Pick of the Week:
W S Industries Ltd
BSE Code: 504220
CMP: Rs.44.40
EPS: Rs.3.21 (Standalone basis)
Dividend Yield: 2.25%

Introduction: W S Industries Ltd (WSIL) incorporated in 1961, is a leading manufacturer of high voltage electro-porcelain transmission insulators and sub-station insulators. The Company operates in two business segments namely (a) Insulators and (b) Turnkey Projects. Insulators being nonconductors are basically protective tools, which subdue the current and are used in transmission and distribution (T&D) of electric power. Ranging from 220 KV to 1200 KV, the company produces only high-end insulators in various types such as suspension insulators, pin insulators, solid core insulators, and hollow porcelain insulators, shackle & stay insulators etc. Besides, it also deals in other products like dropout fuses, isolators, lightning arresters, coupling capacitors, capacity voltage transformers, instrument transformers, line traps and reactors.
Of late, the company has also ventured into turnkey project execution i.e. designing, execution and construction of insulators and transmission lines below 220 KV. Currently, WSIL derives 15% revenue from this segment while the balance 85% comes from the sale of insulators.
Power Grid Corporation, NTPC, State Electricity Boards are among its domestic customers whereas ABB, Siemens, Areva etc. are a few of its international clients. Interestingly, 95% of transmission insulators are sold domestically whereas the majority of the substation insulators are exported.
Shareholding Pattern: The promoters hold 42.54% while the general public holds 57.46%. Among the non-promoters, Life Insurance Corporation of India holds 5.48%, Oriental Insurance Company Ltd holds 1.79%, Religare Securities Ltd holds 1.13%, Schroder Credit Renaissance Fund Ltd. holds 11.92%, Schroder Credit Renaissance Fund Ltd. holds 2.98%, GMO Emerging Illiquid Mauritius Fund holds 5.40% and United India Insurance Company Ltd holds 1.38% of the shares of the company.

Financials: On a consolidated basis the net sales of the company for FY09 came out to be Rs.224.5 Cr as against Rs.226.99 Cr in the same period previous year. The net profit of the company for FY09 is Rs.13.75 Cr as against Rs.16.90 Cr in the same period previous year. The EPS of the company for FY09 came out to be Rs.6.24 as against Rs.7.73 in the same period previous year.
For Q1FY109, the total sales of the company came out to be Rs.45.02 Cr as against Rs.51.94 Cr in the same period previous year. The net profit of the company for Q1FY10 came out to be Rs.66.6 lakhs as against Rs.1.97 Cr in the same period previous year. The net profit is expected to improve growing forward.
Triggers:
• To cater to the domestic demand for substation insulators, WSIL has set up a Greenfield plant with a capacity of 8000 tonnes in Visakhapatnam, Andhra Pradesh. The Company's new unit established at APSEZ, Duppituru Village, Visakhapatnam, Andhra Pradesh has started commercial production of Porcelain Insulators effective from July 06, 2009.
• It is looking to scale up its capacity for executing turnkey projects and is even scouting for a strategic alliance for this business.
• WSIL had around 14 acres of surplus land, which it transferred to its subsidiary, WS Electric Ltd, which in turn developed that property into a 16 lakh sq. ft. Software Technology Park through a joint venture. The construction of the 1st phase of the Software Technology Park co-promoted by the Subsidiary Company W.S.Electric Ltd. has been completed which WSIL may start earning a lease/rental income of around Rs.3 Cr per year. The balance three phases will get completed in the next four years.
• Given the huge expansion and modernisation in the power sector, WSIL’s core business is expected to get best business going forward.
Chart-Check and Conclusion: The company has good order book position which is likely to be scaled up as the Government is giving thrust to the Power Sector in the 11th Plan as well as activities are taking place in the construction, rehabilitation and upgradation of electricity networks in many parts of the world. Thus, the demand for the Company's products and project capabilities will continue to remain vibrant in the days to come.
From the charts it has been found that the stock is on a consolidation mode for quite some time, getting a support around Rs.42. The stock has a strong support in the range of Rs.39-Rs.42, which will be difficult to break on the downside, unless a major correction takes place. The investors are advised to buy the stock on all declines for a target of Rs.80, in the next 12 months time frame. Please keep a SL of Rs.35.4 for any short term play to XXXX.

Note: The stock was recommended to the Paid Groups in the recent edition of the Sunday Report (20th, September, 2009) sent to the Paid Groups.

Sicagen India Ltd

[Excerpts from the Sunday Report sent to Paid Members on 09-08-09]

1. Sicagen India Ltd is now being certified by Borada based equity analyst and my friend Vikram Solanki. He is of the view that the stock has a long way to go and the rise will be sharp after 17th August, 2009. Vikram is of the view that Sicagen India Ltd will gain from the drum making division and selling of some of its subsidiaries, which are either not contributing any significant, amount to the company’s coffers or is making losses.

He is presently studying in details the company’s land holdings and soon will send a report to me, which will be put on this blog. However, what I feel is that even if we give a reasonable P/E to the stock and considering that its FY10, EPS will be around Rs.5-6, value of its quoted/unquoted investments, reserves and surpluses, book value of Rs.90.13, the stock should at least trade in Rs.60—70, ranges by March, 2010. The company as you have seen in the Q1FY10 results has huge reserves and will be come debt free in Q2FY10.

Since the four wheeler sales have been up in the recent months as compared to two wheelers—it is positive for the company as it is into selling of commercial vehicles. The Company is constantly exploring the possibilities of developing its core area of businesses for which new action plans are being initiated by the Management. With a strong business relationship with TATA Steel, TATA Motors, SAIL, Jindal Pipes, Maharashtra Seamless Pipes, Supreme Industries, etc, the Company is confident of making higher turnover and profits in trading of building materials and commercial vehicles.

The Company, as one of the leading providers of trading and marketing services for building materials and vehicle sales, has a very good opportunity to increase its market share. The value of quoted and unquoted investments in other companies and subsidiaries is a whooping Rs.27.63 Cr. The reserves and surplus is Rs.322.56 Cr. The Company has acquired the specialized drum business as the market for drums and barrels is buoyant. The company hopes to generate at least 15% revenues from this front and break even by December, 2009.

(i) The performance of the Building Material division during 2008-09 was commendable albeit recessionary trends. Turn over of Rs 26682.59 lakhs with a net profit of Rs.631.84 lakhs was achieved as against Rs 21961.24 lakhs and Rs 475.39 lakhs respectively in 2007-08. That year saw a quantum jump in sales of structural steel and other construction material. The Company is confident that the same thrust will continue in the current year also. The division has been enlisted as a SAIL dealer for TMT rebars and GP/GC sheets in 9 territories spread across Tamilnadu, Kerala, Karnatakka and Pondicherry.This division also bagged the SAIL Gaurav Samman 2008-09 award for Chennai region from amongst the top 60 dealersin India for its exceptional performance during the year.

(ii) Vehicles & Spares: The revenue of this division for FY09, was Rs.14284 lakhs compared to Rs.16139.76 lakhs in 2007-08. The profit before tax was Rs.161.82 lakhs compared to Rs.205.75 lakhs in the previous year. The total sale of this division was 3202 numbers compared to 3111 numbers in the previous year. Global downturn in the economy and paucity of funding by NBFC’s intensely affected the performance of the Commercial vehicle division. Mitsubishi lancer dealership which was not yielding the expected levels of profit was surrendered during the year. TATA Motors Ltd has given an LOI appointing the Company as dealers for the sale and service of SCV (Cargo & Passenger) range of commercial vehicles and spares in the districts of Thanjavur, Nagapattinam and Thiruvarur in Tamilnadu.

(iii) Goodwill Governor Services: The division continued to perform well and the revenue of the division during FY09, under review was Rs.818.87 lakhs compared to Rs.707.89 lakhs in the previous year and net profit was Rs.195.71 lakhs when compared to Rs 184.76 lakhs in the previous year. During the year, the Company has entered into a distribution arrangement with M/s. IMI Norgren Herion (P) Ltd, Noida for marketing of Norgren products such as cylinders, scoop tube actuators, solenoid valves, pneumatic accessories etc to State Electricity Boards and Captive Power Plants in 10 States.

(iv) Goodwill Travels: The total income of this division for the year was Rs.119.54 lakhs compared to Rs.85.55 lakhs and net profit was Rs.15.73 lakhs compared to Rs.17.96 lakhs in the previous year.

(v) Goodwill Engineering Works: The Company is taking necessary steps to resolve the technical issues and complete the pending patrol boat orders with BEML.

(vi) Speciality Chemicals: This division was acquired during the year. The chemical plant of the division is located at Pondicherry and produces eco friendly speciality chemicals such as water treatment chemicals, radiator coolants etc which are mainly supplied to power plants and various chemical industries.

(vii) Drums & Barrels: The Company has entered into a business transfer agreement on the last day of the financial year for acquiring the drums manufacturing business located at Minjur Chennai. This division manufactures Plain/Epoxy lacquer coated industrial type MS barrels. The company is expected to manufacture, 1.60 lakh barrels per year which will generate sufficient revenues for the company. The Company has successfully hived off its wind mill operations and coffee estates during the year.

2. The investors those who have still now not accumulated Expo Gas Containers Ltd (BSE Code: 526614) should invariably accumulate the scrip at the CMP of Rs.9.98. With the crude oil prices expected to shoot above $100 per barrel within some some months, the investors are likely to benefit. The Company is engaged in the fabrication business for crude oil refineries, power plants etc. Its business was suffering due to paucity of funds. A couple of months back the Company completed OTS (One Time Settlement) with its bankers and became debt-free. Now, going forward the Company is expected to be on the higher growth trajectory. It clients include Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd,Hindustan Petroleum Corporation Ltd, Oil & Natural Gas Corporation Ltd, Gas Authority of India Ltd, Bharat Shell Ltd, Hitachi Zosen Corporation – Japan, Gapco (Sudan) Ltd – Sudan, Mitsubishi Heavy Industries Ltd – Japan, Godrej & Boyce Manufacturing Co. Ltd, Kochi Refineries Ltd, etc. Its CMD is a Technocrat and an Engineer from IIT, Bombay. Its competitor is Artson Engineering (Face Value: Rs.1, CMP: Rs.34.2), which is making heavy losses but is still trading at Rs.340.20 (If we consider Rs.10 as the face value). If we consider the case of Artson Engineering then investor can imagine to what price this debt free company could rise. Buy the stock in bulk and wait for the Q2FY10 results to be declared. For more information on the company please visit: http://www.expogas.com.

Sicagen India Ltd

Here are excerpts of the inputs, sent to me by Rizal Ahmed from Qutar (Middle-East):

Dear Sumanda,

As per latest results of Sicagen India Ltd: the finiancial statement for the quarter ended 30th june 2009, relating to subsidary SDB Cisco (India) Ltd and its subsidary has not been taken into account for consolidation, as the relevant investment in the subsidary(SDB Cisco) is held with an intention to sell/transfer or dispose of in the near future.
My take on this is that It would definitely be prudent to hold till the sale of this subsidary takes place,as it can free up huge amount of cash for sicagen. It could mean a bonanza for the shareholders, whenever it happens. www.sdbcisco.com.

Technicals are indicating that accumualtion is going on in full steam which further suggesting an uptrend soon. A surprising fact: it has also done 14 continuous UCs once; can the pattern be repeated?

Rizal further added spice to his research on the company.

Sumanda, I hope you did notice what else sicagen has added on to its books now? The info would no doubt be a delight to Scagen India Ltd's shareholders....

(a) http://www.sdbcisco.com/news.htm

(b) http://www.sdbcisco.com/clientele.htm

SDB CISCO (India) limited, a limited company is a joint venture between the Security and Detective Bureau Limited, established in 1971 and CERTIS CISCO of Singapore of about the same standing. CISCO is a leading security provider company of Singapore.
SDB CISCO, an ISO 9001:2000 Certified company currently has a strength of about 26,000 security guards and a client base of about 1,400 operating in all over India, through 72 Regional offices.

It provides trained manpower and arms specifically licensed for security of cash, bullion and valuables being transported. Cash pick up/delivery is provided for about 50 leading clients at Delhi, Chennai, Bangalore, Hyderabad, and Coimbatore on behalf of banks including some multinationals. Vehicles modified and including bullet proofing as per RBI norms, armed guards and trained cash collection officers to banks and other customers are also available.

It partners with leading electronic security product vendors worldwide to provide optimum security solutions. SDB CISCO has a full fledged residential Training Academy at Chennai and Training schools in all other Metros and 2 tier cities. SDB CISCO - Where Security is both a Service, and a Surety.

Its full range of services are:

• Trained security personnel (Male & Female) for protection of industrial and commercial establishments and constant vigil, supervised by day and night checks.
• Smart and alert, armed or unarmed guards for banks and commercial establishment for round the clock security
• Vehicles with armed guards for cash transportation of high value documents.
• Cash pickup and delivery to or from concerned banks for clients.
• ATM Management services.Salary collection and distribution for clients at different work sites.
• Surveys to recommend integrated security for optimum man machine mix.
• Security Audit of industrial and commercial establishments to recommend security plans, resources, security procedures, updating of security and help in formulating policy & risk analysis.
• Security Audit and Consultancy.
• Installation and after sales service of closed circuit TV, access control, intrusion detection systems and fire alarms.
• Manufacture and sale of Snatch Alarm Cash Bags.Issue of photo identity cards.
• Fire Protection – Provision of trained fire guards, fire officers and fire tender operators. Maintenance of clients’ fire fighting equipment and also installation and maintenance of fire systems and fire fighting equipment.
• Executive protection/ Bodyguards,
• Security for special events.
• Investigation – Antecedent verification, credit worthiness, surveillance of specified subjects parallel employment and finger print examination.
• Basic & refresher training, as per clients’ requirements for “in house” security and fire guards.

Cash and Valuable Transportation Services: It offers all services related ATMs replenishment machines, cash pick-up and delivery, intra-city and intercity movement of cash and bullion using specially designed cash vans and armed guards. It specializes in sorting and vaulting cash in more than 72 locations.

Electronic Security Equipment: It designs, procures, installs and maintain equipments are rugged and highly advanced electronic surveillance systems. These include CCTVs, Access Control Systems, Fire and Intruder Alarm Systems among others.
Fire Protection: It undertakes fire audits and surveys, provide trained fire guards, conduct mock drills, install and maintain fire hydrant systems and fire fighting equipment.
Investigation: It carries out pre-and post-employment verification, commercial creditworthiness check, investigation of theft, fraud and other enquiries.

SDB Cisco India Ltd & its subsidiary have become a subsidiary w.e.f March 28, 2009.

Pick of the Week
Entegra Ltd
BSE Code: 532287
CMP: Rs.19.7
EPS: 0.21
P/E: 93.81
Industry P/E: 24.04

Introduction: Established in 1995, Entegra Ltd is emerging as a fully integrated renewable energy conglomerate. It was promoted by Mukul Kasliwal, MBA (Finance) from the Simon School of Business, USA, a pioneer in the field of energy and infrastructure development in India, who serves on high powered institutions and committees of Government of India. He has created a strong professional management team of 15 technocrats and execution experts. The average experience of the team is over 20 years.
The company created a fully integrated business model by forming three separate business divisions: (i) EnnerGreen Resources, focuses on generation of renewable energy, (ii) EnnerGreen Solutions, provides customized renewable energy solutions to residential, commercial and industrial facilities, and (iii) EnnerTech Projects, provides EPC and advisory services. Entegra is executing several high-value projects in the three verticals:
EnnerGreen Resources:

• Rs.25bn 400MW Maheshwar Hydro Power Project to be commissioned in FY10.
• Floated a 100% subsidiary, Ennertech Bio-Fuels Ltd to develop bio-fuel technologies and undertake Jatropha plantation in 70,000 hectares of land.
EnnerGreen Solutions:
• Customized renewable energy facilities for a residential tower in Worli.
• Marketing solar heating systems for hot water requirements.
• Setting up 2 solar water heaters with capacity of 300 and 200 litres per day for a Military Hospital.
• Setting up 5 solar water heaters of different capacities for Sultania Infantry and EME Centre.
EnnerTech Projects:
• In the process of acquiring PSC Engineers Pvt Ltd for Rs.100mn, to be invested in a phased manner to foray into transmission and distribution businesses.
• Exclusive tie-up with VRB Power Systems, a Canadian company providing Energy Storage Systems It has access to the cutting-edge technology through strong tie-ups with global players including Borawind (Swiss wind power development company), EDIG (a reputed R&D company from the US engaged in the development of Solar Thermal Systems), SHAP (Italian manufacturer of fluidized bed combustors for biomass and waste combustion and solar concentrators), VRB Power Systems (Canadian company providing Energy Storage Systems), Battery Equaliser (International Manufacturer, Distributor and Service Provider of Battery Refurbishment Technology through which life of a lead acid battery can be extended upto 100%), Pirelli (Italian firm having state-of-the-art technology for converting municipal waste into fuel), and Ankur Scientific Energy Technologies Pvt Ltd (successfully developed and commercialised a wide range of biomass gassifiers ranging from 5 kWe to 500 kWe).
Shareholding Pattern: The promoters hold 73.08% while the general public holds 26.92%. Among the promoters MW Infra Developers Pvt Ltd holds 63.3% of the shares of the company. Among the non promoters, Padmini Mercantile Pvt Ltd holds 3.29%, Durvish Mercantile Pvt Ltd holds 1.85% and Panther Fincap & Management Services Ltd holds 1.92% of the shares of the company.
Financials: On a standalone basis, the total income of the company for FY09 came out to be Rs.106.06 Cr as against Rs.218.7 Cr. The net profit of the company for FY09 came out to be Rs.2.11 Cr as against Rs.13.08 Cr in the same period previous year. The equity capital of the company is huge, Rs.101.9 Cr which eats away most of the profits of the company. But this is compensated by low floating stock of the company as the public shareholding is very low.
Industry Outlook: Huge potential for renewable energy to be tapped in India:
• Hydro Power: India ranks fifth in terms of exploitable hydro potential in the world, with economic exploitable hydro power potential of 148,700MW of which only 30,873MW (20.8%) has been tapped so far and another 13,446MW (9.0%) is in various stages of development.
• Wind Energy: Out of the total potential of over 45,195MW, only 5,340.6MW was achieved till March 31, 2006.
• Solar Energy: Total potential of Solar Energy (Solar Photovoltaic and Solar Thermal) estimated at 160MW/sq.km. out of which only 3.7MW/sq. km was harnessed till Mar’06.
• Bio-diesel: Estimated demand in India at 2.62 million tonnes in 2006-07 assuming a 5% blend in fossil diesel and expected to grow to 3.35 million tonnes by 2011-12.
• Bio-mass Energy: The total potential of Bio-mass power is 52,000MW compared to the installed capacity of just 234MW as on 31 December 2005.
Triggers:
The company is on the verge of completing the Rs.25bn, 400MW run-of the-river Shree Maheshwar Hydel Power Project in Madhya Pradesh, which is the main trigger for the stock.
In addition to this the investment in the shares of Entegra Ltd is a play on strong growth opportunity in the renewable energy sector driven by the Government’s target to increase the installed capacity of renewable energy from 10,000MW at present to 15,000MW by 2011 and 80,000MW by 2032 with an estimated investment of USD2.6 bn in the next five years. Entegra Ltd is well positioned to capture this opportunity through its fully integrated business model with several high-value projects under execution in each of the focused verticals, access to latest technology through strong tie-ups with global technology leaders and a visionary promoter, who has created a strong professional management team of technocrats and execution experts to drive the business. Renewable energy is being increasingly targeted due to strained availability of hydrocarbon fuel basket and environmental concerns in thermal
power generation.

The company also has a good order book position as of 31st March, 2009. Moreover, subsequent to March 31, 2008, the Company has fully repaid certain loans against which the promoter’s shares were pledged.
As a consequence, the Company has initialed the process of obtaining a release of these pledged shares, which is expected to be completed shortly. Also, during the year ended March 31, 2009 and subsequent to year end, the Company has been in negotiations with MPSIDC for consideration of its request either to reschedule the repayment of the liability and grant waiver of the interest for the period or permit the Company to take benefit of the revised OTS policy. As of date, MPSIDC has requested the Company to submit a revised proposal for the settlement, which is expected to be submitted shortly. Based on these negotiations, the Company is confident of obtaining a waiver of past interest and a rescheduling of repayment of the balance amount of interest and principal outstanding.

As mentioned earlier, the company is developing a 400MW (40X10) run-of-the-river hydro power project on river Narmada through a Special Purpose Vehicle (SPV), Shree Maheshwar Hydel Power Corporation Ltd. (SMHPCL), which is expected to be commissioned very soon. SMHPCL has entered into a 35-year Power Purchase Agreement (PPA) with the Madhya Pradesh Electricity Board (MPEB), which is extendable by another 20 years by mutual agreement. The PPA provides for reimbursement of fixed and variable costs and a fixed return on equity of 11% p.a. till all the loans are repaid and 14% thereafter on equity capital. The project is entitled to attractive incentives based on generation above the design energy levels and higher availability. The project is expected to generate approximately 50% higher energy levels considering the water flow from the upstream projects – 1,000MW Indira Sagar and 520MW Omkareshwar. Considering 97.5% availability and average generation of only 1,200 MUs p.a., the project can earn approximately 14% additional Return on Equity (ROE) taking the total ROE to 28%.

Payments from the MPEB have been secured through a 3-tier mechanism-L/C, Escrow account and GoMP guarantee. In case of any default in payment by the MPEB, the contract can be suspended and the power sold in the open market to third parties, where the tariffs are highly attractive.

Entegra Ltd aims to be an integrated renewable energy company, with focus on implementation and running of Renewable Energy generation projects; offering Renewable Energy solutions to residential, commercial and industrial facilities, and providing EPC and carrying power trading. Entegra Ltd has floated a 100% subsidiary, Ennertech Bio-Fuels Ltd to develop bio-fuel technologies and undertake Jatropha plantation in 70,000 hectares of land. It has already secured a long-term lease of land for plantation from the Madhya Pradesh Government. Project cost is estimated at approximately Rs.146mn for 10,000 tonnes per year project and 1420.5mn for 100,000 tonnes per year project.

Jatropha oil is a sustainable substitute for diesel, providing inexpensive and renewable source of energy for transport & power.
Entegra Ltd is leveraging its partnership with Bora Wind AG to foray into the high potential area of developing Wind Power Projects. The first project with 100 MW capacities will be developed in a Special Purpose Vehicle, Ennertech Wind Farms with investment outlay of Rs.6bn and is currently identifying suitable land in the state of Maharashtra, Karnataka and Madhya Pradesh.
EnnerGreen Solutions is marketing Solar Heating Systems for hot water requirement which has a short pay back period of just 2 years and has already received some orders.
Conclusion and Chart Check: At the CMP of Rs.19.70, the stock looks to be undervalued. The charts it has been found that the stock has a strong support in the price range of Rs.15.5 to Rs.18.7 which will be difficult to break in the short term.
At the current market price (CMP) the stock of Entegra Ltd is HIGHLY UNDERVALUED given the incremental fully diluted equity value of Rs.82 per share attributable to Entegra from the consolidation of Maheshwar Hydro Power Project. The company also has a huge business pipeline to be executed in FY10. However, the main trigger for the stock is the Rs.25 bn 400 MW Maheshwar Hydro Power Project to be commissioned in FY10. The scheduled month for commissioning is July, 2009.

Note: This stock was recommend to the Paid Groups in the last Sunday Report (12th July, 2009). sent to them.

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.