigger for the stock price.

3. Alfa Transformers Ltd acquired "PHOENIX SURGICARE PVT LTD" and turned it into a wholly owned Subsidiary Company by acquiring its 100% equity shares. This is generating additional revenues for the company.

4. During FY09, the Company has produced an impressive financial performance in all parameters, namely, revenue growth, operating margins and resource utilization. It is heartening to note that all the business segments have withstood the competition in generating an improved performance, even when the world economy was reeling under massive slowdown. Higher capacity utilization, increased realization and strengthening of operational efficiencies resulted in improved revenues and profits. The Company posted an impressive performance with all round improvement in production, sales and profitability in FY09. This is expected to continue in the next couple of years and it is expected to grow at the rate of Rs.25-30% in FY09—FY11 period.

5. The transformer sector is a play on the strong growth in investment on power generation by the public and private sectors, as India seeks to correct its chronic power shortages. The annual requirement for transformers could be more than 100,000 MVA per annum for next five years. This includes incremental demand from the power sector and industry. This demand will primarily be fuelled by a) higher spending in the power sector on generation; b) the increased spending on Transmission and Distribution as a result of distribution reforms aimed at upgrading the network; and c) the upswing in the industrial capex cycle. So there is enough demand to keep the transformer manufacturers busy for next few years.

6. The governments thrust on the electrification of all the villages will give boost to Distribution Transformers. The Accelerated Power and Rural Development program (APRDP) scheme encourages the States to reduce Aggregate Technical and Commercial (AT & C) losses by upgrading their networks, through efficient metering and billing. Alfa Transformers Ltd sees a huge demand for Singe Phase Transformers coming up in the next couple of years.

7. The company is expanding its transformer manufacturing facilities in other parts of the country. The company has set up a new transformer manufacturing unit at the Industrial Area near Vadodara, Gujarat to meet the huge demand of transformers in that region. The new unit has started commercial production last year. This is generating additional revenues for the company.

8. The company has entered into MOU with Hitachi Metals (India) Ltd. On 9th May,2007 for starting their Metaglas Amorphous Project at their Unit II at Bhubaneswar. The installation of required machinery has been completed and trial production has also been completed and the commercial production has last year. It is now fully operational on commercial basis.

9. The Company continues to enjoy Star Export House status from the Government of India and ISO 9001-200 certification for quality. The Company also received the Award for Export Excellence for the year 2005-06 from Engineering Export Promotion Council, Eastern Region.

10. The Board of Directors has recommended dividend of Rs.1 per share of face value of Rs.10 (10%) for FY09. al Meeting.

11. Since there will have no place at its Unit II plant after accommodating manufacture of CRGO lamination, Wound Core and Amorphous Core & single phase AMDT Transformers, the company needs space for tank fabrication and power transformers. Hence the company is putting its efforts to procure additional plot / land in Bhubaneswar to complete the expansion project at the earliest. Some land has been earmarked for purchase immediately.

12. The Company has initially acquired 2.5 acres of land in Nasik, Maharastra for setting up a Transformer Unit. Negotiations are on to acquire the adjacent land to put up a Power Transformer Unit in that place primarily to cater to the clients in the Western Region of the Country. The cost of the project and means of finance are being worked out for this expansion.
Conclusion and Chart-Check: Looking at the impending growth in the power sector is it advisable to buy Alfa Transformers Ltd for medium to long term perspective for at least 50% return, from the current price, after the price of the scrip stabilizes.

While most of the Chartical Parameters are more or less in buy mode, what I feel is that the stock could come down further if there is a correction in the market to the next support level of Rs.27.5, where it should be purchased in bulk.

In any case the stock could be accumulate between the price range of XXX (This portion for the Paid Groups) range and wait for a break out. The stock is looking slightly oversold at the current price.

Note: The stock was recommended to the Paid Group on last Sunday in the Sunday Report. (latest edition).

Sicagen India Ltd: Poised for Instant Growth

BSE Code: 533014

CMP: Rs.7.94

Face Value: Rs.10

Book Value: Rs.89.54

Price/Book: 0.09

Market Cap: Rs.31.42

Industry P/E: 47.53

Introduction: Sicagen is India's leading provider of trading and marketing services for construction-related industrial and retail infrastructure.
It has a number of divisions:
1.Building materials
2.Vehicle sales
3.Governor services
4.Boat building
5.Speciality eco-chemicals.
The company last year disposed off the Plantations and Wind Energy/Power divisions due to high overhead and low income. It has acquired a drum (barrel) manufacturing company in April, 2009, which is expected to generate 5—10% of the total turnover of the company. The bulk of the revenues of the company come from two divisions: (a) Building Materials (56%) and (b) Vehicle Sales (41%). But this is going to change a bit due to the new acquisition.

It is worth mentioning that the Scheme of Arrangement [Demerger] between the Company and Sical Logistics Ltd (Sical) effective 01, October 2006, which was approved earlier by the shareholders at the Court convened meeting held on 21 September 2007, was sanctioned by the Hon’ble High Court of Judicature, Madras vide its Order dated 20 December 2007. The demerger process was completed by filing the above said Order with Registrar of Companies, Chennai on 14 January 2008.

Pursuant to the aforesaid Scheme, the shareholders of Sical were allotted with equity share[s] of the face value of Rs.10 each as fully paid-up from the share capital of the Company, in the ratio of 1:1 (one equity share for every one equity share held in Sical) as on the Record Date i.e. 01 March 2008. The stock got listed on BSE at Rs.200 and in NSE at Rs.149.70, last year.

Shareholding Pattern: The promoters hold 43.17% while the general public’s holding is 56.83%. Among the promoter group it is interesting to note that, Southern Petrochemical Industries Corporation Ltd holds 1.46%, SPIC Group Companies Employees Welfare Fund holds 0.73%, SPIC Officers & Staff Welfare Foundation holds 0.53% and Nominees of Sical Logistics Ltd holds 0.13% of the shares of the company. Among the non—promoters, Housing Development Finance corporation Ltd holds 1.83% and Infrastructure Development Finance Company Ltd holds 1.14% of the shares of the company. Also it is interesting to note that institutions hold 4.40% of the shares of the company while non-institutions (corporate bodies) hold 20.91% of the shares of the company. Also, Individual shareholders holding nominal share capital in excess of Rs.1 lakh is 8.15%. This leaves very little shares in the open market, giving it a premium value.
Financials: For FY08, the total income of the company came out to be Rs.390.40 Cr. The net profit of the company for FY08 came out to be Rs.5.51 Cr. This is on an equity capital of Rs.39.57 Cr. EPS of the company for FY08 came out to be Rs.1.39. For FY08, the reserves and surplus was Rs.322.3 Cr while net fixed assets amounted to Rs.47.6 Cr.

The financials of the company suffered in Q3FY09, due to overall slowdown of the world economy. On a consolidated basis, the total income of the company for Q3FY09 came out to be Rs.80.43 Cr. Profit from Ordinary Activities before Tax is Rs.1.97 Cr. The net profit (after tax) of the company for Q3FY09 came out to be Rs.1.61 Cr. This gave an EPS of Re.0.41, for Q3FY09. Exceptional items for Q3FY09 came out to be Rs.73.40 lakhs. Exceptional item includes the net impact on sale of coffee estate and profit from sale of windmill located at Palladam Taluk, Coimbatore District. But the picture is expected to change a little from Q4FY09 onwards, due to the overall improvement of the business environment. The company has taken some measure to maximize the profits and minimize the expenditure. The ensuring board meeting on 20th June, 2009, is also expected to chalk out a solid plan/method to maximize the profits of the company.
Triggers:
1. The company in April, 2009 acquired a drum (barrel) manufacturing company which has a capacity of manufacturing 1, 64, 000 barrels per year. This is expected to contribute 5-10% of the total turnover of the company. Hence this new revenue stream is expected to make up for more than what was lost due to the sale of the Plantations and wind mill divisions.

2. The company has sold the Plantations and the Wind Mill division last year due to high maintenance cost and low revenue generation. The company will sell its Travel and cargo division next year, as it is contributing very small amounts of revenues to the overall revenues of the company. Thus the company wants to focus on its key competence which is good.

3. One of Sicagen's core business is trading of building materials such as steel tubes, MS/GI pipes, boiler tubes, seamless tubes, rectangular/square hollow sections, TMT steel rebars, PVC pipes, electrical cables, steel fittings, and cement. It has a network of more than 25 delivery centers across India which serves as the single window to India's top building materials manufacturers that include Tata Steel, Jindal Pipes, Steel Authority of India, Finolex Cables, Supreme Industries, Maharashtra Seamless, ACC Cements. The Company is also planning to expand further beyond the existing range by catering to a wide customer base and increasing its product portfolios. Also, with the government’s stress on infrastructure development, the company is expected to do well in future. Moreover, fresh buoyancy generated in the real estate sector, following Dr.Pranab Mukherjee’s statement, asking all bank to reduce interest rate, augurs well for the company.

4. Another core business of the Company is dealership of commercial vehicles for Tata Motors—ranging from the 0.75 tonne Tata Ace to the top-of-the-line Tata Novus—with showrooms in Chennai and Tiruchirapalli covering 15 (fifteen) districts of Tamil Nadu state. Four more districts in south Tamil Nadu has been added in the last fiscal as compared to FY08. Customers include corporates, retail vendors, and high income individuals. The Company contributes more than 15% of the total sales for TATA Motors in Tamilnadu. It is growing at a fast pace and is increasing its market share and presence in the given segments. Now with further fall in the interest rates or further cut in interest rates by the banks/financial institutions, a boom in the sale of automobiles is in the offing, i.e. a boom in the auto sector is expected very soon (with the fall in the interest rates) and due to overall improvement of the domestic and overseas business environment. Q3FY09 was worst for the company in terms of vehicle sales.
5. Goodwill Governor Services, a Sicagen division, is India's only authorized service centre for Woodward, USA, makers of the world's finest governors. In this division: (a) Marketing and sales of Woodward governors and spares (b) Servicing Woodward governors and retrofitting with electronic governing system, (c) Servicing a wide range of industries--shipping, power plants, cement, fertilizers, steel, oil and other processing industries are done. The company has offices and service centers at Chennai, Mumbai and Raipur with a dedicated test bench to service and market Woodward governors, with trained and experienced service engineers. The customers of Goodwill Governor Services come from shipping, power plants, cement, fertilizers, steel, oil and other processing industries.
6. Goodwill Engineering Works, a Sicagen division, builds passenger and cargo vessels, boats, tugs and barges. The manufacturing facility is located at PIPDIC Industrial Estate, Mettupalayam, in India's southern Pondicherry state.s Customers are primarily India's state-owned companies. The company in the last fiscal restructured the business of this division. However, the board meeting of 20th June, 2009 could take some strong measures either to further revamp this division or go for outright sale.

7. Sicagen's speciality eco-chemicals division provides water treatment and process improvement solutions for the petrochemical, fertilizer, refinery, power, pharmaceuticals, agro and pesticides industries. With the buoyancy coming in the sugar, fertiiser, power and crude oil front, this division is expected to generate sizable amount of revenues for the company.
8. The book value of the shares of the company is Rs.89.54 as compared to its CMP of Rs.7.94. Moreover the turnover of the company for FY08 was Rs.390.32 Cr. Also, in FY08, the company had a reserve of Rs.322.29 Cr. In addition to this in FY08, EPS of the company was Rs.1.15. Hence Rs.7.94 cannot be the share price of the company.

Conclusion: Considering all the points mentioned above it has been found that the shares of Sicagen India Ltd is highly undervalued and would soon get a re-rated. Moreover, with the government’s stress on Infrastructure sector and fall in interest rate would help the Construction and Automobile sectors going forward. The company has main business in these two sectors and hence is expected to do well. The re-structuring of the business and hiving off the loss making entities would help the company to streamline its business and come out with better fundamentals.
From the charts it has been found that the MACD and Bollinger Bands are in buy mode. The stock is looking oversold in the daily charts and bounce could be expected any time soon. The scrip has a strong support around Rs.7—Rs.7.5, ranges which would be difficult to break on the downside.

At the CMP of Rs.7.94, Price/Book is only 0.09, which look absurd. Hence, one can buy the scrip for the short to medium term perspective with a price target of Rs.15—18. Please keep a strict SL of Rs.6.4 for any short term play.

Koutons Retail India Ltd: Mid/Long term jewel
BSE Code: 532901
CMP: Rs.435
EPS: Rs.25.85
Price/Book: 3.8
Market Cap: Rs.1328.99 Cr
Target: Rs.525—Rs.690
Time: 9-12 months

Introduction: Koutons Retail India Ltd (KRIL) is the leading retailer of readymade and stylish fashion wear brand in the country today. With a wide range of apparel designs suited for all segments including corporate, formal and casual dressings for men, women and children, Koutons aptly creates the conducive environment for a family outing, making the family shopping the very best experience at the affordable prices - all at one place.

Koutons is the pioneer in making fashion a household name, through unique promotional schemes and by bringing in modern and fashionable wear within the reach of all segments of society. Today Koutons garments are a name to reckon with in both large and small cities with wile presence in the malls and at high streets. With a careful selection of fabrics mostly dominated by cottons, viscose, worsted wool blends, rubia, printed cotton fabrics, poly cotton fabrics, garment cotton, mill made cotton fabrics, Koutons has an exclusive team skilled and dedicated to develop, discover and stitch - manufacturing garments and making these available to customers.

Called a first of its kind fashion destination with a host of world-class merchandisers and retail experts, Koutons has its retail logistics in place appropriately to suit the market needs and track the key areas which are future business opportunities.

Shareholding Pattern: The promoters hold 63.63% while the general public holds 33.37% of the shares of the company. Also 20% of the shares are locked in for trade, leaving very little shares in the open market.

Financial: The total income of the company for Q3FY09 came out to be Rs.242.30 Cr as against Rs.174.8 Cr in the same period previous year. The net profit of the company for Q3FY09 came out to be Rs.13.01 Cr as against Rs.12.12 Cr in the same period previous year. The EPS of the company for Q3FY09 came out to be Rs.4.36 as against Rs.4.01 in the same period previous year. This is on a small equity capital of Rs.30.55 Cr.

Investment Rationale:

• An effective business model: KRIL is a strong player in the value-retailing format, which provides huge opportunity in a country like India, considering the predominant price conscious nature of the Indian consumer and a strong growing middle class. The company’s integrated operations help it maintain better control over quality and costs. The company’s franchisee model plays a very pivotal role in its success, as it helps the company maintain control on each store’s operation and at the same time encourage entrepreneurship, which drives its top-line.
• Strong brand positioning: The Company’s strategy is to sell fashionable apparels at affordable prices. Thus, KRIL’s target customer is the lower and middle income group, which is the major consuming class. Additionally, the company’s brands are targeted towards young and mid age group, with high fashion aspirations. The company manufactures and sells apparels for men, women and children and across various categories - formals, semi-formals and casuals. Such a positioning helps the company appeal to a wide range of target customers.
• Massive expansion plan: At present, KRIL operates more than 1600 stores across India. It is expected to almost double its current store count to 2,075 by the end of FY10. During the same period, its retail space is expected to increase from 1.2 million sq.ft. to 1.7 million sq. ft. by the end of FY10. Currently, KRIL has major concentration in North India, which contributes about 53% to its revenues. However, the company plans to achieve a pan India presence by expanding in the southern and eastern India. The geographic spread of its expansion will not only widen its operations, but also reduce its regional risk.
• Superior profitability: Due to its integrated operations, KRIL eliminates various intermediaries in its value chain and thus exercises better control over its cost. This gives KRIL a two-prong advantage in terms of ability to pass on most of the cost benefits to the customer by pricing its products low, while maintaining high profitability. Consequently, the company’s operating margins are significantly higher at 18.24%, as compared to 12.92% for Vishal Retail and 10.63% for Pantaloon Retail. Further, the company’s high profitability gives it a margin of safety, in terms of reduction in pricing, to drive the volumes.

Conclusion: Though, currently we are seeing a slowdown in the retailing sector, but the demand is expected to be slowly picking up in the coming days, due to obvious reasons. Also the long-term outlook for the sector remains positive, as organized retail will continue to increase its share in the growing retail industry.

The Company has a growth based business model and also has strong expansion plans. It is expected that the company’s revenue would grow at CAGR of 30-35% over the next three years, on the back of its strong expansion. KRIL will continue to enjoy cost efficiencies and maintain healthy margins.

If we look at the charts we would find that Bollinger Bands and Stochastic are in buy mode. Though MACD is not giving any clear buy signal but it is expected that overall trend of the stock is bullish. One should buy the scrip in the price range of Rs.415—Rs.430, and wait for a break out of the current pattern. Please keep SL at Rs.375 and Rs.350 (exit completely) in case of any short term trade.

Asian Oilfield Services Ltd.

(BSE Code: 530355, CMP: Rs.31.45):

Introduction: It was incorporated to give integrated services in the areas of exploration & drilling of Oil / Gas to ONGC, OIL and such other private Companies. The company is, at present, engaged in carrying out manual & mechanized Short Hole Drilling activities & Seismic job services for exploration of petroleum on behalf of ONGC & Private Companies. The company carries out both 2D and 3D seismic data acquisition. It is currently converting or upgrading its present 2D crews into 3D crews and investing in more 3D crews. In 3D seismic surveys, the image comes clearer than 2D, which gives only a linear image.

Financials: In Q1FY09, the total income of the company came out to be Rs.22.5 Cr as against Rs.4.9 Cr in the same period previous year. What is interesting is that the net profit of the company even after higher:

(i) consumption of raw materials,

(ii) depreciation,

(iii) employee cost,

(iv) exceptional item and

(iv) other expenditure, came out to be Rs.1.3 Cr as against Rs.76.1 lakhs in the same period previous year, on an expanded equity capital of Rs.11.3 Cr (Rs.7.07 Cr). This assumes significance when the crude oil price has become almost one third its peak price.

Industry Outlook: The oil field services sector is expected to grow very rapidly and in India the prospects look very bright. The government is likely to come out with the seventh round of New Exploration Licensing Policy (NELP).

The offshore support industry is witnessing strong demand due to conducive global scenario for sustained exploration and production capex. The global petroleum explorations and production (E&P) majors are witnessing high earnings over the hurdle rates internally fixed by the companies.

The emerging Rs.8, 000 crore seismic services market in India is driven by a combination of rising oil demand, under-penetrated oil geography and a bullish oil market. This is leading to a substantial growth in not only new exploration projects but the revival of abandoned fields.

Investment Rationale:

• 
  
  If one looks at the shareholding pattern of the promoters, in the last two quarter, then it will be found that their shareholding has almost doubled (considering sequentially). This essentially implies that the promoters are bullish on the company’s future prospects.


• 
  
  Asian Oilfield Services Ltd (AOSL) earlier informed that with a view to promote its Overseas Business relating to Oil and Gas exploration and extraction and providing oilfield related Services, the Company has created a Wholly Owned Subsidiary in Singapore under the name of AOSL Petroleum Pte Ltd. With the expected soaring oil prices in the near future, the oil & gas exploration Companies are seeking new technologies and frontiers to enhance the production. Worldwide the E&P spend is growing at a rapid scale resulting in big opportunities for service providers. AOSL Petroleum Pte Ltd was floated with the main objective of routing AOSL investments outside India in the Oil & Gas exploration & support services domain. AOSL also aims to bid for international Seismic Data Acquisition and Processing contracts and is now in the process of building up its in-house capabilities to execute projects outside India.


• 
  
  The company earlier announced that AOSL Petroleum PTE Ltd its 100% subsidiary in Singapore, has invested $4.99 million, into Ensearch Petroleum Ltd. The structure of the investment will be in the form of optionally converted debentures. Through this process, Asian Oilfield Services Ltd (AOSL) has become one of the largest shareholders of Ensearch. This move will help both the AOSL and Ensearch to jointly pursues business opportunities outside India, where they can benefit from each other’s capabilities. With this investment AOSL has entered upstream exploration activities and hopes to get rich dividends in the future. The company has been fortunate enough to get access to over 10 blocks with high prospects of discovery across the world. Moreover, the current management team of Ensearch is very competent and they have shown their capability by acquiring a good portfolio of assets in such a short period of time. With the Crude Oil prices again moving up, AOSL is expected to benefit from a close association with Ensearch.


• 
  
  Ensearch Petroleum Ltd (Ensearch) is in exploration and Production of Oil and Gas. It was established in 2005 as an exploration organization with a goal to create and deliver stakeholders value through effective acquisition and exploration. The company is managed by highly skilled professionals and has created a portfolio of 10 assets with net combine acreage of around 40, 000 sq. kms. The company has operating offices in India, Nigeria and Jordan, with Corporate Offices in India and Singapore. Ensearch has a portfolio of 10 assets (2 in Nigeria, 2 in Jordan, 5 in Australia and one in India, in partnership with ONGC and GSPC). Ensearch is operator in 4 blocks and non-operator in 6 blocks. It has won one block in NELP VII based on provisional results declared by Director General of Hydrocarbons, India (Ensearch has 10% PI). Moreover, PSC negotiations are going on with Ministry of Energy of Georgia for Oil and Gas operations on the Block XIB (Ensearch has 25% PI). It is to be noted that Ensearch led consortium was declared as winners for tenders on obtaining General License on Oil and Gas Operations on the Blocks IX, X & XIIIA in Georgia (Ensearch has 15% PI in all the three blocks and Jindal Steel and Power has the remaining 85%). Asian Oilfield Services Ltd sees a potential of getting Seismic Data Acquistion business from these blocks and will work with Ensearch to further pursue such business opportunities. This is a positive development on the company’s fundamentals.


• 
  
  The company last year secured two orders worth Rs.59.72 Cr from ONGC for 2D Seismic Data and for providing integrated seismic job services & shot hole drilling services to be executed within 400 operating days of the issue of the contract. The company is at present executing the said order. This order is extendable further to acquire more data.


• 
  
  The company has completed over 300 GLKM of project work of Rs.40 crore in Tripura, Assam, Nagaland and Gujarat for ONGC, Jubilant Oil & Gas and Canoro Resources.


• 
  
  The company at present has an order book of around Rs.190 Cr sales last year (Cumulative June 2007-2008) were equal to Rs.47.94 Cr only). Thus the sales will be substantially higher this year. These orders are from government companies like ONGC and Oil India Corporation. Hence they will not depend upon fluctuations in oil prices any way.


• 
  
  The company is likely to get some orders from private players in the North East areas. Their orders are not big but they definitely contribute towards the bottomline in a better way.


• 
  
  The price of crude oil is expected to rise in the near future due to the US summer driving season and also due to expected firming up of the commodity prices due to weak dollar.

Chart-Check: From the charts it can be found that the Bollinger bands, MACD, Stochastic and Momentum indicators point towards an immediately buy in the scrip. The scrip has a strong support at around Rs.30 and Rs.26.8. Any cross-over is expected to take the scrip to around XXX range, in the short term.

Conclusion: The investors are asked to accumulate the scrip in the support zones, for targets of XXXXXX, in the short term. Please keep a SL of Rs.26.5 for any short term play.

Note: The Stock was recommended and this Report was sent to the Quickie Group (Paid Group for Short term Calls) Members on 23rd March, 2009. The Report has reproduced in this as was sent on 23rd March, 2009, with no changes in its recommended price and other details. However, The current price of the stock is Rs. 41.90

Pick of the week
Fame India Ltd (formerly Shringar Cinema)
BSE Code: 532631
CMP: Rs.12.90
Book Value: Rs.26.77
Price to Book: 0.48
Market Cap: Rs.44.89

Introduction: Fame India Ltd incorporated in 1999 and which commenced operations in the same year was formed with the core objective of providing cinema goers a unique movie viewing experience.

In 2001 in order to encourage investment in the sector, the Maharashtra government announced significant tax benefits for multiplex operators, which made investments in this sector more attractive. Sensing this opportunity, the company decided to invest further capital into the Multiplex business. It raised fresh equity capital from GW Capital (one of the leading venture capital funds, and now know as India Value Fund) and commenced operations.

Currently, it operates more than 74 screens and around 21500 seats across 11 cities in India with presence in states of Maharashtra, Gujarat, Haryana, West Bengal, Jharkhand and Karnataka.

The company benchmarks itself with global multiplexes, and strives to enhance its service offering in line with the emerging trends globally. To provide exceptional consumer experience, it has introduced the ‘Gold Class’ screens which feature natural leather recliners, where each recliner stretches to 150 degrees, super size screens, state of the art projection and sound systems. Apart from popcorn and soda, the company also offers specialty food, which can be ordered and delivered on ones seat.

The Company has two subsidiary companies in which it holds 100% shareholding namely M/s. Shringar Films Limited and M/s.Big Pictures Hospitality Services Pvt. Ltd. M/s. Shringar Films Limited is mainly into distribution of films and M/s. Big Pictures Hospitality Services Pvt. Ltd. is into food court business.

Shareholding Pattern: The promoters hold 43.7% while the general public holds 56.3%. Among the promoters, Shravan Shyam Shroff (on behalf of South Yarra Holdings) holds 43.28% of the shares of the company.

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

Financials: For FYO8 on standalone basis, the total sales of the company came out to be Rs.90.4 Cr (Rs.105.2 Cr on consolidated basis) as against Rs.62.42 Cr in the same period previous year. The net profit of the company on standalone basis for FY08 came out to be Rs.12.42 Cr as against Rs.9.83 Cr in the same period previous year. This gave an EPS of Rs.3.84 as against Rs.3.11 in the same period previous year.

For Q3FY09, the company came out with increased topline and dismal bottomline. For Q3FY09, the total sales of the company came out to be Rs.34.6 Cr as against Rs.24.6 Cr in the same period previous year. The net profit of the company suffered due to higher depreciation (Rs.3 Cr in Q4FY09 as against Rs.1.5 Cr), Employee Cost (Rs.3.3 Cr in Q4FY09 as against Rs.2.75 Cr), higher interest cost (Rs.1.05 Cr in Q4FY09 as against Rs.71.1 lakhs in the same period previous year), etc. But major loss in Q4FY09 came from Foreign Exchange fluctuations. The net loss of the company for Q4FY09 came out to be Rs.3.5 Cr as against a net profit of Rs.3.6 Cr in the same period previous year. Moreover, both the net and operating profit margins came out to be negative in Q4FY09 as compared to the same figures previous year.

Triggers:

• The company has commenced its operations at Fame - Panchkula; Chandigarh w.e.f. February 13, 2009 which consists of 3 screens and 652 seats, out of which 42 seats are the fully automated gold class seats which have been introduced in Panchkula / Chandigarh area for the first time.
• The Company commenced operations in the last quarter at 2 (two) new multiplexes viz. (a) Fame - Dhanbad, Jharkhand which consists of 4 screens and 1042 seats. Out of the 1042 seats, 22 seats are the gold class seats which have been introduced in the Jharkhand Bihar area for the first time and (b)Fame Shalimar - Bharuch, Gujarat which consists of 3 screens and 922 seats. Out of the 922 seats, 17 seats are the gold class seats which have been introduced in Bharuch for the first time.
• The Company last year commenced operations of its new multiplex at Fame Raghuleela - Vashi, Navi Mumbai w.e.f. July 11, 2008. The new multiplex has 6 screens including one exclusive Gold Class screen of 62 seats which is accompanied with an exclusive Gold Class Lounge. The multiplex has an overall capacity of 1015 seats. It has also commenced operations at the 4-screen, 993-seat Fame Lido multiplex in Bangalore from January 25, 2008. One of the key differentiators of this multiplex is the introduction of Gold Class Recliners, which is a first in the central business district (CBD) of Bangalore.
• Fame India (Fame) has tied up with HDIL through its 100% subsidiary for programming content for the realty major’s upcoming multiplexes. The subsidiary has also has signed up four more properties in Pune for programming. This apart, Fame has opened a 4-screen property in Bangalore with 993-seats.
• Fame also proposes to foray into film production with an investment of Rs.100mn. The board earlier authorised managing director, Shravan Shroff, to explore various business models in this regard.
• Shringar Films (SFL), the 100% subsidiary of Fame India, has also signed on four Pune-based properties for programming, namely Rahul (two screens), Vaibhav-Hadapsar, Ashok-Pimpri and Arun-Dapodi (one screen each).
• Company continues to use the latest technologies for improving the productivity and quality of its services and products, wherever possible.

Conclusion and recommendation: The Indian M & E industry has surpassed the performance of the Indian economy and most other industries in 2007. According to the latest FICCI-PwC report, the industry is estimated to post a compounded annual growth rate (CAGR) of 18% between 2008 and 2012 supported by immense growth potential in almost all segments. The trends of foreign investment in the sector (Rs.8.5 bn in 2007), Private Equity funding, strategic alliances, inorganic growth of medium sized corporates to grab opportunities in emerging media etc. are expected to reach new heights in the near future.

Indian film industry is projected to double its size to reach Rs.176 bn in 2012 from present Rs.96-Rs.100 bn aided by increase in number of admissions/ticket prices on the exhibition side, momentum of increased popularity for Indian content overseas and growing ancillary revenue streams. India is witnessing a sea change in the way films are produced. More than half of the movies released during the year under review were produced by corporates. While large number of domestic & international players are announcing foray into film production, Indian film industry is marching in direction similar to that of large Hollywood studios and are concentrating on big budget movies with clear focus on quality pre-production and innovative marketing tactics, better budget/timelines management and ability to handle multiple projects simultaneously.

It is interesting to note the fact that upto 97% of the urban youth prefer to watch movies in multiplexes, according to the latest AT. Kearney report which is self explanatory on the considerable growth potential of multiplexes in future. Digitalisation of film exhibition is expected to change the face of film exhibition ensuring simultaneous release of films across the nation including smaller cities which will also curb piracy to a great extent. Needless to add, the consumer experience would be much better with superior film delivery.

Considering all the factors mentioned above it is found that the stock of Fame India Ltd is trading at the price of penny considering the potential to rise up. A year back Religare Securities Ltd recommended the scrip with a price target of Rs.105.

According to the charts the stock has a strong support around Rs.11.80 which will be difficult to break on the downside. On the upside there is as resistance at Rs.14.5—Rs.15.5 ranges, which needs to be cracked for the scrip to move up. The first target seems to be Rs.21 and the second target is Rs.32. Keep a SL of Rs.11.5 for any short term trade.

NOTE: This stock was recommended to the Paid (Premium) Groups in the Sunday Report sent to them, on 10th May, 2009 (10--05-09)

PICK OF THE WEEK

Foursoft Ltd:

BSE Code: 532521

Face Value: Rs.5

CMP: Rs.14.63

Book Value: Rs.24.87

Market Cap: Rs.57

Price/Book: 0.59

Introduction: Hyderabad based Four Soft Ltd promoted by a technocrat P Shrikant, was established as Four Soft Private Ltd in December, 1999. Right from the beginning the company has focused on building enterprise software/Solutions for transportation, logistics and supply chain management using advanced web-technologies. These solutions improve efficiency, visibility and integration to third party software systems.
Four Soft offers custom developed software solutions apart from product licenses. The prime growth area in business is software solutions for the transportation and logistic domain. The software products offered are: 4S eTrans, 4S eLog, 4S eSupply, 4S logistics, 4S Driver, etc.
Shareholding Pattern: The promoters hold 32.97% while the general public holds 67.03%. Among the promoters, Palem Srikanth Reddy holds 5.52% of the shares of the company.
Financials: The total income of the company, on a standalone basis for Q3FY09 came out to be Rs.7.7 Cr as against Rs.8.86 Cr in the same period previous year. The Profit before depreciation and tax came out to be almost flat at Rs.56.2 lakhs as against Rs.74.4 lakhs in the same period previous year. The net loss of the company for Q3FY09 decreased to Rs.28.3 lakhs as against Rs.37 lakhs in the same period previous year. This shows some improvement in the company’s fundamentals. Moreover, both the net profit and operating profits margins remained flat during the 12 months period.
On consolidated basis however, the results of the company for Q3FY09 are excellent. The consolidated results of the company for Q3FY09, on Y-o-Y basis are:
(a) the revenues jumped by 19% to Rs.47.6 Cr,
(b) the EBIDTA showed a jump of 149% o to Rs.18.4 Cr
(c) PBT (Profit before tax) jumped by 259% to Rs.18.5 Cr
(d) PAT (Profit after tax) jumped by 197% to Rs.10.7 Cr.
(e) EPS (Annualised) is a whooping Rs.10.93
(f) the net profit margin is 22.41%, which is a jump of 113% over Q3FY08.
Investmement Rationale:
1. Products of the company find usage in the Logistics and supply chain domain, primarily linked with third party logistics (TPL) and manufacturing industry. As a result of economic slowdown, these companies would be looking at cost reduction on priority basis and hence Four Soft would actually benefit from this process. It is to be noted that its products enhance operational efficiency and reduce waste.
2. The company has been listed on the IMB Service Oriented Architecture (SOA) Business
Catalogue, after successfully completing IMB’s rigorous SOA Technical Validation process. The IBM SOA Business Catalogue is a comprehensive online directory of reusable SOA content that has been validated to perform with IBM SOA Foundation Products. Four Soft Inc, USA, a subsidiary of Four Soft Ltd has joined FCBF (Florida Customs Brokers and Forwarders Association) as a trustee member.
3. The company is trying to strengthen its presence in the domestic market of transportation and logistic industry.
4. The company has recorded a slight improvement in performance in the Q3FY09 as compared to Q3FY08 on Y-o-Y basis (Standalone basis). On consolidated basis the results of the company for Q3FY09 are excellent considering the global slowdown. The following quarters are expected to be good considering improved operational efficiency by increased off shoring to India, favorable currency movement and cost reductions. The company is trying to rationalize its work force in order to cut cost and increase efficiency.
5. The company earlier informed that it has signed a contract with Calderhead Refrigerated
Transport, UK, to implement its warehouse management system - 4s eLog, in Calderhead's temperature controlled warehousing operations.
6. It is the market leader in the transportation and logistics segment with a large international client base including majority of top transportation and logistic companies in the world. With regional offices strategically located worldwide, it supports customers including DHL, Schenker, Agility, UTI, Geodis—Wilson.
7. The company has successfully deployed its warehouse management software application—4S elog at Rohlig Poland, a highly reputed freight forwarder and integrated logistic company in Poland. The test run at Rohlig Poland has yielded positive results and they have started to use the software in live environment from the second week of January, 2009. Rohlig Polland is long term client of the company who has been using CIEL and TWS applications (Legacy products of Four Soft). This implementation is expected to act as springboard for the company to sign more customers and generate more and more revenues.
8. In Q3FY09, six new customers were signed across geographies. The strategic win in the
December, 2008 quarter includes two large logistic companies in India. The company has also successfully implemented flagship products at several prestigious customer locations. The company has also signed a contract with Noordex BV, a Netherlands based freight forwarding/3P (Third Party Logistics) company to deploy its freight forwarding software—4S eTrans SME across Noordex BV’s multiple locations in the Netherlands. The contract will be executed through its subsidiary, Four Soft Netherlands BV.
Conclusion: The Four Soft Ltd has developed a reasonably attractive product portfolio in the niche areas of supply chain management for transportation and logistics industry domain. The economic slowdown will force many companies to look at cost reduction to boost profitability, which will benefit the company. From the charts it is seen that cross over has already taken place which is a bullish sign.
Moreover, Stochastic, Bollinger Bands, MACD, Williams %R are in buy mode. The stock has formed a very strong base around Rs.12.5 and which should be used as stop loss for any short term trade.

NOTE: The stock was recommended to the Paid Groups on 3rd May, 2009 (03-05-09) in the Sunday Report (sent to the Paid Groups).

Cochin Minerals and Rutile Ltd
BSE Code: 513353
CMP:Rs.27EPS: Rs.5
P/E: 5.42
Dividend: 12%
Dividend Yield: 4.43%
Book Value: Rs.29
Market Cap: Rs.21.22.

Introduction: Cochin Minerals and Rutile Ltd, is engaged in the production of Synthetic Rutile which finds application as R/M for the Paint and Pigment Industries. Its By-products are Ferric Chloride which is used as a cleaning agent and Ferrous Chloride used in affluent treatment. The main raw materials of your company are Ilmenite and Hydrochloric Acid. Both these items are indigenously available.
Cochin Minerals and Rutile Limited is a 100 percent Export Oriented unit in the Mineral Processing sector with manufacturing, marketing and research capabilities. The Company's products and their applications are:
a) Main Products: The main product is synthetic Rutile which finds applications as raw material for the Titanium pigment and titanium sponge/metal industry. The annual licensed and installed capacity is 36000MT.
b) By-Products: The following are the by-products:
i) Ferric Chloride which has applications as a etching agent and in Effluent Treatment.
ii) Ferrous Chloride which is mainly used in effluent treatment.

Shareholding Pattern: The promoters hold 54.53% while the general public holds 45.47%. Among the promoters, Kerala State Industrial Development Corporation Ltd hold 13.41% of the shares of the company.

Investment Rationale:

• The company came out with wonderful set of numbers for the Q3FY09. The total income of the company jumped to Rs.36.03 Cr as against Rs.24.09 Cr in the same period previous year. The net profit of the company for Q3FY09, came out to be Rs.1.82 Cr as against Rs.33 lakhs in the same period previous year. This is on a very small equity capital of Rs.7.8 Cr. Besides this the net profit margin of the company increased from 1.37% to 5.06% in the same period previous year. The cash EPS of the company for Q3FY09 came out to be Rs.3.34 against Rs.1.50 in the same period previous year.
• The increase in the profitability is mainly due to the sharp depreciation of the rupee and fall in input costs of fuel and chemicals. Since it is a 100% EOU, hence the depreciation of INR is acting as a boon for the company.
• The technology transfer agreement has been signed with Regional Research Laboratory Trivandrum (National Institute of Interdisciplinary Science and Technology-NIIST), a detailed project report has been prepared and steps are being taken for implementation of the project.
• The Company continues to be ISO 9001:2000 certified by the prestigious agency, Bureau Veritas Quality International, with accreditation from UKAS London, ANSI-RAB, USA and NA.BCB, India.
• The major strength of your company is that its products are of highest International Standards and are well accepted by the buyers.
• Company had been making profits continuously for almost a decade. The company is expected to show improved performance in FY10, due to the fall in the raw materials and stable product prices. There has been improvement in the global demand and price scenario for Synthetic Rutile and company's order book for FY09 was full, which is a positive factor for the company. Impact of the same will be felt in FY10.
• Company is expected to do well for next 18 months atleast as prices of Synthetic Rutile should remain firm.

Conclusion: Considering the points mentioned above the stock should be purchased for a long term view. The stock has given a break out at Rs.26.5 and should move up from here if it is able to maintain this break out. If it is able to break Rs.29, the next target could be Rs.41. The stock is slightly in the overbought territory and hence a little care should be taken while taking too much heavy positions. Please keep a SL of Rs.23 for a any short term trade.

Note: The stock was recommended to the Paid Groups in the Sunday Report on 05-04-09