Established during 1964 in Kolkata, Tantia Construction Ltd (TCL) has gradually evolved over the years from a pure railway construction company to a full-fledged infrastructure company executing various diversified projects. Today it boasts of having presence in roads and highways, railways, tunnels, bridges and flyovers, urban instructure, sewerage and drainage, civil & housing construction etc. Lately, company also ventured into the lucrative marine infrastructure space, power transmission and distribution segment and aviation infrastructure. It is among the few companies which have very strong domain expertise in servicing the Indian Railways – earthwork, ballast, rail-track linking and welding, bridges, tunnels, electrification and signaling. Infact, TCL is among the five Indian companies capable of providing ‘foundation-to-finish’ for mega railway bridges spanning 2-km or more. More importantly, TCL has a very strong presence in the eastern and north-eastern region which gives it an edge, as very few players are interested in bidding in these regions due to difficult terrain. Company’s expertise can be evaluated from the fact that it has constructed over 250 km of roads in the hilly areas of Mizoram, coastal areas of Kerala, plains of Punjab/Haryana and plateaus of Karnataka. On the power project front, company has remarkably garnered the capability of in-house manufacturing and erecting transmission towers within a very short time. Incidentally, company has impeccable track record of completing every single assignment since inception.
In recent years TCL has executed various prestigious and large scale projects in the states of West Bengal, Assam, Bihar, Uttar Pradesh, Tamil Nadu, Kerala and Mizoram, and in neighboring countries like Bangladesh, Nepal and Bhutan. As more than 90% of revenue comes from government project it caters to several govt bodies including Indian railways, Kolkatta Metro railway, NHAI, State PWD, Central PWD, State Electricity boards, HIDCO, KMC, Airport Authority of India apart from NTPC, Ircon Int, SAIL, RITES, IOC etc. It enjoys excellent business relations and has good direct contact with govt resulting in repeat orders of similar nature, extension of projects of a higher value and a listing among preferred partners. Presently, TCL has diversified and huge order in hand position of more than 1000 cr to be executed in next 24 months. Out of that road projects is approx 45%, Railway 20%, urban infrastructure 25% and others 10%. Thus, company has a strong revenue visibility for coming years.
Going forward TCL is planning to bid for bigger projects in power transmission segment as it has executed various power projects and is now qualified to bid for the same. In near future company intends to foray into BOT & BOOT projects to boost up its margin. It is also looking to bag airport projects coming up in non- metro cities. To cash on the boom in civil construction, it is even contemplating to enter into real estate development. As a long term strategy, TCL intends to enter in logistics sector by constructing and owning ware-houses at strategic places across India. Water treatment, solid waste management and sewage treatment are also being considered to widen its work profile.
In March 2006, TCL came out with an IPO of 1.125 cr of equity shares @ Rs 50 per share with public net offer of 42.50 lakh shares. The issue was finally oversubscribed by whopping 83x times. Ironically, against the high of Rs 310 in 2006, scrip is hardly finding any buyer now at Rs 70. Infact it hit an all time low of Rs 56 in July’08 although its fundamentals have improved considerably in last couple of years. For FY08, its revenue jumped up 50% to Rs 362 cr and PBT increased by 30% to Rs 20 cr. However due to higher tax provisioning its PAT improved by only 15% to Rs 15.40 cr posting an EPS of Rs 10 on equity of Rs 15.60 cr. It declared lower dividend of 15% against 20% in FY07. Meanwhile, for Q1FY09 it recorded 40% rise in topline as well as bottomline to Rs 99 cr and Rs 5 cr respectively. Hence for entire FY09 it may clock a turnover of more than Rs 450 cr and profit of Rs 20 cr i.e. EPS of Rs 12 on diluted equity of Rs 16.30 cr. Recently company raised around Rs 30 cr thru FCCB route to be convertible into equity shares @ Rs 140. Considering the CMP, the possibility of conversion in near this fiscal seems bleak, hence not considered in calculating the diluted equity. Being discounted at less than 6x times, this scrip is available fairly cheap. Hence investors are strongly recommended to buy at current levels as share price can double in 12~15 months
courtesy : saarthi
Friday, August 15, 2008
small is beautiful
For the latest June qtr, Lokesh Machines (64.00) reported almost flat nos with NP of Rs 3.10 cr on sales of Rs 20.50. But importantly it reported a higher operating margin of 37% which indicates company may be able to maintain its profit going forward. Secondly it has declared a dividend of 25% which gives a yield of nearly 4% on CMP. Company is engaged in the design, development and manufacture of custom built special purpose machines and general purpose CNC (computerized numerical controls) machines along with their components. It derives 70% revenue from machining division whereas rest 30% comes from auto component division. It primarily caters to customers in the auto OEM, auto ancillaries and general engineering space. Hence it supplies mainly to Tata Motors, Bajaj Auto, Force Motors, Cummins, Bharat Forge, Kirloskar Oil Engines, Everest Kanto Cylinders etc with separate dedicated facilities for M&M and Ashok Leyland. Although it concentrates mainly on domestic market, but lately it has also made a foray in the overseas markets with good orders. On a conservative basis, for FY09 it can report sales of Rs 110 and PAT of Rs 11 cr i.e. EPS of Rs 9 on equity of Rs 11.80 cr. Accumulate at sharp declines.
Caustic soda prices have increased substantially in the recent past, but at the same time the input cost like coal have also shot up considerably. Accordingly, even though there was not much improvement in the profit margin still Bihar Caustic (72.00) reported fantastic nos for the June’08 quarter on the back of increased capacity and sale of aluminium chloride. It registered 55% growth in sales to Rs 53 cr whereas the net profit doubled to Rs 13 cr posting an EPS of Rs 5.50 for the single quarter. To maintain its growth, company has almost completed the expansion of its caustic soda capacity by 20% to 265 TPD by addition of electrolysers as well by debottlenecking. Last fiscal it also commissioned the stable bleaching powder plant with installed capacity of 60 TPD. Moreover its aluminium chloride project with a capacity of 12000 TPA is doing extremely well. At the same time company is taking initiative to reduce its total debt which will bring down the interest cost substantially. To conclude, company is expected to report a top line of Rs 200 cr and profit of Rs 52 cr for FY09 leading to an EPS of Rs 22 on equity of Rs 23.40 cr. Despite being a ‘Aditya Birla’ group company it has been very poorly discounted and is ripe for re-rating.
Accurate Transformers (100.00) is engaged in manufacturing of power as well as distribution transformers ranging from 1 MVA to 40 MVA - in up to 220 KV class. It is looking to venture into manufacturing of higher capacity Power Transformers of 160 MVA from FY10. It also carries out rural electrification project which involves the complete setting up of electricity in remote areas including the laying of lines, poles and substations. Unfortunately, despite having installed capacity of more than 8000 MVA company is working at very low capacity utilization of less than 50% due to high working capital requirement and shortage of funds. That’s why, at the time when its peer companies are growing at phenomenal pace this company has been registering normal double digit growth. Infact for the June’08 it posted marginal de-growth in topline whereas net profit declined by 35% to 1 cr. Despite this it can clock sales of Rs 225 cr and PAT of Rs 8.50 for FY09 leading to an EPS of Rs 29 on tiny equity of Rs 2.96 cr. Company is looking to raise fresh funds thru equity route mainly to fund its working capital requirement. Only aggressive investors can buy at current levels as scrip can double in year’s time.
Recently, Ramsarup Industries (118.00) has come out with decent set of nos for the June quarter. Sales grew by 10% to Rs 383 cr but NP increased by 25% to Rs 15.80 cr on the back of better operating margin. Company is engaged in manufacturing of various grades of steel wires (mainly used by power industry) and TMT Bars. To cater the rising demand company is expanding its total wire manufacturing capacities from 233,000 tonnes to 600,000 tonnes including the production of Low Relaxation Pre-stressed Concrete (LRPC) wires over the next two years. It has acquired 60 acres land in West Bengal and major plant and machinery are being imported from Italy. Importantly, to get access to cheaper and regular raw material supply, last year company took over Balasore Minerals Co, which has iron ore, limestone and dolomite mines located in neighboring Orissa state. But more importantly company is merging its other group company called Ramsarup Loha Udyog which is emerging as an integrated steel producer with captive production of sponge iron, pig iron, billets, power etc. As no official figures are available for the group company, so on a standalone basis company is expected to clock a turnover of Rs 1750 cr and PAT of Rs 65 cr for FY09. This translates into EPS of Rs 37 on current equity of Rs 17.50 cr. Post merger equity is expected to get diluted to roughly around Rs 35 cr.
courtesy : saarthi
Caustic soda prices have increased substantially in the recent past, but at the same time the input cost like coal have also shot up considerably. Accordingly, even though there was not much improvement in the profit margin still Bihar Caustic (72.00) reported fantastic nos for the June’08 quarter on the back of increased capacity and sale of aluminium chloride. It registered 55% growth in sales to Rs 53 cr whereas the net profit doubled to Rs 13 cr posting an EPS of Rs 5.50 for the single quarter. To maintain its growth, company has almost completed the expansion of its caustic soda capacity by 20% to 265 TPD by addition of electrolysers as well by debottlenecking. Last fiscal it also commissioned the stable bleaching powder plant with installed capacity of 60 TPD. Moreover its aluminium chloride project with a capacity of 12000 TPA is doing extremely well. At the same time company is taking initiative to reduce its total debt which will bring down the interest cost substantially. To conclude, company is expected to report a top line of Rs 200 cr and profit of Rs 52 cr for FY09 leading to an EPS of Rs 22 on equity of Rs 23.40 cr. Despite being a ‘Aditya Birla’ group company it has been very poorly discounted and is ripe for re-rating.
Accurate Transformers (100.00) is engaged in manufacturing of power as well as distribution transformers ranging from 1 MVA to 40 MVA - in up to 220 KV class. It is looking to venture into manufacturing of higher capacity Power Transformers of 160 MVA from FY10. It also carries out rural electrification project which involves the complete setting up of electricity in remote areas including the laying of lines, poles and substations. Unfortunately, despite having installed capacity of more than 8000 MVA company is working at very low capacity utilization of less than 50% due to high working capital requirement and shortage of funds. That’s why, at the time when its peer companies are growing at phenomenal pace this company has been registering normal double digit growth. Infact for the June’08 it posted marginal de-growth in topline whereas net profit declined by 35% to 1 cr. Despite this it can clock sales of Rs 225 cr and PAT of Rs 8.50 for FY09 leading to an EPS of Rs 29 on tiny equity of Rs 2.96 cr. Company is looking to raise fresh funds thru equity route mainly to fund its working capital requirement. Only aggressive investors can buy at current levels as scrip can double in year’s time.
Recently, Ramsarup Industries (118.00) has come out with decent set of nos for the June quarter. Sales grew by 10% to Rs 383 cr but NP increased by 25% to Rs 15.80 cr on the back of better operating margin. Company is engaged in manufacturing of various grades of steel wires (mainly used by power industry) and TMT Bars. To cater the rising demand company is expanding its total wire manufacturing capacities from 233,000 tonnes to 600,000 tonnes including the production of Low Relaxation Pre-stressed Concrete (LRPC) wires over the next two years. It has acquired 60 acres land in West Bengal and major plant and machinery are being imported from Italy. Importantly, to get access to cheaper and regular raw material supply, last year company took over Balasore Minerals Co, which has iron ore, limestone and dolomite mines located in neighboring Orissa state. But more importantly company is merging its other group company called Ramsarup Loha Udyog which is emerging as an integrated steel producer with captive production of sponge iron, pig iron, billets, power etc. As no official figures are available for the group company, so on a standalone basis company is expected to clock a turnover of Rs 1750 cr and PAT of Rs 65 cr for FY09. This translates into EPS of Rs 37 on current equity of Rs 17.50 cr. Post merger equity is expected to get diluted to roughly around Rs 35 cr.
courtesy : saarthi
Thursday, August 14, 2008
Wednesday, August 13, 2008
Tuesday, August 12, 2008
Why stock split is done?
Why stock split is done?
1) Companies usually split their stock when they think the price of their stock exceeds the amount smaller investors would be willing to pay. “It is aimed at making the stock more affordable and liquid from retail investors’ point of view.”
2) Generally, there are more buyers and sellers of shares trading at Rs.100 than say, Rs.400, as retail shareholders may find low-price stocks to be better bargains. Stock splits are usually initiated after a huge run-up in the share. This run-up may be linked to the performance of the stock.
3) The company may declare such splits in different ratios like 2-for-1, 3-for-1, 3-for-2, or like 4-for-1. Some companies may go to the extent of declaring a 10 for 1 split, as power services company GVK Power did recently.
For example, XYZ Company is trading at Rs.250 and you hold 100 shares. Hence, the total value of your holding is Rs.25, 000 (250x100).
4) If this company declares a 2-for-1 stock split, your 100 shares become 200 and the share price is adjusted to Rs.125.
The value of your investment still remains the same (this time, 125x200). And if the company had 10 lakh outstanding shares before the split, it will now have 20 lakh outstanding shares after this split, keeping the market cap unchanged.
5) Sometimes, companies may choose to club stock split issue with bonus shares. Bangalore based jewelery manufacturer Rajesh Exports recently declared a 2-for-1 stock split along with a bonus offer of two shares for each share held.
6) This means that each share becomes two, post-split. Now, for these two shares, shareholders will get four additional shares as bonus. Thus, one share translates into six after stock split and bonus issue.
“To ensure increased liquidity for existing shareholders and easy entry point for new shareholders, the decision was made to split the share.”
Benefit to shareholders after stock split and bonus issue.
Due to stock split, the high priced stocks will be available at lower rates. The retailer or small investors can easily afford to buy stocks of low price. There is also a probability that after stock split; the stock price may go up as more investors may rush to buy stocks at lower rates.
1) Companies usually split their stock when they think the price of their stock exceeds the amount smaller investors would be willing to pay. “It is aimed at making the stock more affordable and liquid from retail investors’ point of view.”
2) Generally, there are more buyers and sellers of shares trading at Rs.100 than say, Rs.400, as retail shareholders may find low-price stocks to be better bargains. Stock splits are usually initiated after a huge run-up in the share. This run-up may be linked to the performance of the stock.
3) The company may declare such splits in different ratios like 2-for-1, 3-for-1, 3-for-2, or like 4-for-1. Some companies may go to the extent of declaring a 10 for 1 split, as power services company GVK Power did recently.
For example, XYZ Company is trading at Rs.250 and you hold 100 shares. Hence, the total value of your holding is Rs.25, 000 (250x100).
4) If this company declares a 2-for-1 stock split, your 100 shares become 200 and the share price is adjusted to Rs.125.
The value of your investment still remains the same (this time, 125x200). And if the company had 10 lakh outstanding shares before the split, it will now have 20 lakh outstanding shares after this split, keeping the market cap unchanged.
5) Sometimes, companies may choose to club stock split issue with bonus shares. Bangalore based jewelery manufacturer Rajesh Exports recently declared a 2-for-1 stock split along with a bonus offer of two shares for each share held.
6) This means that each share becomes two, post-split. Now, for these two shares, shareholders will get four additional shares as bonus. Thus, one share translates into six after stock split and bonus issue.
“To ensure increased liquidity for existing shareholders and easy entry point for new shareholders, the decision was made to split the share.”
Benefit to shareholders after stock split and bonus issue.
Due to stock split, the high priced stocks will be available at lower rates. The retailer or small investors can easily afford to buy stocks of low price. There is also a probability that after stock split; the stock price may go up as more investors may rush to buy stocks at lower rates.
Sunday, August 10, 2008
Best Contrarion picks
Best contrarian picks
In equity markets, a person who dares to go against the tide wins big because
when the tide turns he is best prepared for it while others are caught unaware.
This is known as contrarian strategy and has delivered very good returns in
the past especially after the markets have peaked. For this strategy to succeed,
you have to buy stocks at maximum pessimism and when you are confident
about good prospects for the company/sector in medium to long term.
Besides the right timing you need a lot of patience too as in short term it may
continue to lag behind current favourites of the market.
Two sectors which are ripe for contrarian investment right now are banking
and automobiles. Let us look at the rationale behind them:
Banks, automobile stocks have been beaten down a lot while actual
performance is not so bad looking at the credit growth or automobile
sales.
High interest rates and high inflation which have hit these sectors hard
seem to have peaked and things will get better only over time as crude
oil prices drop.
A major proportion of the losses (currency futures) reported by banks
are marked to market which are just notional losses and can recover
soon in future (just like the losses in your portfolio are notional until
you book them by selling).
Due to Basel II norms, small banks need to merge with bigger banks in
next 2-3 years which will create a lot of value for the shareholders of
the big banks. Our recommendation for investors is to concentrate on
top 5 banks in private sector, top 5 in public sector and specialised
banks catering to niche market segments like Yes bank.
25% of world population below 25 years lives in India which is a huge
opportunity for both banks and automobile sector as the income rises.
Young people tend to take more loans from bank and buy luxury items
like cars more.
India is set to become an export hub (due to cost advantage) of small
cars to other emerging economies like Nepal, Sri Lanka, Africa etc.
and hence companies like Maruti, Tata Motors are going to be big
winners. One achievement we all Indians should be proud of is that
Maruti India is soon set to overtake Suzuki Japan in terms of number
of cars produced.
Banks like SBI, ICICI etc have very valuable subsidiaries in
businesses like insurance, asset management etc. value of which is not
fully reflected in the current prices. Example: ICICI insurance arm is
roughly valued at Rs 57000 Crore!
In equity markets, a person who dares to go against the tide wins big because
when the tide turns he is best prepared for it while others are caught unaware.
This is known as contrarian strategy and has delivered very good returns in
the past especially after the markets have peaked. For this strategy to succeed,
you have to buy stocks at maximum pessimism and when you are confident
about good prospects for the company/sector in medium to long term.
Besides the right timing you need a lot of patience too as in short term it may
continue to lag behind current favourites of the market.
Two sectors which are ripe for contrarian investment right now are banking
and automobiles. Let us look at the rationale behind them:
Banks, automobile stocks have been beaten down a lot while actual
performance is not so bad looking at the credit growth or automobile
sales.
High interest rates and high inflation which have hit these sectors hard
seem to have peaked and things will get better only over time as crude
oil prices drop.
A major proportion of the losses (currency futures) reported by banks
are marked to market which are just notional losses and can recover
soon in future (just like the losses in your portfolio are notional until
you book them by selling).
Due to Basel II norms, small banks need to merge with bigger banks in
next 2-3 years which will create a lot of value for the shareholders of
the big banks. Our recommendation for investors is to concentrate on
top 5 banks in private sector, top 5 in public sector and specialised
banks catering to niche market segments like Yes bank.
25% of world population below 25 years lives in India which is a huge
opportunity for both banks and automobile sector as the income rises.
Young people tend to take more loans from bank and buy luxury items
like cars more.
India is set to become an export hub (due to cost advantage) of small
cars to other emerging economies like Nepal, Sri Lanka, Africa etc.
and hence companies like Maruti, Tata Motors are going to be big
winners. One achievement we all Indians should be proud of is that
Maruti India is soon set to overtake Suzuki Japan in terms of number
of cars produced.
Banks like SBI, ICICI etc have very valuable subsidiaries in
businesses like insurance, asset management etc. value of which is not
fully reflected in the current prices. Example: ICICI insurance arm is
roughly valued at Rs 57000 Crore!
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