The contents of this blog are for information purposes and are not recommendations to any person to Buy or Sell Securities. The informations are derived from sources that are deemed to be reliable but their accuracy and completeness are not guaranteed.This blog will mainly feature Research Reports on Companies which are listed on BSE/NSE/CSE & which get lost in the "Information Jungle" of SumanSpeaks--The 19th May, Saturday, 2007.
Monday 5 July 2010
PICK OF THE WEEK Indsil Hydro Power and Manganese Ltd BSE Code: 522165 CMP: Rs.74.75 Book Value: Rs.50.02 Market Cap: Rs.71.11 Cr Dividend: 10%
Introduction: Incorporated in 1990, Indsil Hydro Power & Manganese Ltd is the part of Indsil group. The company is in the business of smelting of specialty alloys and power generation in India. The company has two units named Smelter Works at Palakkad, Kerala, INDIA and Hydro electric works at Rajakkad, Idukki District, Kerala, INDIA. The Company`s products include low carbon silico manganese and high carbon silico manganese. Indsil, with business interests in specialty alloys and power generation is a fast growing GROUP with well integrated manufacturing plants and a well diversified geographical base.
Shareholding Pattern:The promoters hold 50.05% of the shares of the company while the general public holds 49.95% of the shares of the company. DIIs hold 6.67% of the shares of the company. Financials: For Q4FY10, the company came out with good set of numbers. The total sales of the company for Q4FY10 came out to be Rs.23.08 Cr as against Rs.14.13 Cr in the same period previous year. The PBDT for Q4FY10 came out to be Rs.4.63 Cr as against Rs.1.12 Cr in the same period previous year. The net profit of the company came out to be Rs.3.74 Cr as against Rs.23 lakhs in the same period previous year. This is on a very small equity of Rs.9.51 Cr. The EPS of the company for Q4FY10 came out to be Rs.3.93 as against Re.0.25 in the same period previous year. This is on a very small equity base of Rs.9.51 Cr. Moreover, both the net and operating profit margins increased in Q4FY10 as compared to the same period previous year. Triggers:
There are strong rumours in the markets that the company is likely to declare 2:3 Bonus issue with the declaration of the Q1FY11 results. At the current price of Rs.74.75 the stock looks attractively valued taking into considering the upcoming bonus issue (if any). The Company has achieved a target whereby the current debt equity ratio is almost zero. The company is expected to become debt-free within the next few months.
Due to good monsoon till now, water levels for hydro power plants are better compared to last year. In the Ferro manganese business, realization likely is better compared to Fiscal. There is also pick up in export to Europe market due to a little stabilsation of the Euro Zone. The company is looking for acquisition of ore mines in Ferro & Manganese business abroad. The market cap of the company is only Rs.71.11 Cr, whereas the cost of setting up a 18 Mw power plant is around Rs.120 Cr.
Indsil Hydro Power and Manganese Ltd earlier informed BSE that the Company along with its group sister Company, Indsil Energy & Electrochemicals Ltd. have entered into an arrangement on February 17, 2010 with the Muscat Overseas Group from the Sultanate of Oman (represented by Al-Tamman Trading Establishment L.L.C) to form a 50:50 joint venture for the purpose of setting up a 75,000 tpy ferro chrome smelter in the Sultanate of Oman. The project would have access to 100% captive chrome ore which would be made available from the existing mining operations of the Muscat Overseas Group. Indsil would be providing the technology, operating and marketing expertise for the proposed smelter project. The share capital would be held equally by both parties to the joint venture. The project is expected to cost around USD 30 Million or Rs.140 Cr and is expected to operational by end of 2011. This is great news for the share holders of the company.
The Company also has 18 Mw Hydel Power plant in Kerala where rainfalls are very good. Indsil also planning to double its smelter capacity in India. It is one of the safest scrip at the CMP, according to a Mumbai based reputed analyst.
Chart-Check and Conclusion: From the charts it has been found that the stock has made a beautiful pattern and could be accumulated at any price above Rs.72.5 for a target of Rs.80 in the short term and Rs.130, in the medium to long term. The scrip can easily give 100% return in the next 18 months time frame. Please keep a SL of Rs.67.30 for any short term trade.
Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on these recommendations or after reading the report. The calls made herein are for informational purposes and are not recommendations to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness are not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrips mentioned in this column. Investors should take their own decisions while buying and selling the shares/securities.
Note:This stock was recommended to the Paid Groups on 27-06-10, in the Sunday Report, sent to them, as the Pick of the Week.
Thursday 1 July 2010
PICK OF THE WEEK: Videocon Industries Ltd BSE Code: 511389 CMP: Rs.203.85 Book Value: Rs.294.25 EPS: Rs.24.09 P/E: 8.46 Industry P/E: 14.54 Dividend: 20% Dividend Yield: 0.98%
Introduction: Videocon Industries was incorporated in 1986. The company has two core activities, which include the manufacturing, assembly, marketing and distribution of consumer electronics and home appliances, and exploration and production of oil and gas. The company presently has seven operating business divisions, in which major divisions are consumer electronics, home appliances, components, etc. In India, Videocon Industries Ltd has eleven manufacturing facilities. The manufacturing facilities produce a complete range of consumer electronics, home appliances and critical components such as compressors, etc. It is the only listed company manufacturing glass panels in India. The facility at Bharuch is largest in the world at a single location and the third largest overall. Videocon Industries Ltd is one of the major CRT manufacturers globally, with plants in Poland, China and Mexico. The Poland plant also produces glass shells. It assembles air conditioners in Oman and CTVs in Italy. The company has emerged as one of the largest colour picture tube (CPT) manufacturers in the world after the acquisition of Thomson's CPT business, and expects this to grow its international sales in the next couple of years. Videocon started its oil and gas division a few years ago and presently holds a 25 per cent stake in the Ravva oil field, located on the Krishna-Godavari basin. The operating cost of the Ravva oil field is supposed to be the lowest in the world. Internationally, it has interests in oil blocks, one in Oman, two in Australia and one in Timor Sea near Indonesia. It is an ISO 14001 and OHSAS 18001 certified company and has received the CE approval for exports to the EU. It has also been certified by the VDE Testing and Certification Institute and corresponds with British standards as well.
Shareholding Pattern: The promoters hold a whopping 68.46% while the general public holds 22.97%. The FIIs hold 3.64% (3.92%), and DIIs hold 6.63% (5.27%). Thus while DIIs have increased their stake, FIIs have slightly reduced their stake in the company. Moreover, Bennett Coleman & Company Ltd holds 2,325,500 shares or 1.01% stake while Life Insurance Corporation of India holds 9,915,111 shares or 4.29% of the shares of the company.
Financials: For Q4FY10, the company came out with good set of numbers. The total income of the company for Q4FY10 came out to be Rs.2846.16 Cr as against Rs.2220.60 Cr in the same period previous year. The PBT almost doubled to Rs.209.65 in Q4FY10 as against Rs.110.48 Cr in the same period previous year. The net profit of the company more than doubled in Q4FY10 to Rs.149.65 Cr as against Rs.72.98 Cr in the same period previous year. The EPS of the company for Q4FY10, more than doubled to Rs.6.47 as against Rs.3.18 in the same period previous year.
Triggers: • Videocon Industries Ltd informed that the Rights Issue Committee of the Board of Directors of the Company at its meeting held on April 22, 2010, has allotted 5,13,92,243 Equity Shares of Rs.10 each at a Premium of Rs.215.00 per Equity Share on Rights Basis. The amount paid on application was Rs.112.50 (Rs.5.00 towards face value and Rs.107.50 towards premium). Since the right issue price is so much high and hence we say that the stock is likely to move up further. • The Company, through its wholly owned subsidiaries and/or joint ventures is carrying on the exploration activities in the oil and gas fields in Brazil, Mozambique, East Timor, Oman, and Australia. • As a part of Company’s overall plans of acquiring further interests in oil and gas fields worldwide, the Company, through one of its subsidiaries, acquired a 12.5% participating interest in Production Sharing Contract, covering the area referred to as Nunukan Block, located offshore Indonesia. • During the FY10 a pre-salt discovery was announced in the Wahoo prospect offshore Brazil block in the Campos basin wherein VB Brazil Petroleo Private Limitada, a joint venture company of the Company with Bharat Petro Resources Limited, through its wholly owned subsidiary, holds, a 25% participating interest. • More than 480 net feet of natural gas, in high quality reservoir sands with a gross column of more than 1,200 feet was encountered in Rovuma Basin, Area 1, offshore Mozambique, wherein one of the subsidiaries of the Company holds 10% participating interest. • The Company continues to reap dividends from its oil & gas venture in Rawa Oil & Gas Field in India. Moreover, since it is into consumer electronics space, and hence it is expected to get benefit from the Football World Cup and ensuring Common Wealth Games, in India for obvious reasons. • Videocon Telecommuncations Limited (VTL), (formerly Datacom Solutions Limited), one of the subsidiaries of the Company, has been awarded License to provide Unified Access Services in 21 local service areas and has also been allotted spectrum in 20 of these local service areas. VTL is in process of launching the mobile services and has substantially completed creation of the basic infrastructure for the same. VTL has signed interconnect and roaming agreements with various operators and has entered into long term master service agreements with various reputed infrastructure providers for usage of their passive telecom infrastructure services. VTL plans to roll out its mobile services commercially in six circles within a short time. VTL plans to roll out the mobile services commercially in rest of the telecom service areas where spectrum has been allotted, by December 2010. • One of the subsidiaries of the Company, Pipavav Energy Private Limited (PEPL) is implementing a Power project in Gujarat, near Pipavav port, Gujarat. This will be a thermal power plant with a capacity of 1,200 MW and the same will be completed in two phases. PEPL has signed necessary Memorandum of Understanding with the government of Gujarat whereby Gujarat government has agreed to provide all required support to the project. PEPL has obtained necessary environmental clearances from Gujarat Pollution Control Board for constructing the power plant and has also obtained CRZ clearance from State Department of Environment & Forest. Acquisition of the necessary land required for the first phase of the project has been substantially completed and PEPL has invited bids for key equipments and necessary civil work and bathymetric survey work. The Company is also considering power projects in the other parts of the country and evaluating alternate technologies for the same. • The company has allotted 1,858,275 equity shares on preferential basis, to Infotel Telecom Infrastructure Private Limited at a price of Rs.242.16 per equity share inclusive of a premium of Rs.232.16 per equity share. • The company introduced Integrated Digital TV (iDTV) with a built-in digital decoder having MPEG 4 DVB-S2 Digital signal; Introduced LED TV with Nano Pixels for immense picture performance and Razor slim design. It also introduced Unique SMART TV, which set a platform for Internet TV to enjoy the Live Chatting, Browsing, Video conferencing, email access, Blu Tooth connectivity etc.; and various other ranges/series of LCD TV with Full HD 1080p resolution. It introduced Star Rated Products in Consumer Electronics and Home appliances. With this technology, the customer can have benefit of saving approximately 15% of power consumption, resulting into effective utilization of power resources in the nation. • The company introduced paint less product with a unique Hot and Cold Technology for moulding of parts. This helps to reduce pollution generated due to hazardous chemicals used in plastic paints and its process. Customer can enjoy the high glossy finish with ultimate scratch resistance. It has developed new ranges of Direct Cool as well as Frost Free refrigerators like Ecocool, Ecocool Plus, Ecofresh, Deofresh, Nutricool, Nutricool Plus, Powercool. Developed 4 & 5 Star rated refrigerators with new exterior finish i.e. PCM-Pre-coated material. • In near future, the Company is proposing to concentrate on all the areas mentioned earlier and to focus efforts on new technologies which could offer better products in the domestic market. The Company has bagged SAP ACE Award, twice in a row, for Best Consumer Sector Implementation and Excellence in Implementation of Various SAP Modules. • During the year under review, Videocon Indonesia Nunukan Inc., Senior Consulting Private Limited and Jumbo Techno Services Private Limited became subsidiaries of the Company. • The company believes that its strategy of end to end supply chain integration with global scale and low cost base and with entry into the global brand space through the acquisition route will transform it into a global CE & HA powerhouse with a strong cash flow from the oil and gas business. • Videocon Industries Ltd has informed BSE that Videocon Industries Ltd. (VIL) advises that M/s. Anadarko Petroleum Corporation (Anadarko), the Operator of block BM-C-30 offshore Brazil in the Campos Basin, has announced the results of the Wahoo-1 drillstem test in the Wahoo field, located in block BM-C-30, in the deepwater Campos Basin offshore Brazil. The Wahoo-1 well flowed at a test rate of approximately 7500 barrels per day of 31-degree API gravity crude oil and approximately 4 million cubic feet per day of associated natural gas. This is indeed music for the shareholders.
Chart-Check: Considering the points mentioned above, the scrip could be purchased above Rs.203, for a target of Rs.215—Rs.242, in the short term. Most of the parameters are more or less in buy mode, though the scrip is little in the overbought territory. Since the Crude Oil prices are moving during the last few days, it is an ideal stock for the investors to accumulate. Please keep a SL of Rs.186 for any short term play.
Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on these recommendations or after reading the report. The calls made herein are for informational purposes and are not recommendations to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness are not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrips mentioned in this column. Investors should take their own decisions while buying and selling the shares/securities. Note:The stock was recommended to the Paid Groups on 20th June, 2010. The stock already gave good return to the investors.
Friday 25 June 2010
PICK OF THE WEEK:
Samtel Colour
CMP: Rs.16.80
Book Value: Rs.30.23
Market Cap: Rs.90.03
P/E: 1.18
Introduction:Samtel Color is the flagship company of the Samtel group, and manufactures the widest range of Colour TV tubes in India and has a capacity of over 10 million picture tubes per annum. The company was incorporated in 1986 with a technical collaboration with Mitsubishi Electric, Japan to manufacture 14” and 21” Color Picture Tubes (CPTs). With a market share of over 60%, Samtel is India’s largest integrated manufacturer of a wide range of displays for television, avionics, industrial, medical and professional applications, TV glass, components for displays, machinery and engineering services. The group employs 6,000 people in nine world-class factories and has an annual turnover of Rs.1,200 crore. Its clients include leading domestic and international TV manufacturers.
Integrated backwards with its component divisions at Ghaziabad and Parwanoo, Samtel Color also manufactures electron guns and deflection yokes for colour picture tubes.
Shareholding Pattern: The promoters hold 49.61% while the general public holds 50.39% of the shares of the company. The FIIs hold 1.32% while the DIIs hold 2.35% of the shares of the company. Also Life Insurance Corporation of India, holds 2.23% of the shares of the company, which is a very good positive indicator for the shareholders of the company.
Financials: For Q4FY10, the company came out with very good numbers. The total sales of the company for Q4FY10 came out to be Rs.275.65 Cr as against Rs.251.07 Cr in the same period previous year. The PBDT of the company for Q4FY10 came out to be whooping Rs.23.27 Cr as against a loss of Rs.14.90 Cr in the same period previous year. The net profit of the company for Q4FY10 came out to be Rs.7.74 Cr as against a loss of Rs.26.92 Cr in the same period previous year.
Triggers:
The market for color picture tubes (CPT) continued to grow in India although it is declining globally. The domestic CPT market is expected to show growth of around 5-10% over the next two years as the benefit of GDP growth percolate in the Indian economy. Imports which had surged has now started declining after imposition of Anti-dumping duties, by the GOI.
The company has submitted a further debts restructuring proposal to ease the liquidity constraints which has been approved by the Lenders under the CDR mechanism.The Scheme, envisages inter-alia restructuring of principal, conversion of debts into fresh equity shares of the Company, infusion of funds by promoters etc. This is expected to further work wonders for the company.
The committee of the Board of Directors of the Company in its meeting held on January 25, 2008 had allotted 23,25,581 warrants having optional right of conversion into against each Equity share of face value of Rs10.00 each at a premium of Rs.11.50 per share to M/s. CEA Consultants Pvt. Ltd. (promoter Company). The Company has informed that, the committee of the Board of Directors of the Company in its meeting held on July 24, 2009 considered and approved the conversion of Warrants into equity shares and allotted 23,25,581 equity shares of face value of Rs.10.00 each at a premium of Rs.11.50 per share to M/s. CEA Consultants Pvt. Ltd, (the promoter Company)" in pursuant to the preferential issues under SEBI (DIP) guidelines, 2000 as amended from time to time (conversion of warrants within 18 months from the date of allotment of warrants).
It has a series of 1sts (firsts) to its credit: (a) 1st to introduce Digital Color Monitor in India (b) 1st to launch 12", 14" and 17" B&W picture tubes in India (c) 1st to launch 14" and 21" FST tubes in India (d) 1st to launch Mono Display Tubes in India (e) 1st to assemble and seal glass shells in India (f) 1st to offer the largest range of 14", 21" FST and 21" F&FST color picture tubes in India (g) 1st to establish itself as the largest regular exporter of tubes (h) 1st to manufacture specialty tubes for industrial, military and medical applications, from the private sector (i) 1st public-private partnership in the area of defense avionics.
The TV brands on shop shelves have changed over the years–in the eighties, it was Weston, Crown, Texla and Uptron; in the nineties, BPL, Videocon and Onida; and today, it’s LG, Samsung and Sony. The TVs too have changed–B&W made way for colour, the 14-inch and 20-inch screens gave way to the 21-inches, now we have superflat screen TVs, tomorrow perhaps 34-inches and then plasma TVs. Despite all this churning, one company that has survived and grown is Samtel Color. Samtel is today India’s largest colour picture tube (CPT) manufacturer. Its competitors– Hotline, JCT Electronics and BPL in the domestic picture tubes market are fighting financial constraints just to survive in this volume-driven market where the agility and ability to manage and make the most of a fast-changing market are critical.
Prices of TVs, and thus picture tubes, drop sharply (4-5 per cent a year) as volumes scale up; the key to profitability is improved productivity and cost-control as well as the ability to move on to new growing segments where net realisations are higher. Samtel is doing just that. In March 2002, the company set up a third line for 21-inch superflat picture tubes (SFTs) for colour TVs and colour display tubes (CDTs) for PC monitors; two more lines have come up at the same site. Work on the fourth line (for 29-inch tubes) is also completed. So, volumes and net realizations are set to look up in the next few years as the company expands capacity to more than 9 million–more than the total industry size today. Its CDR package is expected to bring new lease of life for the company.
The Indian avionics leader, Samtel Display Systems (SDS), was awarded the Frost & Sullivan ‘Hot Investment Opportunity Award 2009′ in the Indian Aviation Suppliers Market. This award recognizes the Company’s outstanding business model based on unique and differentiated products, continuous upgrades of systems, long-term client contracts and industry certifications such as SAE/AS 9100 Rev-B. This is the first time that Business Financial Services (BFS) at Frost & Sullivan has awarded an Indian participant in Aerospace Sector. It is worth mentioning here that, Samtel Display Systems is the only privately owned company manufacturing high-end avionics products in the country. Moreover, the deal between Samtel and HAL for Sukhoi runs for the entire lifetime.
Samtel Display Systems (SDS) is a key Indian player in high-technology products for avionics and military applications in both domestic and international markets. SDS straddles the entire value chain from design, development, manufacture, testing, qualification, repair & maintenance and obsolescence management of avionics products and equipment for military as well as commercial aircraft. Its products include Color Avionic Tubes (CAT), Multi Function Displays (MFD), Head Up Displays (HUD), Helmet Mounted Displays (HMD), Automated Test Equipments (ATE) and IADS, as well as Control Displays for Armored Military Vehicles. SDS is a part of the Samtel Group, India’s largest integrated manufacturer of a wide range of displays for television, avionics, industrial, medical and professional applications, TV glass, components for displays, machinery and engineering services.
Earlier in 2010, Samtel Display Systems (SDS), one of India’s leading private sector aerospace companies, has inked a memorandum of understanding (MoU) with Swedish major Saab to jointly develop, manufacture and market a new generation head-up display (HUD) for helicopters. RIGS is a new-generation advanced lightweight HUD designed by Saab to provide helicopters with a cost-effective display solution. RIGS gives all-weather capability, ideal for flying and landing helicopters in challenging conditions, by presenting landing information and images from enhanced vision sensors, enabling pilots to see through darkness, smog, smoke and various levels of snow, rain and fog. SDS is already in advanced stages of developing HUDs for fighter aircraft. Subsequent to this MoU, SDS will now also be involved in the development of RIGS HUD together with Saab. SDS and Saab will jointly market RIGS in India to potential Indian customers for the Indian commercial and military airborne market. SDS will be involved in the development of RIGS electronics and software and will also develop and manufacture parts of the RIGS HUD. Initially, the parts manufactured by SDS will be for the Indian market, with the potential of serving international market in the long run. SDS may also, at a later stage, leverage its relationship with HAL (Hindustan Aeronautics Limited) for the joint marketing activities of RIGS. The company hopes that this collaboration will extend to other international markets as well over the next few years. This is the second MoU to be signed between Saab and SDS. This collaboration marks its next step towards consolidating its position in the Indian aerospace and defense market. Samtel Display Systems (SDS), earlier announced the opening of its office in San Jose, California, as part of its international expansion programme. This development marks a significant foray of SDS into the international market, thus facilitating close liaison with existing and potential customers, while helping SDS pursue business development activities in this geography. Since the creation of SDS, the company has received overwhelming response from the US market. The new venture is expected to minimize constraints due to long distances and time differences and enable it to reach out to wider-set of clients. SDS is a frontrunner in India’s private sector defence industry, having joint ventures and memorandums of understanding with Thales, Airbus, Honeywell, Lockheed Martin and Boeing, as well as Indian government defense organizations, the Defence Research and Development Organisation (DRDO) and Hindustan Aerospace Limited (HAL). It aims to grow from an expected turnover of Rs.100 Cr in 2010-11 to Rs.600 Cr in 2014-15 through expansion into the head-up displays, helmet mounted displays, automated testing equipment and OLED (organic LED) technologies. The only Indian company to manufacture cockpit displays for the Airbus family, it is also the chosen supplier of cathode ray tubes for Honeywell’s EFIS40 electronic flight instrument system. This segment was previously monopolised by Sony.
Chart Check and Conclusion: In a major turnaround, Samtel Color, the flagship company of electronics giant Samtel group, posted a net profit of Rs.76 Cr ($17.11 million) for fiscal 2009-10 (FY10) against a loss of Rs.75 Cr for the nine month period ended March 31, 2009. For the fiscal ended March 31, the company has declared a consolidated revenue of Rs.1, 114 Cr as compared to Rs.717 Cr during the nine-month-period ended March 31, 2009.
The consolidated revenue for the quarter ending March 31 increased by 10 percent to Rs.269 Cr in comparison to Rs.245 Cr for the corresponding quarter of the previous year. The company’s net profit after tax increased by 129 percent to Rs.8 crore in comparison to a loss of Rs.27 Cr for the corresponding quarter in the previous year, “thus showing a complete turnaround of the result”.
Samtel Color’s EBIDTA has shown an increase of 1,336 percent during the quarter by rising to Rs.31 crore in comparison to a loss of Rs.2 Cr in the previous year. Samtel Color manufactures the widest range of colour TV tubes in India from 14-inch to 29-inch and has a capacity of over 10 million picture tubes per annum.
From the charts it has been found that most of the parameters are in buy mode. One can accumulate the scrip at the CMP of Rs.16.80, for a target of Rs.21-25 in the short term. Please keep a SL of Rs.12-13 for any short term play.
Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on these recommendations or after reading the report.
The calls made herein are for informational purposes and are not recommendations to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness are not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrips mentioned in this column. Investors should take their own decisions while buying and selling the shares/securities.
Note:The stock recommended on 13th June, 2010, to the Paid Group members in the Sunday Report.
Tuesday 15 June 2010
PICK OF THE WEEK: ANG Auto Ltd BSE Code: 530721 CMP: Rs.49 and Rs.53.50 Book Value: Rs.72.84 EPS: Rs.5.78 P/E: 9.26 Industry P/E: 16.46 Market Cap: 67.09 Cr 52-Week High/Low: Rs.62.95/Rs.35.30
Introduction: When it comes to providing complete undercarriage solutions for trucks and trailers, ANG Auto Industries Ltd (Formerly ANG Auto Ltd) is the preferred name world over for its quality products such as heavy vehicle spare parts and automotive trailer parts. It is a Tier I and Tier II approved original equipment (OE) supplier to some of the leaders of HCV segment in US, Europe and Latin America. The company deals in heavy vehicle spare parts like automatic slack adjuster, manual slack adjuster, fully dressed dummy axle, automotive trailer parts and air brakes. It has succeeded in reaching a broader international market in these years. It is one of the largest manufacturers in India of the components used in manufacture of trailer axles, transmission and airbrake systems. More than 55 % of its revenue is derived from exports to quality conscious US and European markets in addition to Australia, Brazil and Mexico, among others. Its brand-enhancing customers comprise Tier-I and Tier-II companies across the world like Arvin Meritor (USA), Alliance Corporation (USA), Zenus Starker–BMW (USA) and Bosch Rexroth (UK), among others. Its manufacturing presence across five facilities covers nearly 250,000 sq. ft. across NOIDA and Faridabad, Sitarganj and Uttranchal (both adjacent to New Delhi, India’s capital). Its shares are listed on the Bombay Stock Exchange, Delhi Stock Exchange, National Stock Exchange and Ahmedabad Stock Exchange.
Shareholding Pattern: The promoters hold 48.38% while the general public holds 51.62%.
Financials: On a consolidated basis, For Q4FY10, the total sales of the company came out to be Rs.124.45 Cr as against Rs.117.2 Cr in the same period previous year. Profit from Operations for Q4FY10, before other income, interest and exceptional items came out to be Rs.14.12 Cr as against Rs.15.24 Cr in the same period previous year. The net profit of the company for Q4FY10 is a whooping, Rs.5.05 Cr as against Rs.81.91 lakhs in the same period previous year. This is on a very small equity of Rs.12.54 Cr. The consolidated EPS of the company for Q4FY10 came out to be Rs.4.03 against Re.0.65 in the same period previous year. Thus there is a significant improvement in the financials of the company in FY10 as compared to FY09.
Triggers:
The company last year entered into a joint venture to produce and market mobile towers solutions in India. ANG Auto Ltd and TowerWorx, US, have 50:50 stake in the new company known as TowerWorx India (P) Ltd. It is important to note that TowerWorx, US, is the largest mobile tower producer in the US having a large customer base across the globe like AT&T, TMobile and Verizon, among others. The joint venture is expected to reap in good revenues from the telecom companies, in the near future.
Last month the company received a huge order of Rs.33.37 Cr from L & T MHI - Boilers Pvt. Ltd. for manufacture and supply of boiler support structure for Jai Prakash Power Venture Ltd. for their upcoming power plant at Nigrie, Dist. Singrauli, Madhya Pradesh. The company hopes to garner more such orders in the near future.
The company attained the ISO and TS-16949 certifications, and is moving to implement the TPM and the TQM standards across all its plants over the coming days.
It is one of the few companies in the auto-ancillary space in the world to be completely integrated - from the manufacture of components to sub-assemblies and assemblies and finally to vehicles. What makes ANG Auto unique in India among the select few in the world is the convergence of integration and scale revolving around a priority to commission capacities among the top three in the country.
It has enhanced its value at every intermediate point in the following ways: (i) Through economies of scale, growing volumes to match global standards, (ii) Through the innovation of products enhancing the competitiveness of its users, (iii) Through the manufacture of quality products, leveraging its rich international experience of processes and practices. As a result, ANG Auto quantities, taking the business of its customers ahead. Industries Ltd of today provides international-quality products at Indian cost in growing
It is important to note that domestic trailer use is still at a nascent stage in India. The government’s thrust on improving road infrastructure and proper implementation of overload restriction for the commercial vehicles is expected to drive the demand for trailers. The container movement volumes have now begun to show some positive momentum.
India is now a global auto component hub and a significant player in the global automobiles supply chain. It is now a supplier of a range of high-value and critical automobile components to global automobile giants. Moreover, the good point is that the automobile industry is showing signs of revival as CV sales rebounded in FY10 as compared to FY09. Moreover, an investment of around US$15 billion, slated for the auto components sector over the next few years, is expected to drive sectoral growth. The prospects of the domestic auto industry appear optimistic as an increasing number of global automobile OEMs are establishing bases in India. Toyota Motors earmarked Rs.3, 200 Cr investment over 2008-11 for the second plant at Bangalore. Nissan intends to move its small car unit from the UK to India. It is expected that the country will be able to offset China and other Southeast Asian countries' traditional manufacturing advantage in the coming years; taking the industry a step closer to its targeted revenue of US$40 billion by 2014.
Auto companies have passed on the 2 per cent rise in excise duties duty to the customers and hence they are not affected. Now increase in disposable income of consumers with significant relief on personal taxation in the Union Budget of 2010-11 is expected to drum up the sales of auto majors in the near future—already some signs are being seen in the market. A significant relief on personal taxation front in the Union Budged 2010 could possibly outweigh negative factors. In addition, the excise duty rollback is only one third of the total cut (6 per cent) doled out through the stimulus package. There were no further negative surprises for the Auto Sector in the budget, 2010. It would be important to touch upon other significant budget proposals relevant for auto sector. While corporate income tax rates remained unchanged, reduction of surcharge on domestic companies from 10 to 7.5 per cent would lessen the tax burden. However, Minimum Alternate Tax (MAT) increases from 15 to 18 per cent, will to some extent offset the for eligible companies having an approved in-house R&D unit from 150 to 200 per cent of the expenditure incurred. This would stimulate additional investment in R&D activity paving way for innovation. With the growing trend towards providing advanced driver assistance features, safety and comfort features in vehicles, continuous innovation and adoption of new systems will be vital to retain competitiveness in the automotive industry. Certain companies were required to call back large number of vehicles in recent past due to technology issues. This tax measure could possibly work as a fillip to increase focus on R&D in long term resulting in better technology products. Thus the sector outlook remains strong for the ANG Auto Industries Ltd. benefit due to reduction in surcharge. One of the budget proposals enhances weighted deduction
To reduce dependence on the auto sector, ANG has ventured into the manufacture of boiler structure for thermal power plants. The Government of India has envisaged capacity addition to the tune of 78,700 MW during the Eleventh Five Year Plan, of which 75.85% is expected to be thermal power capacities. This provides significant optimism to the Company’s business outlook. The Company enjoys a favourable debt-equity-ratio, enabling it to raise further debt in any case of any need.
The Company enjoyed 46:54 revenue split between domestic and export markets. Off late the company has shifted its focus from the European market to Latin American, the US and other smaller markets and hence it would not affected too much by the European Financial Crisis.
Constant efforts are being made by the Company to reduce energy consumption, upgrade technology as well as equipment and derive optimum benefits from the present sources. The Company is continuously identifying the scope for improving end use efficiency by evaluating the generation of power increased. In-house training is imparted regularly to plant personnel for adopting technology advancements and cost containment. Further, the Company follows better product improvement, cost reduction, better quality and stability of products. techno-economic viability of various energy conservation measures. The Company’s captive engineering practices, which include reverse engineering processes for enhancing productivity,
The company has invested Rs 24.98 Cr in a steel fabrication unit for the manufacture of boiler structures for thermal power plants. The trial run has already begun in the company’s unit and soon the commercial production will start. It has also bought back 7,50,000 equity shares at Rs.53.52 per share and 7 mn bonds at a 50% discount on face value.
Chart Check and Conclusion: From the charts it has been found that the stock is just near the 50 and 200 day moving averages which is positive sign for the shareholders and investors in general. From the charts it is further found that MACD, RSI and Candle Stick Patterns are in buy mode. One can buy the scrip above Rs.51.5 for a target of Rs.80 in the medium to long term. In the short term the scrip may move towards Rs.62, where some profit booking is advised.
Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on these recommendations or after reading the report. The calls made herein are for informational purposes and are not recommendations to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness are not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrips mentioned in this column. Investors should take their own decisions while buying and selling the shares/securities.
Note:The stock was recommended on 06-06-10, to the Paid Groups in the Sunday Report sent to them.
Tuesday 11 May 2010
PICK OF THE WEEK
Info Drive Software Ltd
BSE Code: 530703
CMP: Rs.27.10
EPS: Rs.1.63
Introduction: Info-Drive Software Limited [BSE: INFDS, 530703], is a multi-dimensional Technology and Business Services Company offering:
* Specialized expertise in Applications Deployment and Banking Solutions
* Remote Infrastructure Management
* Biometric Solutions at enterprise level and
*Back-office transaction processing in Healthcare and Benefit Administration domains.
The company serves the high-growth banking in the Middle East and Far East markets segment by providing turnkey systems integration solutions entailing custom software implementation, hardware optimization and data center maintenance. Through a unique synthesis of organic and inorganic growth model on top of highly specialized offerings in the IT, Infrastructure and BPO verticals, it has established a well-balanced portfolio of services catering to the mainstream, uncontested, and emerging markets globally.
With headquarters in Chennai (India), Info-Drive has service delivery centers across India, Kuala Lumpur (Malaysia) and Dubai (UAE) supporting the business development centers in the USA (Sunnyvale and New York), and Singapore. These also support the multiple systems integration centers pan-India.
Its corporate culture is driven by:
* A strong sense of client-centricity
* Empowered decision-making with high accountability
* Sustained investment in domain expertise for continual differentiation in offerings and
* A constant focus on identifying green field opportunities for steady value creation for the company.
These attributes have fuelled Info-Drive’s rapid growth in the chosen markets, helping it become a truly ‘niche’ provider of both scale and specialized services. Partnering on an integrated or discrete engagement model, we are able to unlock measurable savings for clients globally.
Its portfolio of services entails:
* Business Process Outsourcing services
o Healthcare (Data Capture, coding and billing)
o Benefit Administration services (Life cycle of Qualified Pension Plans and IRS filing)
* IT Services
o Lifecycle Development Services
o Product Support and Customization Services
o Platform Porting Services
o Product Migration Services
* IT Infrastructure Management Services
o Remote Infrastructure Management
o DataCenter Management
* Biometrics
o Avant Guard-Auto
o Avant Guard-IT
o Avant Guard-Access Control
o Avant Guard- 32 Bit E-Kit
Shareholding Pattern:The promoters hold 18.50% while private corporate bodies hold 16.51%. The non-promoter holding is 81.50%.
Share Holding Pattern as on :
31/03/2010
31/12/2009
30/09/2009
Face Value
10.00
10.00
10.00
No. Of Shares
% Holding
No. Of Shares
% Holding
No. Of Shares
% Holding
PROMOTER'S HOLDING
Indian Promoters
5408456
18.50
5407956
18.50
5372208
18.37
Sub Total
5408456
18.50
5407956
18.50
5372208
18.37
NON PROMOTER'S HOLDING
Institutional Investors
Mutual Funds and UTI
800
0.00
800
0.00
800
0.00
Banks Fin. Inst. and Insurance
7600
0.03
8000
0.03
8000
0.03
FII's
91689
0.31
91689
0.31
91689
0.31
Sub Total
100089
0.34
100489
0.34
100489
0.34
Other Investors
Private Corporate Bodies
4827674
16.51
4836407
16.54
4859177
16.62
NRI's/OCB's/Foreign Others
4015445
13.73
2989783
10.23
3920618
13.41
Others
1026589
3.51
1001917
3.43
1002828
3.43
Sub Total
9869708
33.76
8828107
30.19
9782623
33.46
General Public
13860637
47.40
14902338
50.97
13983570
47.83
GRAND TOTAL
29238890
100.00
29238890
100.00
29238890
100.00
Financials:For FY09, the net sales of the company came out to be Rs.13.65 Cr as against Rs.4.25 Cr in the same period previous year. The other income of the company came out to be Rs.97 lakhs as against Rs.49 lakhs in the same period previous year.The operating profit of the company for FY09 came out to be Rs.4.77 Cr as against Rs.2.64 Cr in the same period previous year. The Gross profit of the company for FY09 came out to be Rs.5.55 Cr as against Rs.2.95 Cr in the same period previous year. The net profit if the company for FY09, came out to be Rs.5.22 Cr as against Rs.2.28 Cr in the same period previous year.
The EPS of the company for FY09 came out to be Rs.1.79 as against Rs.0.78. The net profit in FY09 would have been much higher if the employee expenditure and other expenses have not shot up by so much. The employee expenditure increased to Rs.1.64 Cr in FY09, as against Rs.72 lakhs in the same period previous year. The other expenditure shot up to Rs.7.24 Cr as against Rs.90 lakhs in the same period previous year. The depreciation has also increased significantly during FY09, as against FY08.
For Q3FY10, the total sales of the company came out to be Rs.5.19 Cr as against Rs.6.46 Cr in the same period previous year. The operating profit of the company nearly doubled to Rs.1.84 Cr in Q3FY10 as against Rs.1.03 Cr in the same period previous year. The net profit of the company for Q3FY10 came out to be Rs.1.62 Cr as against Rs.1.01 Cr in the same period previous year. The operating profit margin of the company increased to 35.51% in Q3FY10 as against 15.85 % in the same period previous year. The GPM of the company increased to 32.7% as against 17.57% in the same period previous year. The NPM of the company increased to 30.95% (almost double) in Q3FY10, as against 15.19% in the same period previous year. The EPS of the company for Q3FY10 came out to be Rs.0.55 as against Rs.0.34 in the same period previous year.
For the nine months ending December, 2009, the total sales of the company came out to be Rs.10.69 Cr as against Rs.119.4 Cr in the same period previous year. The net profit of the company during the period came out to be Rs.4.20 Cr as against Rs.3.98 Cr in the same period previous year. The operating profit margin of the company also increased to 43.96% as against 34.77% in the same period previous year. The NPM of the company during the period came out to be 38.81% as against 31.74% in the same period previous year. The EPS of the company for the nine months ending December, 2009, came out to be Rs.1.44 as against Rs.1.36 in the same period previous year.
However, a little concern is given by the fact that during the nine months ending December, 2009, the employee expenditure almost doubled to Rs.2.64 Cr as against Rs.1.19 Cr in the same period previous year. But this is offset by the significant decrease in the other expenses to Rs.3.35 Cr as against Rs.6.6 Cr during the nine months ending December, 2009.
Triggers:
There is a big change in the global economy and the Company has been able to adapt well and march along with overall improved performance. Keeping in mind the Company’s future outlook and the avowed objective to reward the Shareholders, the Board shall maintain its policy of returning a portion of its free cash flow to its shareholders at a level it considers prudent in light of the current economic and financial environment. The Board recommended a Dividend of 5% (Rs.0.50 paise) per share for FY 08-09.The Board is confident of ensuring sustainable returns to the Shareholders for now and many years to come.
The Company continued to win new engagements and grow existing relationships in the traditional area of Hardware Sales & Maintenance, Systems Integration and has strengthened its presence in areas such as IT Consulting and IT Infrastructure Management services. The broad range of services enables the Company to provide end-to-end solutions to its clients - combined with its geographical spread provided comprehensive and high value added services to its clientele.
The Company in FY 08-09 has chalked out a new strategy and has realigned its operating structure and enhanced technology offering. The revised organizational operating structure paves the way for more accountability & performance by casting a P&L responsibility on Heads of Operations. The Company today is much more focused and is executing at a higher efficiency than a year ago.
The synergies between the subsidiaries which have been acquired in the past are yielding results in making InfoDrive as a group, provider of end-to-end comprehensive solutions.
The Company’s Income from operations in FY09 grew by 221% to Rs.13.65 Cr from Rs.4.25 Cr in 2008, thus making further growth in 2009. The corresponding Total expenditure including depreciation is Rs.9.28 Cr in 2009 from Rs.1.87 Cr in 2008. Correspondingly the Profit after Tax increased by 129% to Rs.5.22 Cr in 2009 as compared to a profit of Rs.2.28 Cr in 2008.. The Company’s Stand alone operations have shown substantial growth. The company seeks long term engagements with clients while addressing their Outsourcing requirements. Its customer centric approach has resulted in high level of client satisfaction. The demand for the Company’s services continues to look robust, and the relentless focus on niche areas within Business Process Outsourcing (BPO) and Information and Communication Technology (ICT) services continues to resonate with target customers.
The Company’s chosen target segment in BPO space does not have any exposure to the recession in USA and has not seen any slowdown in demand from its US clients. USA continued to be the largest market for its BPO operations and hence any improvement in the fundamentals of the US is positive for the company. The company derived 75 percent of its BPO revenues from repeat business. The Company continues to believe that, for the nature of services it provides, growth is predicated on superior service delivery execution, ongoing value enhancing workflow and domain competency rather than on vagaries of macroeconomic market forces.
The Company’s investments in uncontested market opportunities and innovation have enabled it to conceptualize and undertake a large, end-to-end critical project in Digi-Life segment. As part of this practice initiative, the Company has won several high-value contracts in Information and Communication Technology (ICT). It has rapidly established itself as industry leader in creating a truly unique e-Living Practice that provides automation, digital life-style, and community networking & unified integration of media, telecom and internet for homes and community.
The quality of revenue and the annuity nature of its client contracts make its growth plans highly predictable and sustainable over a longer time horizon, relative to its sector peers. The global economic events and the resultant slow- down has created enormous headwind to the growth of services industry in general and offshore outsourcing industry in particular. The Company’s investments in new growth engines like e-living, specialized service offerings in BPO like Benefits Administration Services and value centricity in the large Systems Integration projects have helped convert today’s challenging market environment into opportunities for growth.
Even in this difficult environment, the Company continues to make substantial investments in developing its domain expertise and strengthening its technology competencies. The Company is focused on Intellectual Property (IP) led growth strategy in some of the chosen service offerings and as a testimony have built several tools like InsTIL, CampIT, industry pioneering Biometrics solutions and are actively offering these to several blue-chip clients, as an integral part of its service offerings. As a result of these initiatives, the Company is well equipped to benefit when the global economy, especially the US, is revving.
Though the current external macroeconomic conditions continue to be uncertain, however it is widely believed that the company’s performance bulwarked by a professional management team will continue to surpass the expectations, as witnessed over the last few years.
·Info-Drive Software Limited (Singapore Branch) was incorporated in November 2007, to expand its business in Hardware Sales & support services business in Singapore. The Company in FY09 has signed a reseller agreement with Hewlett Packard Singapore (Sales) Pte Ltd (HP) for selling the entire line of HPs Products in India.
Subsidiaries: TheCompany today is a global corporation having presence in 5 countries :
SubsidiaryCountry of Incorporation
Info-Drive Software IncUnited States of America
Info-Drive Systems Sdn BhdMalaysia
Info-Drive Software LLCUnited Arab Emirates
Precision Infomatic (Madras) Pvt LtdIndia
Info-Drive Software Pte LimitedSingapore
Info-Drive Software LimitedCanada
Precision Techserve Private LimitedIndia
Precision Galaxy Private LimitedIndia
Precision Techconet Private LimitedIndia
Legend Systems Private LimitedIndia
Technoprism IncUnited States of America
Technoprism LLCUnited States of America
During FY09, InfoDrive Dubai has made good progress on its strategy to target multi-year deals with end to end ownership of customer systems and processes. This initiative has helped the Company further its objective of long term partnership with the customers. Within few months of launch of Digi-life practice, InfoDrive Dubai secured its first multiyear million dollar order in ICT space for InfoDrive, India. The scope of work includes providing community datacenter, call-center & e-Living experience. Hardware Platform, Software Drivers & Applications are developed in conjunction with several OEM & technology giants including Microsoft and Cisco. The phase one of the project which includes e-Living thrill ideation, e-Living commerce blueprints, infotainment solution architecture has been successfully delivered in FY09.
Info-Drive Software Ltd has informed last month that it is entering into the S A S, and Risk Management Practices. These Practices are advanced and analytical practices in the areas of operational risks, anti -money laundering, fraud analytics, and customized fraud solutions. The company hopes to derive significant revenues from it.
Last year, Info-Drive Software LLC, an IT services provider and a subsidiary of Chennai-based Info-Drive Software and Xerox had formed a "go to market" strategic partnership for offering to the customers paperless office products and total document solutions of Xerox in the UAE. In a statement, Info-Drive said the tie up will help medium and large enterprises to conserve cash by eliminating wastes and business-non value -adds at department and organization level while retaining core business value adds. It is one of the few who has become a member of the business partner program of Xerox Solutions & products in the UAE.
Conclusion: Considering the points mentioned above the scrip could be purchased at the CMP of Rs.27.10 for a target of Rs.31-31.5 in the very short term. MACD, Bollinger Bands, Stochastics, etc are in buy mode and cross over could take the scrip upto Rs.35 in the short to medium term, unless the world markets further crashes. The candle stick chart pattern is indicating good upward movements in the days to come. Moreover, volume built-up was seen in the counter in the last trading session. But on the negative side the scrip is still below its 50 and 200 DMA. In case of any market crash please put a Stop Loss at Rs.24.5.
Note: The stock was recommended to the Paid Groups on this Sunday (9th May, 2010) in the Sunday Report.
Disclaimer:Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on these recommendations or after reading the report.
The calls made herein are for informational purposes and are not recommendations to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness are not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrips mentioned in this column. Investors should take their own decisions while buying and selling the shares/securities.
Kernex Microsystems India Ltd: Basking on Huge land Holdings:
BSE Code: 532686
CMP: Rs.82.6
Book Value: Rs.105.43
Market Cap: Rs.103.25 Cr
Introduction:Established in 1991 and registered
as 100% Export Oriented Unit with Software Technology Parks of India, Department
of Electronics, Govt. of India, New Delhi, it is a ISO 9001:2000 certified
company with expertise in Software, Hardware development and Systems
Integration. It is presently engaged in the business of manufacturing,
installing and maintaining of anti-collision systems as well as conceptualizing,
designing, and developing certain railway safety and signal systems for Konkan
Railways Corporation Ltd. These safety and signal systems are suitable for
medium to low speed & density railway tracks like in India and
other developing countries.
The company entered into a technology
partnership with Konkan Railway Corporation Ltd, Navi Mumbai for design,
engineering and development of anti-collision systems which provides safety to
trains in Railways. It holds exclusive license for manufacturing, installation,
commissioning and maintenance of anti-collision systems in India. It
also has an outsourced facility for the Konkan Railways Corporation Ltd for
manufacture and supply of ACDs and related accessories. It is also a technology
partner for the development and implementation of ADDs for Metro Sky-Bus Urban
Transportation System, Advanced Railway Signal Systems and other safety systems.
It holds exclusive marketing rights of ACD systems all over the world except
India.
Based on the concept and domain knowledge
provided by Konkan Railway Corporation Ltd, it has developed the networked
Anti-Collision Devices, using Global Positioning System, Radio Data
Communication, Application Logics and Inter facing these with an Auto Breaking
System developed by KRCL. With operations in USA and
planned operations in Far East, Africa and Middle East, Kernex is truly a global
player in the offing.
Shareholding
Pattern:
The promoters hold 55.74% while the general public holds 44.26%. Moreover FII
hold 1.55%, while mutual funds/UTI holds 1.11%.
Shareholding belonging to the
category
"Public" and holding more than 1% of the Total No.of Shares
Sl. No.
Name of the Shareholder
No. of Shares
Shares as % of Total No. of Shares
1
SMS Holdings Pvt Ltd
273,181
2.19
2
Somerset Emerging Opportunities Ltd
193,217
1.55
3
Enam Investment Services Pvt Ltd
137,500
1.10
4
UTI Mid Cap Fund
139,156
1.11
5
Vinaya Kumar Gavini
160,267
1.28
6
Challa Subrahmanay Sarma
186,212
1.49
Total
1,089,533
8.72
Financials:
For Q1FY10, the company came out with flat topline and a slightly subdued
bottomline. The total income of the company for Q1FY10 came out to be Rs.5.82 Cr
as against Rs.5.97 Cr in the same period previous year. The net profit of the
company for Q1FY10 dipped due to higher interest and tax component to Rs.52.3
lakhs as against Rs.1.07 Cr in the same period previous year.
Triggers:
The
company would benefit from the Indian Railway’s move to focus more on signal
modernization and increased usage of automated signaling systems. Kernex
Microsystems (India), the Hyderabad-based railway safety product manufacturer
is the only player in anti-collision devices for the Railways and is set to
capitalize on the public sector transporter’s thrust on ‘safety’.
Kernex
Microsystem last year announced to foray into infrastructure projects and
power sector, the two most happening sectors of today.
The
company has redrawn its plans to carry on the expansion programme, wherever
required, as against plans mentioned in the prospectus dated December 6, 2005
in regard to scheduled time of completion. However, establishment of new
manufacturing centre for ACID, ADDS and Advanced Signal Systems, construction
of various buildings, including machinery & external services, electrical
supply, roads, sewage & compound walls, gates and other related security
arrangements and also training centre, cafeteria and transit accommodation for
trainees, R&D Block, administration and manufacturing facility is nearing
completion.
The
Phase-1 of development of ACD systems has been completed and pilot project
commissioned in the Q1FY10. Railways have accepted the ACD system for
deployment in all the Railways. Orders are expected through Konkan Railways
Corporation for Southern, South Central and South Western Railways in the near
future.
Honourable Railway Minister during the Railway Budget speech on 26th February,
2008, stated that ACD is found working satisfactory and therefore, proposed to
be deployed in South Central and South Western and Southern Railways.
According to Railways Corporate Safety Plan, ACD deployment is to be completed
all over Indian Railways by 2013-2014. This is music to the investors in
Kernex Micro Systems.
The
Company has signed a contract in November, 2008 with Egyptian National
Railways, Egypt
for development and supply of 136 Semi-Automatic Level crossing Gates. The
Contract is under execution.
Its
unique product, Multi-Section Digital Axle Counter has been developed under
technical collaboration on schedule time and is under cross approval by RDSO,
Lucknow,
Indian Railways. It is to be noted that the company earlier dropped the
product called TAWD, consequent to the dropping of the same by the Indian
Railways, in view of anticipated huge demand for the product called 'Digital
Axle Counter’.
Its R&D
Division has done number of improvements and changes in the application
software and hardware as required by the Konkan Railway Corporation. This
includes AMSS, upgradation of ACD Reporting System & ACD survey automation
system.
The
company’s International Marketing division continued marketing operation for
selling the ACD and related systems in Egypt, South Africa, Brazil, Pakistan,
Australia and South Asian countries. Consequently the ACD System is short
listed as one of the viable system for Egyptian Railways. South African
Railways is also examining the possibility of integrating the ACD system with
OBC system already installed in South African Railways, spoornet.
The
company has also been working on development of 'Multi Section Digital Axle
Counter’ in collaboration with M/s Altpro, Zerob, Croatia. Complete test
data, technical details, company details and Safety case has been submitted to
RDSO, Indian Railways. Discussions with Altpro, to jointly manufacturing the
product and KMIL to Market the product to Indian Railways is in progress.
Meanwhile M/s Altpro, Croatia has appointed Kernex as their Sole technology
partner / Altpro Agent / Joint Venture partner in Indian subcontinent for
their product range like Digital Axle Counter, Train detection System,
ATPS, SIFA, incident recorder and for other safety system.
The
company has entered into technology partnership with Tiffien Batch, Germany
for providing Automatic & Semi Automatic Level crossing system, up to Sit 3
levels. This should help Kernex to enter into International markets in
semi developed and under developed countries like Africa and South Fast Asia
and Australia for the supply a Level Crossing Systems.
The
company has so far purchased over 243 Acres of land at the Warangal
highway near Yadagirigutta and has also acquired over 157 Acres land at
Amanagul, Mehboobnagar district and acquisition of further Land, in the
area is planned. All equipments required for this project have been fully
acquired. In case of SPAD, planning is in progress and the project is expected
to be completed by Dec, 2009 as against the revised scheduled month of June,
2008. This is due to delay in finalization of specifications and requirements
by Indian Railways.
The
development of Hot Box and Wheel Vibration Detection systems is in progress
and is expected to be completed by 31st Dec, 2009 as against the revised scheduled month of Nov,
2008. This is due to delay in finalization of specifications. Another
opportunity waiting in the wings is the provision of ATP system for Metro
Trains that are planned in major cities of the country. With technological
collaboration, the company can become one of the important players in this
field too.
New
Offices of the company are being established in Delhi, Chennai. Guntakal and
Hubli based on the release of new orders and also central survey centre at
Hyderabad. Other locations will be taken up in phased manner as per
the commencement of work ordered by Indian Railways. Kernex Microsystems
(India) set up a 100% subsidiary in the US in September 2000 to implement
software products of the company in that country. It is now engaged in
developing and implementing software for the US corporate hospitals.
Concerns:
The
biggest threat the company faces is from Multi Nationals, who want to sell
their equipment in India. To gel over this competition, the Company is
upgrading the technology at a fast pace.
Any delay
in decision making, administrative and departmental procedures could delay the
receipt of orders, making its facilities idle and under productive.
Chart Check and
Conclusion:
Considering the points mentioned above the stock could be purchased at the CMP
of Rs.82.6 for 6 months to 9 months time frame for at least 50% appreciation
from the current price. Moreover, an encouraging fact is that the promoters are
technocrats and have wide experience in electronics/software industries, both in
India
and abroad and hence they possess a deep understanding of the business of the
company. Another point which is worth noting is that the stock is trading below
its book value of Rs.105.43
Now from the charts it has been found
that the stock is in highly oversold territory and a small bounce cannot be
ruled out in the short term. Though Bollinger bands are in buy mode however,
other momentum parameters are still not giving an immediate buy for the scrip.
Also, though the MACD is not giving an immediate buy signal but it could slowly
drift towards the buy mode. The stock needs to close above Rs.85 on closing
basis, to start rising again. If it crosses Rs.95 which looks probable the stock could touch as high as Rs.130. Please keep a SL of
Rs.67 for any short term trade.
Pick
of the week
DECCAN CHRONICLE HOLDINGS LIMITED
BSE Code: 532608
Face Value: Rs.2
CMP: Rs.37.85
EPS: Rs.5.5
P/E: 6.88
Dividend: 150%
Book Value:
Rs.43.58
Market Cap:
Rs.926.86 Cr
52-Week High/Low:
Rs.224/Rs.36.15
Introduction:
Deccan Chronicle Holdings Ltd, erstwhile Deccan Chronicle was formerly engaged
in weekly and daily journals in Andhra Pradesh. The company acquired a news
paper publishing business in December 2002; post which it established a strong
foothold in the state. The company aims to be the leading publishing house in
the country.
Deccan
Chronicle, the flagship newspaper of the company is the leading English daily in
Hyderabad and Andhra Pradesh. It publishes seven editions of the Deccan
Chronicle in Andhra Pradesh from their printing presses located at Hyderabad/Secunderabad,
Vijayawada, Rajahmundry, Vishakapatnam, Anantapur, Karimnagar and Nellore. It is
the fourth largest circulated and read English daily in India. Besides Deccan
Chronicle, the Company also publishes Andhra Bhoomi in Telugu (daily, weekly and
monthly).
Deccan Chronicle
covers latest local, regional, national and international news. The newspaper
also provides business, sports, weather, city culture, beauty, and health
related news and information through its online portal.
Shareholding Pattern:
The promoters hold 63% while the general public’s holding is 37%. Among the
non-promoters are a number of Mutual Fund houses which holds substantial stake
in the company.
Shareholding belonging to the
category
"Public" and holding more than 1% of the Total No.of Shares
Morgan Stanley Investment Management Inc A/c Morgan
3,888,224
1.59
6
Life Insurance Corporation of India
3,429,892
1.40
7
Franklin Templeton Mutual Fund A/c Franklin India
3,200,000
1.31
8
Morgan Stanley Mutual Fund A/c
Morgan Stanley Growth
3,675,000
1.50
Total
27,885,644
11.39
Financials:
For Q3FY09, the company came out with almost flat topline and subdued bottomline,
due to general downturn in the world economy.
The total income
of the company for Q3FY09 rose to Rs.228.3 Cr as against Rs.226.5 Cr in the same
period previous year. Deccan Chronicle Holdings’ third quarter net profit fell
75% to Rs25.67 crore over the corresponding period a year ago. The net profit of
the company for Q3FY09 came out to be Rs.25.7 Cr as against Rs.102.94 Cr in the
same period previous year.For the
nine-month period ended 31 December, Deccan Chronicle posted a net profit of
Rs131.92 crore, a 51% decline from Rs269.29 crore last year.
The operating
and net profit margins of the company decreased considerably Y-o-Y. The net
profit suffered due to high raw material price (Rs.129.04 Cr in Q3FY09 as
against Rs.82 Cr], higher staff cost (Rs.13.53 Cr in Q3FY09 as against Rs.6.53
Cr), and almost doubling of other expenditure (Rs.17.73 Cr as against Rs.9.8Cr).
However with the government expected to come out with special package for the
media sector, the company’s top and bottomline could change dramatically on the
positive side.
Investment Rationale:
Advertisement,
the main growth driver:
Advertisement is the key revenue driver in the Indian newspaper giant. DCHL’s
advertisement revenue accounts for nearly 80%-90% of the total revenue. The
media industry, both print and electronic, is facing the impact of the global
financial crisis in the form of decline in advertisement revenue. However,
representatives of the print media had already approached the I & B ministry
seeking an upward revision in rates of government advertisements. The
government has almost assured to some stimulus package to the media industry
and to tide over the situation.
Foray into new
business:
The Deccan Chronicle group has floated an international cargo airline company
“Flyington Freighters Ltd”. The new company, which will start services from
July this year, has placed orders for purchase of six A330-200F cargo planes
from Airbus at a cost of $175 million each. While the aircraft delivery is
slated for 2009-2010, Airbus has agreed to lease two aircraft to the company
in the mean time.
Launching New
Editions:
In the middle of last year, Deccan Chronicle Holdings Ltd launched its Mumbai
Edition of "Financial Chronicle" in association with the "International Herald
Tribune". During the year, 2008, DCHL entered the Business daily market by
launching its newest print offering, Financial Chronicle simultaneously from
Hyderabad and Chennai and extended its presence in Bangalore and Mumbai
recently. Also, it announced a tie up with International Herald Tribune for
launching its branded 'World Business Section' inside Financial Chronicle. The
Mumbai edition of the Financial Chronicle would have four pages of IHT's World
Business Section and its logo would be put on the front page of the daily. But
one should remain cautiously optimistic on DCHL's foray into this space as it
is already crowded with several offerings by other big Print Media houses.
During May 2008, the company finally launched its much awaited Bangalore
edition of Deccan Chronicle.
Strengthening
its base in Southern India:
The company had already launched the Bangalore edition of Deccan Chronicle and
approved an initial investment of Rs.25 Cr in addition to the use of existing
assets in other locations.
Inorganic
expansion:
The company is expanding its reach through inorganic expansions. It had
acquired control of Asian age Holdings, which publishes newspaper “The Asian
Age” in five cities. The acquisition will help strengthen the brand image of
Asian Age at the back of increasing print run. The company had also acquired
Odyssey India Ltd (Odyssey) for Rs.61.2 crore, in a cash deal. Odyssey is a
growing leisure retail chain, is engaged in sale of books, music, toys,
greeting cards and FMCG products. This move was intended to notch
advertisement from FMCG giants.
Buy Back of
Equity Shares:
The Board approved the proposal for buy back of equity shares of Rs.2 each of
the fully paid up equity share capital of the Company, at a price not
exceeding Rs.100 per equity share aggregating to Rs.180 Cr from equity
shareholders other than the Promoters and persons in control of the Company.
The maximum number of shares to be bought back through the Stock Exchanges
shall not exceed 3, 50, and 00,000 Equity Shares of Rs.2 each which represents
14.29% of the paid up capital of the Company. However the Promoter Holding in
the Company shall not exceed 75% of the Paid up capital of the Company post
buy back. The minimum number of Equity Shares (minimum buy back shares) to be
bought back is 1,00,00,000 Equity Shares of Rs.2 each.
Stimulus
Package for the Media Sector to boost growth:
Taking note of the difficulties faced by the media industry due to the
financial crisis, the government last week said it will shortly announce a
stimulus package for the sector. The I & B ministry has already sent certain
recommendations about the package to the Finance ministry and the government
is expected announce it soon. Moreover, the good point is that the said
package is
mostly concerning the print media and hence the scrip is expected to be
positively effected more than those in the electronic media.
Indian Premier
League (IPL)--Profitable in the first year itself:
Deccan Chronicle had bagged the rights for the IPL team of Hyderabad for US
$107mn payable over the next 10 years. The IPL Hyderabad rights would be a
part of Sieger Solutions. DCHL named the team Deccan Chargers and spent around
$5.9mn in annual fees to recruit players. While there is every chance that the
venture would achieve breakeven only after a couple of years, management has
indicated that the IPL venture turned profitable for the company in the first
year itself. DCHL clocked around Rs107.5cr revenue and incurred expenses to
the tune of Rs88cr during its first year of operations. Hence, it made a neat
profit of Rs19.5cr from the venture. Also Deccan Chronicle Holdings Ltd will
not sell its Indian Premier League cricket team, Deccan Chargers, as there
were no buyers in the market, a top official said. Deccan will review the
decision to sell Deccan Chargers in three years from now as this downturn
cycle was likely to be extended till 2012. It is to be noted that, Deccan
Chronicle had in 2008 paid $107.01 million for the Hyderabad team for Indian
cricket board’s Twenty20 series for 10 years.
Sieger
Solutions – Potential unlocking on the cards:
Sieger Solutions, a wholly owned subsidiary of DCHL, was formed in July 2006
to handle media space selling for DCHL for a pre-defined commission. However,
Sieger has stopped clocking revenues from this model and now houses all the
internet portals – Deccanchronicle.com, Papyrusclubs.com and Mydigitalfce.com.
For FY2008, Sieger Solutions registered revenues of Rs.72 Cr and PAT of Rs.35
Cr primarily driven by a subscription based model from a website called
Papyrusclubs.com (student community forums) under which it has tied up with
several institutes to publish and share campus news over the Internet.
Recently, DCHL also entered into an outsourcing agreement with New York Times
(NYT) to manage their internet properties out of India as well as some of the
development activities connecting to the digital space. Sieger Solutions is
expected to rake in incremental revenues of Rs.150 Cr from this arrangement in
FY2009. DCHL is also in talks to sell 5% equity stake in Sieger Solutions to
NYT.
Conclusion:
During FY2008-10, we can expect DCHL to post a CAGR growth of 16% in Revenue
aided by 18% CAGR growth in advertising revenues and 8% CAGR in circulation
revenues. On the Earnings front, we can expect DCHL to report a CAGR of 15%
largely boosted by a decline in interest costs
However, on the
operating front, the DCHL is expected to post a subdued growth owing to a sharp
decline in Operating Margins on account of stiff competition in Chennai, initial
losses on account of the Bangalore edition and the Financial Chronicle launch,
and higher newsprint prices. Hence, we can expect DCHL to post a CAGR growth of
9% in EBITDA during FY2009-10.
However, there
are valid concerned on DCHL owing to its poor quality of growth (funding working
capital requirements through Balance Sheet), scalability issues (too much
dependence on single region), poor corporate governance (management not
delivering on promises made – buyback, un-locking in subsidiaries) and
unsustainable Margins (60% OPM as against peer average of 20%). While management
has addressed some of these concerns – reduced debtor days to 90 days by
securitization with ICICI for a 12% discount, and initiated talks with NYT to
unlock value in Sieger, still some more clarity on the same is expected.
Moreover, depreciating rupee is negative for the company as it imports
newsprints.
Growing
awareness among the common mass is leading to the rise in the circulation of
newspaper. The growth was triggered mainly by India and china. DHCL occupies
second position in the print industry and caters to the most part of the
Southern India. Its paper Deccan Chronicle is the most read newspaper in Andhra
Pradesh, Chennai and Hyderabad. The company is also eying a substantial share in
Bangalore and is expanding to newer geographies which include Mumbai and Pune.
Revenues of the company will also be triggered, by the upcoming expansion plans
of Odyssey.
At the CMP of
Rs.37.85, the stock is trading at dirt-cheap valuations considering its future
upsides from the Sieger Solutions deal with NYT and IPL’s good performance. The
valuation can also be corroborated by the growing advertisement revenues and
increasing subscription.
Note:
This Report
is from the Yesterday's (08-02-09) Sunday Report which was sent to the Paid
Groups, Yesterday (8th February, 2009
Is Satyam
Computers Services Ltd, a buy at Rs.39.95 ??!!
To
understand this fact, let us consider the following points, a little
meticulously
.........
Satyam Computer
Services Ltd
Scrip Code :500376
Quarter ending :September
2008
Shareholding belonging to the category "Public" and holding more than 1% of the Total
No.of Shares
Sl. No.
Name of the Shareholder
No. of Shares
Shares as % of Total No. of Shares
1
Aberdeen Asset
Managers Ltd A/C Aberdeeninternational India Opportunities Fund (
Mauritius ) Ltd
23,800,000
3.53
2
Fidelity
Management & Research Company A/C Fidelity Investment Trust - Fidelity
Diversified International-Fund
Aberdeen Asset
Managers Ltd A/C Aberdeen Global Asia Pacific Fund
10,680,500
1.59
6
Life Insurance
Corportion of India
9,959,281
1.48
7
Citigroup Global
Markets Mauritius Pvt
8,203,186
1.22
8
JP Morgan Asset
Management Europe SARL A/c Flagship Indian Investment Co Maurities Ltd
8,179,448
1.21
9
LIC of India
Money Plus
7,941,345
1.18
10
Swiss Finance
Corporation Mauritius Ltd
7,515,806
1.12
11
Government of
Singapore
7,128,885
1.06
12
Morgan Stanley
Mauritius Company Ltd
7,096,342
1.05
Total
144,617,042
21.47
The following Fund Houses sold shares
yesterday in the open market due to too much panic created by the "Media
Terrorists":
1. SWISS FINANCE
CORP MAURITIUS LTD===> Sold 7786759 shares at Rs.74.61
2. ABERDEEN INTERNATIONAL INDIA OPPORTUNITIES FUND MAURITIUS LTD===>Sold 9830811
shares of the company at Rs.43.41
3. ABERDEEN ASSET MANAGERS LTD ABERDEEN GLOBAL ASIA PACIFIC FUND===>Sold 4179064
shares at Rs.43.41
Hence it can be concluded from the above
data that Majority of Fund Houses feel that Satyam Computers Ltd will be able to
come out of the mess created by its Founder Chairman Mr. B Ramalinga Raju??!!
Moreover, Sukumar
Rajah, chief investment officer (CIO) of equity in India at Franklin Templeton
Investments, which manages $4 billion of assets in the country, said in an
e-mail, “This unfortunate development will be a short-term negative for market
sentiment,”. Still, by forcing regulators to improve oversight, the incident
“should be a Long Term Positive,” Rajah said.
According to a
well known and reputed financial web-site, developing-nation stocks are trading
near their cheapest levels in a decade after the global economic slowdown and a
slump in commodity prices sent the MSCI Emerging Markets Index down 54 percent
in 2008. In comparison, the
MSCI World Index dropped 42 percent. Shares in the
MSCI emerging-markets index trade at 8.8 times reported earnings, while
developed shares fetch 11.5 times profit. Sensex companies trade at 9.5 times
earnings.
Aberdeen Asset
Management Asia Ltd.,
Satyam’s largest
institutional investor as of September, said its investment outlook for India
hasn’t changed. Funds run by Aberdeen own at least 5.12 percent of Satyam,
according the Hyderabad-based company’s filings for the quarter ended Sept. 31.
“People will grow
a bit more dispassionate, but you can say the same for the U.S. and elsewhere,”
said
Hugh Young, managing
director at Aberdeen’s Asian unit, which manages $37.3 billion. “India has great
companies that do the right things. Hopefully this is a one off.” He declined to
say how many Satyam
shares Aberdeen holds, or
whether any were sold recently.
India’s
$1.2 trillion economy may grow 7 percent in the year ending March 31, the
slowest pace since 2003, according to government forecasts. The economy may
expand at close to that rate in the next fiscal year as the global recession
cuts exports and domestic demand wanes, Junior Industry Minister Ashwani Kumar
said in New Delhi yesterday.
To understand the
mammoth-ness of Satyam Computers Services Ltd let us take note of the following
facts: Satyam Computer Services Ltd, employs 53,000 people, operates in 65
countries and serves almost 700 companies, including 185 Fortune 500 companies.
More than half of its revenue comes from the United States.
The most encouraging news
came from www.cnn.com
which writes: "Analysts
say Satyam is ripe for a takeover, and the government is expected to submit a
formal report on the matter Thursday".
Therefore, can we construe
that those highly skilled stock market professionals, who have purchased some
shares of Satyam Computers Ltd will have a field day in the next few months??!!
However, the most horrifying part of
this event is that that cash balance that was non-existent got certified by one
of most reputed auditors in the world map, PricewaterhouseCoopers LLP.
This reputed auditor of Satyam Computers Ltd’s, declined to comment on the scandal,
according to an e-mail from the New York- based firm’s public relations adviser,
Edelman.
I had earlier discouraged
all my Paid Clients not to enter Satyam Computers Ltd, when it fell to
around Rs.179---I was anticipting something like this, from my exprience durring
the dotocm boom-bust cycle in the 1990s and early 2000. But is it time to
buy this stock at the CMP of Rs.39.95, for the short term gains??!!
Prajay Engineers Syndicate Ltd: Accumulate on all declines;
BSE Code: 531746
Face Value: Rs.10
CMP: Rs.17.70
Book Value: Rs.152.34
EPS: Rs.17.87
P/E: 0.99
Dividend: 25%
Market Cap: Rs.70.26 Cr
Buying Price:
The scrip should be bought above Rs.18.5
Company Background:
Prajay Engineers Syndicate Ltd (PESL) was promoted by Mr. Chandra Mohan Reddy.
It’s a 25 years old partnership firm converted into a public limited company in
the year 1994. It pioneers in construction activities in the twin cities of
Hyderabad-Secunderabad. Its Key developments include residential flats,
townships, shopping malls, office buildings and group housings.
The company has developed around 6.7
million square feet over the past twenty years across more than 75 projects and
a further 10.7 million square feet of land is under various stages of
development. Prajay has a significant presence in the hospitality segment also,
with three landmark ventures in the city: Prajay's luxury resort, the Celebrity
Holiday Retreat and the 30 room Celebrity Boutique Hotel (located 500 metres
away from the airport). Prajay has been the leader in identifying new locations
that are today of strategic importance, which has given it huge cost advantage.
Shareholding Pattern:
The promoters hold 16.42% while the general public holds, 83.58%. Among the
general public FIIs hold a whooping 58.78% of the shares of the company.
Shareholding belonging to the category "Public" and holding more than 1%
of the Total No.of Shares
Sl. No.
Name of the Shareholder
No. of Shares
Shares as % of Total No. of Shares
1
Copthall Maritius Investment Ltd
1,808,085
4.55
2
Goldman Sachs Investment Mauritius Ltd
852,543
2.15
3
Citigroup Global Markets (Mauritius) Pvt Ltd
2,130,796
5.37
4
ABN Amro Bank N.V. London Branch
1,518,952
3.83
5
Merrill Lynch Capital Markets Espana S.A.S.V.
1,487,223
3.75
6
Morgan Stanley Investments Mauritius Ltd
617,200
1.55
7
Swiss Finance Corporation Mauritius Ltd
1,047,459
2.64
8
S Madhuri Reddy
410,000
1.03
9
N Ravinder Reddy
2,020,100
5.09
10
Merlin Securities Ltd
5,336,134
13.44
11
GRA Finance Corprate
457,701
1.15
12
Clsa Mauritius Ltd
1,361,942
3.43
13
ABN Amro Bank N.V. London Branch
424,211
1.07
14
BSMA Ltd
760,000
1.91
15
Deutsche Securities Mauritius Ltd
2,358,893
5.94
Total
22,591,239
56.91
Financials: Though for Q2FY09, the total
income was almost flat the net profit of the company suffered due to higher
expenditure and higher depreciation, as can be seen below. The fact that the
interest cost was more or less flat comparing Q-o-Q was a good sign. Moreover,
the tax component was also less in Q2FY09, as compared to the same quarter
previous year. However, due to the downturn, the operating margin and net profit
margin took a quantum hit. However, this is going to correct in the next few
quarters, due to the fall in the price of raw materials, in the last few
quarters and also due to seasonal demand.
Standalone
Result of Prajay Engineers Syndicate Ltd
The company earns 95% of its
revenue from Real Estate and from Hospitality segment.
In March 2007 the company posted a
turnover of over Rs.2,000 million and profits of around Rs.800 million. It
achieved Rs.1,000 million turnover in one quarter.
Last year the company signed a
joint venture with Sunway Group, Malaysia
for development of residential condominiums projects in Hyderabad.
Prajay Engineers' Land bank stands
at approximately 850 acres 80% of which is in and around Hyderabad
In the last twenty years of its
existence, PESL has delivered 75 projects and developed around 6.7 million
square feet.
Investment
Rationale:
The increased demand for
residential units and commercial, office space for the IT and ITES companies
suggest that the spurt will continue for years to come. An estimated inflow of
Rs.5,508 billion investments in this sector will usher in development at a
remarkable pace.
Government thrust on
infrastructure spending has given a tremendous boost to construction sector in
terms of market size resulting in higher demand across the sector.
Prajay Engineers Syndicate's base
in the twin cities of Hyderabad
and Secunderabad offers it a myriad of opportunities in the real estate sector.
The rapidly growing IT/ITES industry in Hyderabad
has its roots in the proactive role of the state government pitching Hyderabad
as the 'Hi-Tec' city of India.
The Government's decision to
launch Bio Tech
Park and Fab City has further given a boost to technology driven growth in
Hyderabad.
The company currently has around
31 projects underway and plans to construct around 37.6 million square feet in
the next four to five years. All projects have credit Rating of A+ by FIs.
With its visionary approach and
contemporary building practices, cutting edge management discipline, Prajay is
at the forefront of imparting dynamism to infrastructure development industry.
The company is foraying into Tier
II cities of Andhra
Pradesh like Vizag and Vijaywada, by FY10.
The company want to invest around
Rs.500-600 Cr in the coming years to develop the hospitality segment; to create
1000 room capacity by 2009 in the 5 star, 4-star and the 3- star business class
categories; and to develop 31 projects including residential, commercial, retail
and hospitality projects, aggregating to around 37.57 million square feet over
the next five years.
PESL’s 100% subsidiary Prajay
Holdings, has received a commitment of FDI recently, to the tune of rupees
equivalent of US $ 36 million for one of its prime projects at Hyderabad wherein
a development of around 40 lac square ft has been planned by the company.
The company is riding high on the
real estate and infrastructure boom: it has set a target of reaching Rs.1000
crore turnover by FY10.
Future Focus:
Premium Apartments, Ultra-modern Townships, Development of Golf course,
Independent premium bungalows, Development of 3 and 5 star hotels,
Infrastructure development, Shopping Malls. These are all high volume and high
margin activities.
Conclusion:
As the
trend of spiraling growth continues, there are miles more to go, and further
milestones to achieve. With 31 planned and ongoing projects, which will
culminate into construction of around 38 million square feet and the residential
segment comprising of about 84 percent of the total area under development, the
company is expected to do well in future. The stock at the current market price
provides an investment opportunity and one should invest in it taking a call for
12-15 months horizon for at least 50% from the CMP of Rs.17.7.
Chartical
Indicators:
For the short term, buy the scrip only if it closes above Rs.18.5 on a daily
closing basis. The MACD and CCI are in perfect buy mode, while Stochastic,
Bollinger Bands, and Williams%R
are also in buy mode.
Moreover, in the Candle Stick Chart Pattern, the inverted hammer, formation
indicates that a significant decline has taken place in the stock price and the
shorts are beginning to cover their positions---a very bullish indicator.
With this Candle Stick Chart Pattern, it is imperative to watch the next day's
trading action. If the stock
opens strong and remains strong during the day, then a key Reversal is likely in
progress—a perfect time to bag the scrip.
Note:
This stock was recommended to the Paid Groups in the
Sunday Report of 30-11-08.