Which 3 stocks is Ashish Chugh betting on?

Bombay Burmah

This is a stock which is not just a value play as far the core business is concerned but also provides margin of safety in terms of investments which it holds. There is also a possibility of unlocking in some of these investments. This company is a part of the Nusli Wadia group.

It is a 150-year old company and it is probably one of the oldest listed companies on the bourses. It is a diversified company. I would call it the jack of all and master of none who is into tea, coffee, auto ancillary, dental products and laminated products.

As far as their tea and coffee business is concerned, the tea plantations are spread about 2,800 hectares, mostly in the state of Tamil Nadu which comprises of nine estates and seven tea factories which together produce about 10 million kg of tea every year. They also have estates in Tanzania.

The coffee plantation is mainly in the Coorg district of Karnataka. The company has rubber plantations in Indonesia and is also developing property in Kanjurmarg in Mumbai and Coimbatore.

Britannia Industries Limited is a 51% subsidiary of Bombay Burmah. Last year, Bombay Burmah utilized its cash to buy over the stake of Groupe Danone when the exited Britannia Industries and by virtue of which today it holds about 51% through subsidiaries and subsidiaries of subsidiaries which translates into a value of close to Rs 2,500 crore because Britannia has a marketcap of close to Rs 4,800 crore. They also hold about 15% of Bombay Dyeing which is valued at close to Rs 300 crore.

So they have a complex structure of subsidiaries and various subsidiaries of that subsidiary. For FY10 this company recorded an EPS of close to Rs 26. Since it’s more than a 100-year old company, all the assets which are there in the books of the company are valued at historical basis. The value today maybe much more than what is getting reflected in the books of accounts.

Tomorrow, if Mr Wadia decides to give Ness and Jeh their separate spaces, there could be major restructuring and untangling of the complex structure which is currently there in Bombay Burmah which may lead to value unlocking. They also hold a small stake in GoAir whether there is a possibility of value unlocking. Whether these things happen or not, is anybody’s guess. In spite of this, given the price of Rs 380-385 the stock is a great value buy.

--

Tata Global Beverages

This is a company which has evolved from an Indian tea farming company to a global beverages company, having a number of brands and focused towards marketing of those brands. The brands which are owned by the company and the group include Tata Tea which is a super brand in India. Besides this, they have Tetley which is present in almost 70 countries and has a market leadership in UK and Canada.

Good Earth is a leader in herbal tea and specialty teas in the US. The other brands of the group are Tata Coffee, Eight O'Clock Coffee which is one for the best selling whole bean coffee in the US. They also have Himalaya Water which is under Mount Everest Mineral water.

Over a period of time, since the Tata Group has changed the name from Tata Tea to Tata Global Beverages, Mr Ratan Tata has indicated that all the beverage business of the group maybe consolidated into Tata Global Beverages, which means that in future you may see a merger of Tata Coffee and Mount Everest Mineral Water into Tata Global Beverages.

The balance Sheet of the company became healthy in 2007 after it sold Glaceau stake to Coca Cola for about USD 1.2 billion and made a profit of close to USD 525 million which translates into a profit of about Rs 2,300-2,400 crore. This infused a lot of cash into the company and the company’s balance sheet became much healthier. Today, the company has cash of close to Rs 2,000 crore. It has got a debt of close to Rs 1,700 crore but the cash in the balance sheet will provide the armour for future expansion of the company.

Mr Ratan Tata’s vision is to make this company into a reckoning player in the global beverage business. In the future we may see the Tata Group introducing a number of healthy drinks like lassi, nimbu pani, cold coffee, iced tea etc into the folder of Tata Global Beverages. Besides this the water business has immense potential.

With regards to valuation, this company has a marketcap of less than Rs 7,000 crore. The sale of the company is almost about Rs 6,500-7,000 crore which means it is available at one time of sales. If you look at other FMCG companies including HLL, Nestle, ITC etc these companies are trading at between 4-7 times of their sales.

Here the perception is that it is a commodity company but over the years it has successfully transformed from a commodity to a marketing and FMCG company. Over a period of time this stock will witness a re-rating and it may be valued at almost the same level as the peer group. Besides that, the company has aggressive plans over the next five-years which may see the turnover becoming 2-3 times from these levels.

Tetley, itself may have a valuation of more than Rs 7,000 crore. This is one of those stocks for an institutional investor or for an investor who doesn’t want to take a risk with small and midcaps. In the largecap space, you have this company which is a value play and it trades at much lower than the peer group. This is a company where you can witness growth to come in the future.

--

Sankhya Infotech

This is one stock for very high risk kinds of investors because these are companies where you can loose the entire capital. Investors should keep that in mind. This company may become a dark horse. There are a few interesting developments which have taken place in the company in the last few months.

In the month of April, HPL Power System bought a 10% stake in this company through market purchases at a price of close to Rs 39. One of the promoters of HPL is Kavita Prasad, who is the daughter of the main promoter of HPL Power Systems. She has joined in as a Director of Sankhya Infotech.

The promoters have also recently allotted about 15 lakh warrants to themselves at a Sebi determined price, which I believe in their case will be close to Rs 30. Against the buying price of Rs 40 HPL Power and Rs 30 at which the promoters are increasing their stake in the company, the stock is currently available at Rs 21-22 which is close to its 52-week low.

Looking at the business of Sankhya Infotech, this is a company which is into a number of domains like e-learning development. They make simulators for the defence segment. The company also caters to the aviation segment and has a number of leaders in aviation like Kingfisher, Emirates, Air France and Boeing as its customers.

As per the latest balance sheet, this company has got an order book which is close to Rs 100 crore. They got listed in 2000 and since then it has been making profits at net level. In FY07 this company made a profit of Rs 7 crore, FY08 Rs 9 crore, FY09 Rs 4.5 crore and in FY10 it made a profit of Rs 2.5 crore. The profit got impacted because of demand from the income tax authorities of about Rs 7 crore which the company appealed against won.

In future you may see the company focusing more on defence and defence related projects, since HPL has a strong position in the defence segment. Against the book value of Rs 60, the stock is available at about Rs 22 and it is available at close to its 52-week low. They have been making profits at net level since the beginning. So this is a stock for high risk investors but at the current price it may be worth the risk.

Buy AXIS Bank for Long Term

AT FIRST glance, the deal between Axis bank and Enam Securities appears very expensive,
considering that the bank is paying nearly 16 times Enam's annualized FY11 profit before
tax (PBT). However, given Enam's major strengths in the investment banking and
institutional broking business and higher profitability compared to its peers, the deal should
pay off for Axis bank in the long term.
The acquisition would enable Axis Bank to enter the league of one-stop-shop financial
institutions, currently dominated by ICICI Bank and HDFC Bank. For Axis Bank's
shareholders, earnings upside following the deal will be limited in the short run, given the
bank's much bigger balance sheet size. But the deal fills in the strategic gap in the bank's
service offerings.
While the deal appears to be on the expensive side, it needs to be noted that it is purely
stock based, which means no cash will change hands. This also means Enam's promoters
would hold on to the equity of Axis Bank for at least one year. Given this restriction and the
recent volatility in stock markets, it is perhaps appropriate that Enam has managed to
attract a premium valuation.
For instance, Enam's closest peer Edelweiss Capital trades at over 12 times its annualized
FY11 PBT. Compared to this, Enam's valuation seems way high. But in the event of a further
decline in emerging stock markets, Axis Bank's stock price may also slide, going forward.
Assuming that it declines by over 10%, Enam's valuations would come in line with those of
its peers.
Another compelling factor is Enam's operations are yielding far superior margins at over
40% compared to 25-30% margins of its peers. Axis Bank would also get access to Enam's
experienced team, which includes over 400 professionals. This is crucial since the
investment banking business is purely relationship driven.
One concern for Axis Bank is the duplication of services. A few analysts point out that the
bank already has an investment banking licence and a broking subsidiary. Given this, it will
be critical to see how well the bank identifies synergies with Enam's acquired operations.
As part of the deal, the bank would issue fresh equity to Enam's promoters, which would
form over 3.3% of the enlarged equity base, post deal. The resulting dilution in the bank's
earnings per share in the short term would be less than 0.5%, which need not stoke
concerns. The bank has most of its fundamentals in place with a healthy growth in the loan
book and a robust asset quality. Its current stock price is 3.4 times its book value, lower
compared to HDFC Bank's 4.7. The bank's stock might see a small dip in the near term,
given the market's perception of steeper valuation of Enam. However, the valuations would
be justified once the acquired businesses start contributing to the bottom-line.

trading calls on wealthsec blog

Top Picks - Fundamental

PTC India Ltd (PTCIND)
CMP - 120
Target - 180

Bajaj Holdings & Investments Ltd (BAJHOL)
CMP - 858
Target - 1182

Shiv-Vani Oil & Gas (SHIOIL)
CMP - 404
Target - 525


Top Picks - Technical

Karnataka Bank Ltd (KARBAN)
CMP – 164.9
Time Horizon - 1 Month
Target - 181.3

Aban Offshore Ltd (ABAOFF)
CMP – 695.5
Time Horizon - 1 Month
Target - 750

Neyveli Lignite Corporation Ltd (NEYLIG)
CMP – 130
Time Horizon - 1 Month
Target - 145

Bajaj Finance Q2 PAT up 143% at 52.8 crore

Buoyed by a strong volume growth in consumer and SME business lines, Bajaj Finance Ltd reported a 143 per cent jump in its PAT for the second quarter ending September 30, 2010, at Rs. 52.8 crore as against Rs. 21.69 crore in the year-ago period.

Total income surged 49 per cent at Rs. 326.4 crore from Rs. 219.7 crore in the year-ago period, according to a company statemnet.

Deployments to the consumer durables witnessed a 58 per cent increase during the quarter at Rs. 401 crore as against Rs. 211 crore in the year-ago period while small and medium enterprise business lines saw a 71 per cent jump in deployments at Rs. 251 crore as against Rs. 157 crore in the year-ago period.

In two-wheelers, the company's deployment stood at Rs. 472 crore in during the second quarter as against Rs. 312 crore in the year-ago period, up 74 per cent.

The company's customer-base increased from 1,93,075 to 3,17,398 while total deployment rose 112 per cent to Rs. 2,128 crore from Rs. 1,003 crore in the year-ago period.

Loan loss and provisions were Rs. 61.5 crore (including Rs. 19.4 crore of one-time accelerated provision in Q2FY11 as against Rs. 58.5 crore in the correponding period of the previous fiscal. Adjusted for this accelerated provision, loan loss and provisions would have been Rs. 42.1 crore.

The company's capital adequacy ratio, including tier-II capital and excluding current year's profits stood at 21 per cent.

The company's NPA provision coverage ratio as at September 2010 stood at 75 per cent.

SAIL achieves best ever Q 2 sales

The July-September quarter of 2010 has been the best-ever Q2 for Steel Authority Of India with sales of 3.17 million tonnes (MT) achieved during the period, sources in Rourkela Steel Plant said Saturday.

In comparison to sales in Q1 SAIL achieved a growth of 30 percent. The previous best Q2 in respect of sales was 3.08 MT achieved in 2009-10, they said.

During this year's Q2 SAIL sold 8.5 lakh tonnes of special and value-added steel products, showing a growth of 10.1 percent over the corresponding period last year. Special steel constituted 30 percent of the total domestic sales achieved in Q2.

Sales growth in Q2 was mainly due to higher intake by construction and manufacturing sectors. This was reflected in higher sales of products such as wife rods, rounds and bars, structurals, CR sheets/coils and galvanised items, the sources added.

Career Point Infosystems, debutes 104% up

Tutorial services provider Career Point Infosystems which listed today has registered a massive gain of 104%, or Rs 322.35 to close at Rs 632.35 on the BSE. It listed at Rs 461.10 as against issue price of Rs 310. The company raised Rs 115 crore through the issue, which opened for subscription during September 16-21, 2010. It was subscribed 47.39 times. Career Point's market capitalisation stands at Rs 1,146.64 crore.

The company intends to use issue proceeds for construction and development of an integrated campus facility; expansion of classroom infrastructure and office facility; acquisitions and other strategic initiatives; and to meet expenses towards general corporate purposes.

In an exclusive interview Pramod Maheshwari, CMD and CEO of Career Point today said that the company will continue to grow at its historical run-rate of 25% year-on-year. He said in terms of the revenues, the company would end the current fiscal with Rs 80-85 crore. He is also hopeful that the company would post Rs 25 crore in profits for the fiscal. He added that Career Point would be adding facilities for about 2,000 students as part of its capacity expansion plans in FY12.

Join the rally...

One of the TV Channel spoke to Radhika Gupta, Director, Forefront Capital Management for her fundamental view and Hemen Kapadia of chartpundit.com for his technical view on various stocks and sectors.

Here are the expert views on various stocks/sector:


On Sesa Goa
Gupta is positive on the stock. “We are bullish on Sesa Goa and I think it’s a sector and a stock to be invested in for the long term if the investor has that kind of horizon. We are very bullish on the commodity space and on the metal space within that so we read that as a positive development and within that space Sesa Goa has consistently been in a favorable position so bullish on the stock overall.”

Kapadia is in sync with Gupta on this one. He says, “The stock looks good. We had a protracted decline. We are out of that, it’s stabilized and now it’s looking good. I would have a buy on the stock. It looks good from a medium to longer-term point of view.”


On Bharti Airtel
Gupta says if you have a longer-term horizon on telecom and Bharti then it’s not such a bad space to be in. She says, “We were fairly bearish on telecom but now we have become a little more neutral on the sector and Bharti is the best bet within the telecom sector. It has the highest growing market share, a good outlook ahead with the Zain deal that they have strong operations, but you need to have a longer term outlook in Bharti, maybe a year or two years to really reap the benefits. In the shorter-term we would be little bearish or neutral.” She also adds that she doesn’t see a major recovery coming back into the sector or into Bharti in the three-six months horizon. She says if the investor is looking at a shorter-term, he should probably exit and deploy that investment into more attractive sectors so like power, auto’s or pharma, something where he will see a shorter term gain.

Kapadia agrees with Radhika’s viewpoint. He says, “It’s going to take a long time. We have moved from Rs 260 to Rs 380 almost. I have a hold on the stock because it’s a technical weakness but it is getting heavy. The upside is getting tightly capped so six months I am not sure. Stock doesn’t look bad but the cream has been lost. We could be just walking into a correction, not yet but we are probably on the anvil of walking into a correction and that could take a few months or so.” He says to hold the stock and needs to extend his time horizon from six months to about two years or more.


On auto space:
Gupta says, “I think that perspective on Maruti is that while auto is growing sector, Maruti has seen fair amount of strong volume growth. If the investor has to be in the auto sector there are other individual names within autos where he is likely to see better growth in the prices because Maruti while the topline has been good because of the royalty payments, the bottomline has been hit and is likely to continue being hit. So, something like a Tata Motors or even a Mahindra and Mahindra in the similar space are probably more attractive investments.

On Maruti Suzuki:
Kapadia says, “I think the auto sector looks good, but I think most of the stocks have had run ups, no exceptions there. But I think Maruti will be a hold. I am not sure of the investor’s idea of selling now and buying back later can be practically implemented. Sounds good, but sometimes you could miss out on stocks in markets like these. So, yes, Maruti have moved up for seven weeks in a row. Its ripe for a correction, its overdue, it’s likely overbought. But since the investor has got a longer term investment outlook, I think it we will have a hold on Maruti. Maruti is in a longer term uptrend and we have just finished a 14 month-12 month correction so to speak and we will be back on track again. So, longer term point of view I would have a hold. Shorter to medium-term yes Maruti is probably susceptible to a correction.”


On Tata Steel
Gupta is bullish on the metal space. She adds, “We like the metals and within that the steel space as a whole. Tata Steel is actually one of the strongest plays within that space. Given the companies focus on cleaning up its balance sheet, managing debt, the news that we have seen coming out of Corus, management’s ability to execute over the last couple of years, in general Tata Steel is on very strong footing within this space.”

Kapadia finds Tata Steel a good bet in the long-term. He says, “We are back with a longer-term uptrend but currently the stock has moved from Rs 490 to Rs 680 in eight weeks or so and it’s also overbought. Maybe there is still some more upside till Rs 700 but if I were to buy for the slightly longer-term I will wait till it comes down to Rs 640 or below. I would avoid buying it at current levels because it’s had a run-up, so we could be walking into a correction which is probably overdue for the market as well as for Tata Steel.”

On Kalyani Steel
Kapadia finds Kalyani Steel an interesting stock. The company underwent some restructuring, so the charts have been slightly twisted but currently they are in the last stages of what is possibly an eight-nine week intermediate correction. He says, “Very strong support comes in at around Rs 130, I think downside appears limited, it seems to be setting the stage for an up move. Once this correction gets over, this could end in the next week or two, if not the next couple of weeks. That would set the stage for resumption of its intermediate uptrend and frankly speaking I would stick my neck out and say we are setting a stage for a 20-25% move in the next three months or so.”

On IT sector
According to Gupta this is probably a good time to exit most of the IT names. “We are pretty bearish on software as a pack. Couple of reasons, 1) rupee fluctuation will hurt them; 2) rising employee cost have been a problem for most of these software names and 3) then most of them are trading at fairly rich valuations. So the kind of earnings they need to show to justify the valuations are something that we think is unlikely to come in the next round of earnings. So they are looking overvalued and seeing margin pressures so weak thing for software and Infosys within that is one of the weaker and more overvalued players,” she feels.

However, Kapdia feels there is some upside left for the IT pack. “If you look at the entire IT lot—I think the Wipro, HCL Technologies—have posted 10 year highs. Infosys is at a all time high—short-term, medium term, long term all time frames and all counts it is in an uptrend.

On Infosys, he suggests a hold. “There I some more upside to go before the move fizzles out and the entire IT pack, even a laggard like Tech Mahindra probably looks good enough for a bounce right now so I have a hold on Infosys, I think there is more upside. Probably a Wipro or a HCL Tech might do slightly better than Infosys but Infosys is still a hold.,” he says.

Commenting on other IT counters, Kapadia says, the prospects of the Patni aren’t that exciting right now. However, he is upbeat on Hexaware. “We have had a 10-12 month correction. The time retracement has been there but price retracement has been rather shallow. Simply put, it is looking good and its coiling up like a though the breakout comes in at Rs 90. Hexaware looks exciting enough to warrant a close look and may be even a buy. So Patni doesn’t look too exciting, Hexaware does. In terms of Foursoft—that’s also moving sideways for once again this 12-14 month point of view. Looks okay but out of the three stocks—Hexaware looks to be the best of the lot. I think one can expect 30% upside from here in the next six to nine months,” he adds.

On Reliance
Kapadia says Reliance has been a bad underperformer but to expect Reliance not to perform would be a folly. He adds, “I have been tracking Reliance since my school days. Yes, it hasn’t moved but I think it has the capacity to surprise very much on the upside. I am not sure that an investor should sell call options of Reliance after 17 months of a sideways momentum and if he does he will have to keep a very strict stop loss. If the investor does sell call options he will have to calculate his cost in a sense call option plus the premium gain and if that and the spot price and the futures price crosses that, he will have to hedge it by going long in futures. It’s highly complicated, and slightly dangerous. In fact if Reliance dips a bit I would suggest selling put options because I am bullish on Reliance and not bearish. But frankly speaking just to make up for the losses selling calls and puts are very dangerous. I think you would loose two years of money that you have made in futures and options when you take such dangerous strategy especially in the market open with a gap sometimes. I would suggest a hold on Reliance. I think by the time the bull market comes to an end Reliance should be Rs 1,300 or more.”

On Reliance Capital
Gupta finds the financial space well placed. She finds that Reliance Capital hasn't done much. “Fundamentally it's not a bad business. It is the largest asset management company (AMC) in India. One of the few that's profitable although the insurance side has suffered a loss. I think there are other players in this space like an IFCI or an LIC Housing Finance that have done a lot more and have a much sharper growth trajectory ahead of them. So I would advice the investor to look at that a little bit.”

Kapadia has a buy call on this stock despite the fact that the entire bull market of the last year or so has given Reliance Capital a complete miss. He adds, “Currently we are in the midst of what is possibly a rounding bottom on the week. Maybe it looks like an inverted head and shoulder. Simply put, there is a bullish formation at play. Maybe it takes some more time and at the risk of sounding silly maybe the bull market gets over by the time Reliance Capital moves. Technically speaking it looks great. We haven't had a deep price retracement so despite its deep underperformance I have a buy on the stock especially if you have a year or two investment horizon.”

On Banks
Kapadia doesn’t track the financial sector but agrees it looks good. “All time highs but no resistance levels so I would have a hold. I think we could be moving towards maybe Rs 450 or so in the next couple of months.”

“Bank of Maharashtra looks relatively better in the sense we have some more history in terms of an upside. There is headroom. There is resistance at Rs 74. If you take that out from a weekly point of view I think we could be moving towards Rs 85 or so. Like most banks it’s in an uptrend, looks good and I think one can expect further upsides. I also find Dhanlaxmi Bank looks good.”

Buy GVK Power & Infrastructure, short term

Buy GVK Power & Infrastructure BSE Code- 532708 @ 47 with the target of 59 (short to medium term)
-
Stock is also in Futures and Options
One can buy in Options Call of Strike Rate 50 for the month of Oct2010

-
For Opening FREE DEMAT and Trading account CALL us Today

Buy TTML @ 22.75 Target 27 - 29 Rs. in few weeks

Buy Tata Teleservices Maharashtra @ around 22.75 for few weeks with the target of 27 Rs. - 29 Rs.

If you need a Portfolio Management Service for Equity, Options, Futures, Nifty, Commodities then feel free to call us

We are Vasai Road based broker who provide excellent service

Delivery Call: Buy Adani Power for the target of 160

Delivery Call: Buy Adani Power for the target of 160- 165 Rs. in very short term

our yesterdays call of Cosmo Films touched Rs. 165 (from 140 in just 1 day)

-

For opening Demat and Trading account in Vasai based Wealth Securities call us on 09321318382