Great Eastern Shipping - Initiating Coverage
Friday, July 04, 2008
SBI Caps Securities has initiated coverage on Great Eastern Shipping Co Ltd with a BUY rating. GE Shipping possesses a sizeable fleet with presence in carrying crude oil, products and dry bulk segments. Great Ship India, a subsidiary of GE Shipping is aggressively scaling up its offshore fleet. It plans to expand its fleet size from 3 vessels in FY 2007 to 20 vessels by FY 2010E.GE Shipping has an exceptional track record in managing its fleet effectively thereby insulating itself from the cyclical business risks. In FY 2008 it has deployed 58 percent of its fleet in spot compared to 55 percent in FY 2007 because of the bullish freight rates in spot. Overall, Shipping industry to balloon as there is a rise in global trade.
The company is expected to report an EPS of Rs 104.40 and Rs 111.92 for FY09 and FY10 respectively. SBI Caps has set a Price target of 493 INR, which averages the price arrived through the EV/EBITDA, P/E, P/BVPS, P/NAV and M.cap/Revenue model for both global average and GE Shipping average.
DalalStreet.Biz Opinion: We are neutral on the stock and advice investors not to rush but ADD / BUY only on corrections.
Related Coverage: ABG Shipyard.
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Published by Webmaster @ 7:00 PM IST.
Indian Markets - Short Term Pain, Long Term Gain
The Indian market has corrected by a whopping 35% since the Jan-08 highs, one of the biggest drops in Asia and Emerging Markets. Inflation is at a 13-year high and fiscal deficit pressures have overshadowed fears of a US recession and a drop in global risk appetite.
Corporate performance continues to surprise on the upside, with headline growth at a robust 21%. After the recent 75bps rate hike, we do not rule out further hikes. In addition, oil payments are pressuring liquidity, and could also push up rates further.Advance tax figures were good if not superior.
The Indian market now trades at a P/E of 13.5x (P/B of 3x) for FY09E, well below an 18-year average of 15.5x and level with Asian peers.After four years of economic growth of 9%+, we expect a slowing to ~7+% going forward. Maintain focus on Large Caps and stocks with good quality earnings. Telecom, IT Services, Energy and Pharma are likely to be market-performers while Capital Goods [includes Infrastructure] and Autos will remain sluggish. Real Estate and Utilities are likely under performers.
Investors can ADD good quality stocks on Decline. We advise caution to risky sectors like Real Estate.
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Published by Komal M @ 11:11 AM IST.
DLF on a Buy Back Saga to Boost Stock Price
Thursday, July 03, 2008
DLF Ltd the company which has cheated its old investors and is not very professional in management now feels that its stock price is below its intrinsic value and wants to BUY Back its own stock. Mr. K.P.Singh, welcome to the real world - Dalal Street. On Dalal Street, only folks who create wealth and who help the nation grow its economy have respect, not Land Lords who just want to make money by virtue of Land Holdings. On this street everybody knows how Realtors made money and hence this carnage on your stock.
Considering minimum requirement of 10% to stay listed, the company can buy 1.8%, which on the current market cap implies ~Rs 1,800 crore outgo. It has March 08 net gearing of 50% (Rs ~10,000 cr net debt). The company plans to fund the buyback using internal accruals, which is quite feasible.
However, as per company law, we believe that DLF will be constrained from issuing fresh equity for a period of six months (from the closure date of the buyback).
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Published by Webmaster @ 7:44 PM IST.
Year to Date Performance of Indian Indices
Wednesday, July 02, 2008
The markets have crashed as if there is no tomorrow. The Government which failed to curb inflation and Industrial lobbies [Iron, Cement etc] is continuing with the Nuclear deal saga forcing political instability and a havoc in the Indian markets. The worst performing sectors on Indian bourses are Real Estate, Power, Small Caps and Capital Goods. Healthcare, FMCG and IT have come to aid the defensive investors. Here is a YTD performance of Various Indices. | Index | 01/01/08 | 27-06-2008 | % Chg |
| Realty Index | 13037.89 | 4875.25 | -62.61 |
| Power Index | 4647.66 | 2335.26 | -49.75 |
| Smallcap Index | 13703.07 | 6938.07 | -49.37 |
| Capital Goods | 19747.8 | 10442.14 | -47.12 |
| Consumer Durable | 6897.19 | 3649.33 | -47.09 |
| Bankex | 11510.31 | 6125.95 | -46.78 |
| PSU | 10633.48 | 5821.62 | -45.25 |
| Midcap Index | 9935.03 | 5558.75 | -44.05 |
| BSE 500 | 8660.63 | 5367.19 | -38.03 |
| BSE 200 | 2672.81 | 1691.44 | -36.72 |
| BSE 100 | 11206.64 | 7228.84 | -35.5 |
| Auto | 5716.49 | 3689.92 | -35.45 |
| Metal | 20061.49 | 13292.45 | -33.74 |
| S&P CNX NIFTY | 6144.35 | 4136.65 | -32.68 |
| Sensitive Index | 20300.71 | 13802.22 | -32.01 |
| Oil & Gas | 13280.88 | 9387.63 | -29.31 |
| Tech | 3973.32 | 3093.63 | -22.14 |
| FMCG Sector | 2375.07 | 2073.15 | -12.71 |
| IT | 4471.48 | 4004.75 | -10.44 |
| Healthcare Sector | 4411.54 | 4150.05 | -5.93 |
You can also see the list of stocks that have lost value between 20% to 95%.
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Published by Webmaster @ 10:17 AM IST.
Caution on Indian Banks - Morgan Stanley
Thursday, June 26, 2008
According to Morgan Stanley, India has the worst macro among Asian countries right now - implying significant probability of tightening. This move is clearly bad for banks - the question is how bad. In Morgan's view, it's very bad - don't be surprised if banks correct by another 25-30% from current levels, even after they have declined 30-50% YTD.
Banks earnings will be hit by slower volume growth, weaker NIMs and deterioration in credit quality. The hike in rates will impact individuals and as well as corporate profitability, which will probably cause further deterioration in asset quality. PSU Banks will book MTM losses on their bond portfolio, given that 10-year G-sec yield that have already moved around 60-70bps since Mar-08 and will increase further given RBI's latest move.
Indian Banks and their forward P/E [FY-2009 E] is recorded as below.
HDFC 23.6
Kotak Bank 21.5
HDFC Bank 19.9
Reliance Capital 19.9
Axis Bank 18.8
ICICI Bank 16.7
IDFC 16.3
SBI 11.9
IDBI 7.6
PNB 5.8
BOI 5.6
Corp Bank 4.7
Bank Of Baroda 4.6
Canara Bank3.8
OBC 3.1
Dalal Street Opinion: One can accumulate PSU Banks with really long term horizon [5-10 years] as they are profit making and dividend declaring companies. Their full vaule will be unlocked within the next decade.
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Published by Sunil K @ 7:22 PM IST.
How to Calculate SENSEX Earnings / EPS ?
Wednesday, June 25, 2008
Many have always wondered how to calculate the Earnings / EPS of Bombay Stock Exchange's 30 stocks benchmark Index - the SENSEX. It is a very easy and the process is highlighted below.The EPS of Sensex is the sum of all the individual companies EPSs considered on a pro-rata basis on the available floating stock of the company.
Lets analyze what does this mean, First, have the list of 30 companies which constitute the SENSEX in a spreadsheet. Or download the spreadsheet from BSEIndia.com. Now, all you need to do is get individual EPS of each company independently. This EPS must be taken on a pro-rata basis depending on the availability of the free float for calculating the BSE Sensex EPS. (i.e non-promoter holding, it is readily given by BSEIndia) Make another column in your spreadsheet and multiply the EPS the company reported by the Adjustment Factor.
For example, lets consider ACC. ACC reported an EPS of Rs 72.70 for FY-2008. The Adjustment Factor for ACC is 0.60, means 60% of ACCs stock is free floating stock [or non-promoter non-locked in stock] Multiplying 72.70 * 0.60 = Rs 43.62 is ACCs contribution to SENSEX EPS.
We are attaching the Spreadhseet for your ready reference which you can download and use it in every way you want to. Kindly feel free to post any questions you have in mind.
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Published by Webmaster @ 4:38 PM IST.
Indian Party Spolied for Sure, But Not Over
Thursday, June 19, 2008
In a somewhat bold report written by Citigroup Economists, they are of the view that the Indian Party Sp'OIL'ed for Sure, But It's Not Over [Reason OIL].
The 40% rise in oil prices since Jan 2008 is key to the direction change seen across all macro variables in India. The pressure could ease a bit from FY10 as new hydrocarbon discoveries come onstream.
Surprising but true - in terms of transport fuels, the Indian consumer is not as subsidized as is generally thought…high taxes are the culprit.
Citi has maintained GDP estimates at 7.7% for FY09 ; but lowered for FY10 from 8.3% to 7.9%. The Rupee likely to remain weak in the near term and with inflation to remain high, Citi sees further monetary tightening in coming months.
Including all the off-balance sheet items as well as the state deficits, India's combined deficit would come in close to 9% of GDP. This is an area to worry about.
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Published by Webmaster @ 12:44 AM IST.
Emco + Crompton Greaves to Transform your Portfolio
Wednesday, June 18, 2008
Investors can consider Holding or Adding Emco and Crompton Greaves to transform their portfolio.Emco:
Emco has posted a healthy net sales growth of 36% YoY to Rs 3.4bn for Q4FY08 and 44% to Rs 9.4bn for the full fiscal. Project division revenues have picked up pace during H2FY08, contributing 30% of net sales for the fiscal. The management expects an even higher revenue share from this division in FY09, at 45%. Emco's order book stands at Rs 11bn, which is 1.2x FY08 sales. The healthy order backlog and bright outlook for the project division indicate good revenue flows over the next two years.
EBITDA margins moved up by 155bps during Q4FY08 to 14.2% and by 50bps for FY08 to 13.7% on strict cost control measures. Expect margins to dip slightly to 13.4% in FY09 given the higher share of project division revenues, which earn lower margins than transformers.
EMCO is expcted to report a fully diluted EPS of Rs 14.7 and Rs 18.9 for FY09 and FY10 respectively. On a DCF model, one can expect EMCO stock to trade at Rs 240 in 9 months.
Crompton Greaves:
Crompton's power division revenue growth slowed down to 13% in FY08 after growing at a 33% cagr over previous three years. Management attributed this slowdown to a fire in one of the power transformer plants and implementation of more stringent quality standards at its domestic factories.
Margins for power business are expected to be 50-75 bps lower than FY08 due to the sharp increase in steel prices. Management expects margins for Industrial and Consumer division to be stable. For the overseas business the management expects margins to improve by 1-1.5% in FY09.
In Q4 FY08, order booking has been slow. However, enquiries have been strong in recent months so there is no slowdown expected in the next 18 months or so. Finally, at the recently concluded investors meet, the management expressed confidence of maintaining 25-27% revenue growth for the power business and 14-22% growth for the Consumer and Industry divisions over next few years.
On a consolidated basis Crompton is expected to report an EPS of Rs 13.2 and Rs 18.1 for FY09 and FY10 respectively. CLSA has a BUY on Crompton with a price Target of Rs 333.
Oue View: Existing investors can hold. Fresh positions can be taken around Rs 230 levels.
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Published by Sunil K @ 10:34 AM IST.
United Spirits - Mallya running out of spirit
Monday, June 16, 2008
After the pathetic loss of Royal Challengers in IPL, it seems like Vijay Mallya is running out of spirits. [J/K] What is really haunting Mallya is higher price of molasses. Industry sources indicate continuing molasses price run up led by lower sugar production and growing demand for ethanol. Merill estimates molasses to be in sharp deficit versus surplus over the last two years and FY09 price to rise ~36% vs 25% earlier.United Spirits [US] margins will reverse their impressive expansion of past three years and decline by 80bps in FY09. Synergy benefits from SWC integration have likely maxed out and UNSP does not have pricing power in 2/3rd of its Govt. controlled markets to counter rising molasses prices.
India has adopted a bio-fuel policy according to which 5% blending of molasses produced ethanol with fuel is permitted. This limit for mixing of ethanol in fuel is going to be raised from 5% to 10% from 1st Oct’08. This would generate a significant demand on molasses which is used to manufacture ethanol.
The stock has corrected 31% from its peak in January. It is now trading at P/E of 27xFY09E EPS and ~70% premium to the Sensex. Merill estimates US to report an EPS of Rs 43.20 and Rs 55.7 for FY09 and FY10 respectively. Merill has cut the price target on United Spirits to Rs 1,350 with an UNDERPERFORM rating on the stock.
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Published by Komal M @ 11:46 AM IST.
Jyoti Structures + KEC International - Transmission Tower Business Outlook
Sunday, June 15, 2008
The Outlook for Tower and related business remains positive in medium to long term even though the sector saw their margins come down YoY due to cost inflation leading to higher raw material cost. KEC International and Jyoti Structures are two favorites in this sector.KEC International:
The merger of RPG Transmission and NITEL will lead to higher efficiency and will enhance operational and financial capability of KEC. The recent quarterly performance of KEC clearly demonstrates this fact.
Current order book of KEC stands at Rs 50 bn, which is 1.75 times of the FY08 revenue. The total turnover would grow at a CAGR of 28% for FY08-FY10E. The government is planning to go for tendering of 40000 telecom towers under USO fund to role out telecom network in the rural areas. With KEC planning to make a big entry here we expect the growth in revenue in Telecom Towers for the company would remain at 40% CAGR during FY08-FY10E.
On a consolidated basis expect a 25% CAGR in revenue and 21% CAGR in net profit for KEC over FY08-FY10E. EPS for FY09 is expected to be Rs 41.4 and Rs 51.2 for FY10. One can ADD KEC based on 8x EV/EBIDTA for FY10E with a 12 month price target of Rs 685. At the Target price the stock would trade, at 17x and 13.4x to FY09E and FY10E EPS estimates.
Jyoti Structures:
Jyoti Structures (JSL), one of the key players in the Transmission & Distribution space. JSL is amongst the top 3 players in India and has a strong management with proven execution skills.
JSL stands to gain the most from the Private sector Power business. JSL's domestic order book stands at Rs 2652 crore with around Rs 1800 crore orders from the transmission line towers projects. Around 2/3rd of the transmission line tower projects orders are in the 400 KV lines and around 40% of the rest in the 765 range KV lines.
The 70% South African subsidiary of JSL has also witnessed a good move in winning substantial orders in a short time span. Currently this subsidiary has a total orders to the tune of USD 110 mn which are to be executed in the next one and half year's time.
JSL is expected to report a modest EPS growth of 17% for FY09 to Rs 10.53 and for FY10 32% to Rs 14.00. Existing investors can hold to the stock. Fresh Additions can be considered with a 12 month price target of Rs 190.
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Published by Komal M @ 11:16 AM IST.