Broking House - Prabhudas Liladher
Recommendation - Buy
Healthy profits with an attractive valuation...
In its report dated 4th April 2007, Prabhudas Lilladher (Prabhu) Recommends Buy on Yes Bank at its Cmp of Rs 140 With Target of Rs 185.
Prabhudas Lilladher (Prabhu) mentions that Yes Bank was started on a green field platform in August 2004. This was the time when interest rates had fallen considerably and banking sector started witnessing high growth in credit off take. Prabhu highlights that this not only helped Yes Bank in establishing itself in a highly competitive environment but gave it an edge over other banks in terms of starting with a clean balance sheet. Yes bank started with focusing on corporate loan book to leverage on its corporate relationships and stayed away from venturing into retail assets.
Prabhu throws light that in a rising rate environment, when most of the banks face higher level of uncertainty on bottom line due to depreciation losses on investment book as well as higher provisioning cost due to probable increase in delinquencies; Yes bank offers a safer bet as it is newly set up on green field platform. This gets complemented by professional and well skilled manpower supported with state of the art technology platform, says Prabhu.
Prabhu highlights that Yes Bank doesn''t carry any legacy of bad loans; so far Yes Bank has focused on corporate and SME loans where it has reported aggressive loan growth. This is the segment which in comparison to retail segment has better absorbed the various interest rate hikes without any meaningful slowdown in credit demand or increase in delinquencies. Green filed platform coupled with robust risk management system in place has resulted in zero level of net as well as gross NPAs.
Prabhu states that Yes Bank is growing its branch network quite aggressively. Out of 60 branch licenses, it has set up 29 branches as on Q3 FY 07 and expected to roll out the remaining branches in next couple of months and it is expected to reach 100 mark by end FY 08.
Parabhu believes that Yes Bank given its green field platform, superior infrastructure and high growth potential offers attractive investment opportunity. Give its strong balance sheet and healthy profitability it could be one of the prime acquisition target as well. Prabhudas recommends BUY on the stock with a price target of Rs 185, which translates to 3.5x FY09 ABV.
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Broking House - Citigroup Global Markets Inc
Recommendation - Buy
Capacity expanding with high level of gearing.
In its report dated 4th April 4, 2007 Citigroup Global Markets Inc (Citi) recommends a "Buy" on Aban Offshore Ltd (Aban) at its current price of Rs. 2,052 with a target price of Rs. 2,850.
Citigroup Global Markets Inc (Citi) mentions that Aban Offshore Ltd (Aban) is the flagship company of the Aban group which was established in 1986 as an Indo-US joint venture in offshore drilling. Aban is the largest offshore oilfield service provider in the private sector in India, says Citi.
Citi states that Aban''s acquisition of Sinvest has created a material, leveraged play on the tight market for offshore drilling services. Citi further adds that re-pricing of existing rigs and a significant pipeline of 9 drilling assets coming on-stream over the next 2 years will help Aban grow consolidated earnings 20.5x over FY06-FY09E.
Citi points out that Aban''s consolidated net debt of US$210 m presents a very high level of gearing given its equity base of US$65 m. Citi also initiates that gearing will come off very rapidly with strong cash flows from operations (US$130 m over FY08- 10E) and further equity infusion in the parent entity (with consequent dilution) cannot be ruled out.
Citi maintains that the capacity is expanding across all offshore asset classes, but there is no evidence that additions have exceeded demand growth. Citi forecasts E&P spending to rise by 7% in CY07, following a 26% growth in 2006. Spending plans are now building in higher long-term oil prices (US$53.7/bbl); however, sensitivity to oil price changes has declined.
Citi makes us aware that slowdown in offshore services demand growth could have a huge impact on Aban given its high gearing. Citi further states that re-pricing of 3 of Aban''s domestic rigs, due this quarter, will be a short-term trigger for the stock.
Hence, Citi raises target price for Aban to Rs2850, from its earlier price of Rs1700 based on 8x FY09E consolidated EPS, in-line with target multiples for global peers. Citi reiterates Buy, but raise the risk rating on the stock to High from Medium due to Aban''s high financial leverage.
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Broking House - HSBC Securities
Recommendation - Overweight
Newspaper industry to achieve vertical growth
In its report dated 30th March, 2007 HSBC securities and capital Markets (HSBC) upgrades HT Media Ltd. (HT) to "Overweight" at its CMP of Rs.178 with target price of Rs.230.
HSBC mentions that the profile of HT Media is transforming from a print company to a comprehensive media offering with the addition of radio and internet businesses. HSBC believes that the media channel and geographical diversification will increase exposure to fast growing radio and on-line segments, and also insulate earnings from shifts in spend by medium and advertising category.
HSBC expects the traditional print business to keep on growing ad revenues by over 20% pa and also anticipates that new ventures in radio and the internet will provide an additional leg of growth. HSBC expects a 28.7% in top line CAGR FY06-08e as the group''s strategy of bundling ad space accelerates HT Media''s ability to garner revenues from geographical expansion and new media formats.
HSBC highlights that HT''s new business newspaper, Mint produced in association with the Wall Street Journal has been successfully launched with an initial print order of 80,000 copies achieving a No.2 position in Delhi and Mumbai market combined. The group also plans expansion into other cities making Mint an important weapon in HT media''s arsenal.
HSBC mentions that HT''s new internet venture plans to leverage on its newspaper business to achieve verticals in matrimonial, real estate and recruitment. HSBC estimates on-line revenues of INR 25 cr in FY08E and growing to INR 130 cr by FY11E.
HSBC points out that HT Media''s "Fever 104 FM" gives the company exposure to FM radio, one of the fastest growing media markets in India and estimates revenue generation of INR 40 cr in FY08E and EBIT break even by FY10E.
HSBC anticipates that HT''s high operating leverage will ensure that profit grows much faster than revenues, driving 126% EPS growth FY07-FY09E. HT media''s FY08E PE multiple of 24.0x is lower than Indian TV stocks'' average PE of 30.8x, but the stock offers superior EPS growth of 62.4%, compared to the 30.4% average in the TV sector. HSBC mentions 12-month PE multiple/DCF price target emerges at INR 230, implying 29.7% absolute upside and upgrades rating to Overweight