What's in my portfolio
- Tamilnadu Newspaper
- Parsvnath Developers
- UTV Software
- Zee News
- Triveni Engineering
- Deep Industries
- Pantaloon Retail
- Tata Steel
- Mphasis
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Saturday 4 August 2007
Monthly call
Canara Bank
Current Market price: 257
Target 1: 291
Target 2: 308
Canara Bank is the second largest PSU bank after SBI with a business size of Rs 240,886 crore. It has a network of 2,400 branches. The bank has recorded strong and consistent growth over the past five years, with RoE in the 16-17% range. It has also maintained rapid loan growth, which has traditionally been above industry average. After SBI, it is among those best positioned to participate in relatively large capex-related funding.
Past Performance:- It reported 2.9% net interest margin (NIM) for FY07, a slight dip from 3.01% for FY06. Its FY07 loan book grew 24% y-o-y to Rs 98,505 crore and deposits grew 22% y-o-y to Rs 142,381 crore.
Future expectations:-
I expect advances to grow 20-22% in FY08 with margins expected to be maintained. FY07 PAT jumped 5.7% to Rs 1,420 crore from Rs 1,382 crore. At the current price of Rs 257.55, the stock trades at attractive pricing.
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Six Month Call
TNPL
Current Market price: 101
Target 1: 141
Target 2: 153
Current Quote of TNPL
TNPL's cost reduction initiatives, especially in raw material, power and chemical costs (through shifting from conventional bleaching to elemental chlorinefree bleaching) and shift toward higher realisation product mix will help it sustain margins at higher levels despite input cost pressures. I expect these initiatives would result in operating margins increasing by 400 bps from 21% in FY06 to 25% in Y08E.TNPL's cost reduction initiatives, especially in raw material, power and chemical costs (through shifting from conventional bleaching to elemental chlorinefree bleaching) and shift toward higher realisation product mix will help it sustain margins at higher
levels despite input cost pressures. I expect these initiatives would result in operating margins increasing by 400 bps from 21% in
FY06 to 25% in FY08E.
Also due to a conscious shift in the product mix, I expect the company to see an impressive growth in sales revenue, increasing at a CAGR of 5% over FY06-08E to Rs 930 crore from Rs 849 crore. Over the years, TNPL has reduced newsprint production in wake of rising imports and has shifted focus on copier paper. This shift has increased the average per tonne realization by 7% over FY06- 08E. Due to a conscious shift in the product mix, I expect the company to see an impressive growth in sales revenue, increasing at a CAGR of 5% over FY06-08E to Rs 930 crore from Rs 849 crore. Over the years, TNPL has reduced newsprint production in wake of rising imports and has shifted focus on copier paper. This shift has increased the average per tonne realization by 7% over FY06-08E.
The target price for this stock is 141 and 153 respectively with a strong buy call from my side.
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Target-A-Year
UTV Software
Current Market price: 452
Target 1: 670
Target 2: 730
Current Quote of UTV Software
UTV Software has reported a revenue growth of 7% at Rs 560 million, EBITDA growth of 162% at Rs 118m and PAT growth of 165% at Rs91m. The growth comes on the back of 20% growth in the television business (content and airtime sales) and Rs 208 million of revenues contributed by interactive business (including recently acquired gaming companies – Ignition, UK and Indiagames). Filmed entertainment business has reported revenues of Rs101m in Q1FY08 (63% decline), as UTV is yet to monetize its recently released movies (Life in a Metro, The Namesake and I Think I love my wife). UTV is emerging into an exciting media model with presence in filmed entertainment, gaming, broadcasting, television content, animations etc. With a view to fund its filmed entertainment operations, UTV has raised USD 70m through AIM listing (valuing the entity at over USD300m) and has lined up 8-10 release a year including co-productions with likes of M Shyamalan, Will Smith, Mira Nair, etc.
UTV's broadcast operations is expected to go underway in August, as UTV launches its youth based GEC – Bindass (in JV with Astro Broadcast), and builds up team for its planned variety and specialty channels. UTV is also scouting for strategic tie ups for its various broadcast channel. UTV has charted out aggressive growth plans in each of the business segments and UTV's fund raising plans in each of the operations would open up opportunity of value unlocking. UTV is attractively valued at current market capitalization of ~USD300m. As per my expectation this pick is an outperformer and will tend to benefit shareholders in long run.
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Next IPO
TAKE Solutions Limited
TAKE Solutions (TSL) the Chennai-based company came out with an initial public offer (IPO) to mop-up upto Rs 1,533 million to fund the company`s expansion plans. TSL planned to float 2.1 million shares at a price band in the range of Rs 675- 730. The issue is open for subscription till August 7.
The issue will constitute 17.50% of the fully diluted post issue paid up equity capital of the company. The book running lead manager to the issue is Edelweiss Capital.
Shares of the company will list on both BSE and NSE.
Company Profile
Incorporated in 2000, TAKE Solutions is an international business technology company with domain expertise to provide supply chain management and life science solutions. TSL product portfolio includes 16 active products in the supply chain management and 6 products in the life science. TSL has completed more than 2,500 software installations for over 250 customers ranging in size from multinational enterprises to medium- and smaller-sized companies. TSL operates its global operations with help of 8 subsidiaries around the world.
Objective of the Issue
TSL plans to utilise the issue proceeds for acquisition of companies engaged in same business in India and/or abroad to enhance the geographic reach. In addition, TSL will invest funds into product development & expansion of domestic infrastructure facilities, refund debt facilities utilized for acquisitions of US based ClearOrbit and prepayment of term loan.
Financials
TSL presented outstanding financial performance during fiscal 2007. TSL on consolidated basis, registered a robust earnings growth of 3.28 times in fiscal 2007 to Rs 316.37 million over fiscal 2006, supported by strong revenue growth. During the fiscal 2007, TSL reported a revenue growth of 3.79 times to Rs 1,828.29 million over fiscal 2006. On the contrary, the operating margin of TSL slipped to 25.26% in fiscal 2007, a decline of 737 basis points over fiscal 2006.
Valuation
TSL offered the shares at P/E multiple of 19.26x to 20.84x at floor and cap price respectively, as against its peers Sasken Communication Technologies and Subex Azure, which are trading at P/E multiple of about 39x and 101.7x respectively. On the other hand, shares of TSL are available in the range of 7.63 to 8.25 times of net asset value at floor and cap price respectively. Among the other factors, TSL`s niche position in supply chain management and life sciences segment combined with large product bank with low ownership costs are expected to strengthen the position of TSL in future.
Considering the above factors, the issue of TSL seems to be underpriced with a potential to provide short term gains, subject to favourable market conditions.
My Expectation
In usual scenario this IPO must be hitting 1000 on the listing day. And it may go upto 1150 in a month.
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Grey market Premium
Alpa Labs - (On Discount. The IPO was poorly subscribed.)
Omaxe - Rs 110.
Omnitech Info - Rs 115.
Zylog - Rs 310.
IVR Prime Urban - Rs 12.
Central Bank - Rs 38.
SEL - Rs 16.
Asian Granito India - Rs 18.
Purvankara - Rs 40.
Refex - Rs 18.
Take Solutions - Rs 275.
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Recent Happenings
Sensex loses 700+ points or 4.5% after hitting a new high at 15868.
Global stocks indices plunge on US credit woes.
Cement companies under MRTPC scanner for increasing cement prices.
Declared quarterly results indicate lowest growth in five quarters.
Market Turnover crosses Rs.1 trillion mark on the last day of settlement.
Inflation up at 4.41% against 4.27% in the previous week.
RBI quarterly review scheduled for the next week.
Govt wraps Indo-US nuclear deal.
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Major losers of the past week
1. SBI : Double Top at 1620, breaks the rising channel with a falling gap
2. HDFC : Double Top at 2045 confirms below 1898. but rising channel is breaking
3. RPL : Potential H & S top formation broke the neckline
4. Cairns Indiia : H & S top formation achieves its minimum target
5. IVRCL Infrastructure : H & S top formation achieves its minimum target
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Grey Market Premium (Updated)
Alpa Labs - (On Discount. The IPO was poorly subscribed.)
Omaxe - Rs 110.
Omnitech Info - Rs 115.
Zylog - Rs 310.
IVR Prime Urban - Rs 12.
Central Bank - Rs 38.
SEL - Rs 16.
Asian Granito India - Rs 18.
Purvankara - Rs 40.
Refex - Rs 18.
Take Solutions - Rs 275.
Learn the basics: http://knowmarket.blogspot.com/
Friday 3 August 2007
Buy IVRCL Infra below 380
IVRCL continued its splendid performance in Q1FY08 with a growth of over 55% to its topline as well as bottomline. The company als o added over Rs21 billion to its order backlog which currently stands at Rs 95 bn. The company had raised over Rs5.5 bn through the QIP route during FY07 which would help the company meet its funding requirement for various BOT projects and meet the working capital requirement. The Company has also recently successfully launched the IPO of its real estate subsidiary IVR-PUDL and has raised over Rs 7.8 bn from the same. We believe that the company's growth trajectory will continue in future and the pace of order accretion provides added visibility. We recommend a buy for this with a view of 9-12 month with a target price of 510.
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