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Saturday, December 09, 2006
Bears on rampage ....
When it was thought that market will take it forward beyond 14K market tanked and yes it was victory of bears on a given day. I doubt whether they will succeed again on Monday with the same veracity. At least for the day my reading flopped and I expect weak opening on Monday with another 100 points downside as there was no short covering at all till the end of the day. It is very clear that if operators wanted to reverse the game with the word go on Monday then short covering had to happen today. Even if US market goes by 3% today our market will correct further on Monday. Therefore avoid buying on Monday morning even if Sensex open on plus side and wait for correction of 100 odd points on lower side for fresh buying. At the same time do even think to go short because Bulls want only that too happen……
RIL, SBI, ACC and Tisco will remain my focus stocks where I will bet blindly irrespective of the fact these stocks are momentum stocks (except SBI) and will remain volatile with Sensex movement. Monday Cairns issue is opening and RIL and ONGC will get re-rated. Today's movement should not even be considered as major correction though majority of traders echoed that view.
We have initiated a buy call on a large cap company though the price is like a small cap. Apple Finance Ltd. the beleaguered Atul Nissar co having huge property besides the diamond plaza at BKC where the current rates are Rs 30000 per sq ft. Co plans to sell around 2.4 lac sq ft at an estimated selling price of Rs 25000 per sq ft raking in revenue over Rs 600 crs. Costs could be Rs 48 to 50 crs whereas tax outgo could be close to Rs 100 crs. Debt is around Rs 200 crs after OTS which could leave around Rs 250 crs with the co the value of which comes to Rs 45 per share. It is not sure how much money will come to the co and how much will be out of books is anybody's guess. Even if that is discounted I think there is fair chance of making at least 200 to 300% returns is not ruled out. Permanent Magnate is another realty story in Mumbai where operators are active and could flare up like a rocket. A cartel close to Enam and T Rowprice has accumulated enough shares over last one year and now just started the price movement. Earlier at Rs 84 we had initiated buy call on Elnet which is never known for its realty. Today when broke this story to a leading fund the stock hit upper cct of 20%. It has huge land which was earlier outskirts of Chennai and now has within the city limits. Stock has potential to become 10 baggers from here.
The buzz is not getting over here….the biggest ever Kolkata realty story is yet to be unfolded in market is Gillander Arbuthnot. Co has reported net profit of Rs 8 crs on equity of Rs 11 crs for Sept quarter out of its tea, construction and real estate business. On merits alone stock should get valuation of Rs 200 plus. Its property is running into millions of sq ft which co is going for development post de-merger of realty division. I would rate this stock as one of the best stock in Indian terrain and suggest all investors to have at least 500 to 10000 shares with a vision of 1 year where value unlocking will happen.
Please bear in mind whichever stock we had chosen from illiquid belt has become liquid in a short span of time. Binani, Crest, Century ply and Josts all went on to become rocket. The supply is coming from the fund whose wish list is that the Gillander should go below Rs 100 where they want to make some deals then rig up the price. At the same time there is a smart investor whom I know personally has accumulated over 1 lac share so far and in a mood to acquire another 3 to 5 lac shares between Rs 100 to Rs 125. Therefore every time this stock goes to a level of Rs 100, value buying starts. Once this crosses Rs 150 level the desperate fund will come forward for buying.
"The three great essentials for achieving anything worthwhile are hard work, "stick-to-it" ingredient, and common sense." If you follow the same in investing in stock may be you too make tons of money like all intelligent market wizards do make. Buy when nobody is interested and no volume and in bulk with conviction and sell when market demands it. All big men earned big money doing this…..
Thanks Vinit
The Week That Was - Sensex sheds 45 points
The market ended a loser during the week, the first time after six straight victorious weeks.
The BSE Sensex lost 45.29 points for the week ended Friday (8 December), to settle at 13,799.49. The Nifty lost 35.60 points, to settle at 3,962 during the week.
On 4 December, the BSE Sensex rose 29.55 points, to 13,874.33, as shares from auto, metal and sugar sectors were bought. The 30-share BSE Sensex gained 63.32 points, to 13,937.65 on 5 December, as buying continued, shares from the metal and IT sector at forefront.
On 6 December, the BSE Sensex settled marginally higher by 11.35 points, to 13,937.65, after witnessing high volatility throughout the day’s trading session. It also surged to an all-time high of 14,035.30 on the same day.
The Sensex rose 23.03 points to 13,972.03 on 7 December, a record closing high amid a mixed trend in the Sensex's constituents. the BSE Sensex plunged 172.54 points, to 13,799.49 on 8 December, tracking weak global markets.
Bharti Airtel lost 0.29% to Rs 631.10. Reports state Vodafone Group is looking to hike stake in the telecom firm. Vodafone holds 10% stake in Bharti Airtel.
Tata Consultancy Services (TCS) lost 1.02% to Rs 1,175. As per reports, the company won a five-year outsourcing contract from Britain's United Biscuits. Reports add that the multi-million-pound deal involves IT support services such as application support, business analysis services and strategic IT programmes for Europe's second-largest biscuit maker.
Tata Steel rose 2.31% to Rs 479. It had signed an agreement with Nippon Yasen Kabushiki Kaisha for an equal shipping joint venture. The JV will cater to both dry and bulk cargo.
Reliance Industries rose 0.38% to Rs 1,265.90. It had struck a 52-week high of Rs 1,350, on 5 December. The company’s hydrotreater plant at Jamnagar refinery, which was partially damaged in a fire on 25 October, had been refurbished and started functioning from 1 December.
NTPC rose 2.02% to Rs 151. In a recent report dated 5 December 2006, Merrill Lynch has raised the price target on the scrip, to Rs 180. Its revised price target is based on a discounted cash flow (DCF) analysis. The brokerages have raised their earnings estimates for NTPC.
Reliance Communications rose 0.87% to Rs 445.85, amid reports that the company has invited bids for 90-100 million cellular lines, valued at $7-8 billion. It added 1.35 million new subscribers in November (CDMA plus GSM based).
Tata Motors rose 2.19% to Rs 861.50. Tata Motors’ vehicle sales rose 43% in November to 49,061 units compared with the same month a year ago. Sales of commercial vehicles rose 46% to 25,793, while sales of cars rose 48% to 19,475, helped by a surge in sales of its Indica model. Exports rose 9.6% to 3,793 units.
Shares from the sugar sector were in demand on speculation that the exports ban may be lifted shortly. Also, reports that Indonesia will buy as much as 2,00,000 tonnes of sugar by March 2007, to ensure supplies to keep a check on prices and control inflation. Indonesian sugar production is expected to reach 2.3 million tonnes this year, which is 7% lower than an initial target. Bajaj Hindustan (up 7.62% to Rs 253.75), Balrampur Chini Mills (up 9.64% to Rs 89.25), Dhampur Sugar Mills (up 10.46% to Rs 94), Shree Renuka Sugar (up 5.23% to Rs 523) and Sakthi Sugar (up 8.38% to Rs 111.40) surged.
Helicopter operator Global Vectra Helicorp advanced 9.57% to Rs 206.35, boosted by reports that the government proposes to raise FDI limit in helicopter firms and in non-scheduled airline operations from 49% to 74%.
Export house Adani Enterprises surged 9.76% to Rs 236.20, after data showed that Reliance Mutual Fund has purchased 43.3 lakh shares of the company on Wednesday (6 December), in a block deal, on BSE. Foreign fund Lotus Global Investment sold 52 lakh shares in the block deal, which was executed at a little over Rs 200 a piece.
Shreyas Shipping & Logistics jumped 37.25% to Rs 133.90, after the company disclosed plans to raise up to Rs 150 crore for buyouts in India or abroad, or for investments in logistics companies. The company's board will meet on 9 December, to consider these proposals.
i-flex solutions surged 21.98% to Rs 2,047, after Oracle Corp raised the open offer price for i-flex to Rs 2,100 per share. Oracle now intends to raise its stake in i-flex to 90% from the earlier plan of raising its holding to 75%, from existing 55%. In September 2006, Oracle had announced an open offer for 20% stake at Rs 1,475 per share.
India's wholesale price index rose 5.30% in the 12 months to 25 November, lower than previous week's annual rise of 5.45% due to a fall in food and energy prices, data showed on Friday. The annual inflation rate was 4.48% during the corresponding week of the previous year.
The European Central Bank raised its key interest rate a quarter of a point to 3.5% on Thursday (7 December), despite strength in the euro which some analysts expect could stunt economic growth and hurt the crucial export sector.
Nissan Copper Ltd. Subscription Details
Qualified Institutional Buyers (QIBs) - 1.28 times
Non Institutional Investors + HNI - 19.8 times
Retail Individual Investors (RIIs) - 4.47 times
Employee Reservation - 0.43 times
OVERALL - 4.7 times
Ess Dee Aluminium IPO Subscription Details
Qualified Institutional Buyers (QIBs) - 50.71 times
Non Institutional Investors/HNI - 37.35 times
Retail - 6.36 times
Employees - 1 time
OVERALL - 32.5 times
Capita Telefolio Volume No 13, Issue No 3 dated Saturday, 9th December 2006.
The following recommendation is based on price as on Friday, 8th December 2006.
BUY: Bharat Earth Movers at Rs 976
Now full details:
BUY : Bharat Earth Movers at Rs 976
BSE Code : 500048
NSE Symbol: BEML
Market Lot: 1
Bharat Earth Movers will be a key beneficiary of expected pick-up in investment in mining sector and metro rails.
Actual EPS for March 2005 : Rs 47.7
Actual EPS for March 2006 : Rs 50.9
Projected EPS for March 2007 : Rs 61.2
End of Capita Telefolio Volume No 13, Issue No 3 dated Saturday, 9th December 2006.
Sharekhan Investor's Eye dated December 08, 2006
Booming economy keeps sentiments upbeat
Key points
- We feel the government's improved performance so far in this fiscal has been partially overlooked by the market and the same could act as a catalyst for a rally in the stock market during the run-up to the Union Budget 2008.
- In our last Market Outlook report dated October 06, 2006, we had stated that we expected an upgrade in the Sensex' earnings estimates going forward and we have witnessed an 11.4% earnings upgrade for FY2007E, in line with our expectations of a 10-15% earnings revision.
- The domestic scenario remains upbeat: On a year-on-year (y-o-y) basis, the gross domestic product (GDP) has grown by 9.1% and the Index of Industrial Production (IIP) has risen by 10.9% in H1FY2007 with a strong growth of 12.1% in the manufacturing sector.
- In Q3FY2007, no major surprises are expected on the earnings front. However since the Diwali festival fell in October in FY2007 and in November in FY2006, some purchases could have already got reflected in the higher Q2FY2007 numbers, especially for the automobile sector. Hence the y-o-y growth in the profits could be slightly muted for Q3FY2007 compared with that in Q2FY2007.
- US housing data continues to be weak; however the third quarter GDP numbers were better than expected. The huge inventory build-up is the main concern, which is feared to limit growth in the last quarter. The market is expecting the US Federal Reserve (Fed) to start cutting rates from March 2007 onwards.
- Normally, December is the year-ending month for most foreign investors, who prefer to allocate fresh funds from January onwards. However there has been a change in this pattern since FY2004 and we expect the foreign institutional investors (FIIs) to actively participate in the stock market during the run-up to the next year's budget. A study of the trend of FII activity in the Indian stock market over the past two fiscals reveals that 51% of the net investments for FY2005 and 50% of that for FY2006 were made between November and February.
- We continue to prefer domestic demand-driven stories like automobiles, banking, capital goods and cement.
STOCK UPDATE
Lupin
Cluster: Apple Green
Recommendation: Buy
Price target: Rs670
Current market price: Rs545
Price target revised to Rs670
Key points
- A strong thrust on the chronic therapy segments, a doubling of its field force and aggressive new product launches have enabled Lupin's domestic formulation business to grow at higher than industry growth rates. We estimate Lupin's domestic business to grow at a compounded annual growth rate (CAGR) of 22.5% over FY2006-08E, on the back of 15-20 new launches per year and an increase in the productivity of the field force.
- We believe the US generics business will be the major growth driver for Lupin. Sizeable new product opportunities coupled with the sustained growth in existing products provide a strong visibility to Lupin's earnings from the US generics market. We have estimated revenues of $70 million in FY2007E and $130 million in FY2008E from the US generics business. Further, any Para IV wins will provide an upside to our estimates.
- Lupin has recently started formulation exports to the European countries. Having already made 11 dossier filings in FY2006, the company plans to file 10-12 dossiers every year. We estimate Europe to add $3 million and $10 million in FY2007E and FY2008E respectively to Lupin's top line.
- Lupin's anti-T business is primarily geared towards the domestic and semi-regulated markets. Being a leader in the anti-TB space, Lupin is extremely well positioned to capitalise on the resurgence of TB due to the increased incidence of AIDS worldwide (including in the advanced markets like the USA). Even though we have not factored in any upside from the TB opportunity in the regulated markets, we are positive on Lupin's prospects in this area.
- The changing business mix, more focused towards advanced market formulations, coupled with the commissioning of the new finished dosages facility in the excise and tax-free state of Jammu is likely to cause Lupin's operating margins to improve. We believe that the margins will expand by 180 basis points over FY2006-08E.
- Lupin has a robust pipeline of 4 new chemical entity (NCE) molecules, one of which has just completed Phase II trials and will shortly enter Phase III trials, two of which are in Phase II clinical trials and one in Phase I trials. Lupin's lead NCE, an anti-migraine molecule has received approval from the Drug Controller General of India (DCGI) for Phase III trials in India. The management has indicated that it may announce an out-liencing deal for the molecule. Any development in this regard will provide an upside to our estimates.
- With the sustained growth in the domestic market, huge opportunities arising out of the increased incidence of HIV-related TB worldwide, strong visibility in US earnings from sizeable product opportunities and the ramp-up of the business in Europe and the other markets, we expect Lupin to deliver a strong performance over the next few years. To factor in the above, we have revised our revenue and earnings estimates for Lupin. We expect Lupin's net sales to grow at a CAGR of 25% over FY2006-08E and earnings to expand at a CAGR of 33.9% over the same period.
- At the current market price of Rs545, Lupin is quoting at 14.7x its FY2008E earnings estimate, on a fully diluted basis. Keeping in mind the strong business fundamentals and growth potential of the company, we reiterate our Buy recommendation on Lupin, with a revised price target of Rs670. At our revised target price, the stock will discount its FY2008E earnings by 18x.
ORG Informatics
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs190
Current market price: Rs173
$10mn raised through GDR issue
ORG Informatics has successfully raised $10 million through a global depository receipt (GDR) issue in the overseas markets. The issue has been priced at around Rs155 per share and would result in dilution of the equity base by 28.6 lakh shares. The company has also done a preferential issue of 6 lakh warrants to investors at an average price of Rs170 recently. Consequently, the fully diluted equity base would expand to Rs17.2 crore, up from Rs13.7 crore.
Sharekhan Top Picks dated December 08, 2006
In the November 2006 issue, we had recommended the best 12 of our Stock Ideas as Sharekhan Top Picks. As on December 7, 2006, the return on this basket of stocks has been 2.2% as compared to the Sensex, which has given 6.1% returns and the S&P CNX Nifty, which has given 6.6% returns.
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Booming economy keeps sentiments upbeat
Booming economy keeps sentiments upbeat
Key points
- We feel the government's improved performance so far in this fiscal has been partially overlooked by the market and the same could act as a catalyst for a rally in the stock market during the run-up to the Union Budget 2008.
- In our last Market Outlook report dated October 06, 2006, we had stated that we expected an upgrade in the Sensex' earnings estimates going forward and we have witnessed an 11.4% earnings upgrade for FY2007E, in line with our expectations of a 10-15% earnings revision.
- The domestic scenario remains upbeat: On a year-on-year (y-o-y) basis, the gross domestic product (GDP) has grown by 9.1% and the Index of Industrial Production (IIP) has risen by 10.9% in H1FY2007 with a strong growth of 12.1% in the manufacturing sector.
- In Q3FY2007, no major surprises are expected on the earnings front. However since the Diwali festival fell in October in FY2007 and in November in FY2006, some purchases could have already got reflected in the higher Q2FY2007 numbers, especially for the automobile sector. Hence the y-o-y growth in the profits could be slightly muted for Q3FY2007 compared with that in Q2FY2007.
- US housing data continues to be weak; however the third quarter GDP numbers were better than expected. The huge inventory build-up is the main concern, which is feared to limit growth in the last quarter. The market is expecting the US Federal Reserve (Fed) to start cutting rates from March 2007 onwards.
- Normally, December is the year-ending month for most foreign investors, who prefer to allocate fresh funds from January onwards. However there has been a change in this pattern since FY2004 and we expect the foreign institutional investors (FIIs) to actively participate in the stock market during the run-up to the next year's budget. A study of the trend of FII activity in the Indian stock market over the past two fiscals reveals that 51% of the net investments for FY2005 and 50% of that for FY2006 were made between November and February.
- We continue to prefer domestic demand-driven stories like automobiles, banking, capital goods and cement.
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