3i Infotech

3i Infotech

3i Infotech

3i Infotech

3i Infotech

3i Infotech

3i Infotech

We recommend a buy in 3i Infotech stock from a short-term perspective. It is apparent from the charts of the stock that since March low of Rs 25 the stock has been trending upwards. However, the stock encountered resistance around Rs 100 in early October and was declining till late November. A medium-term support at around Rs 77 arrested the stock's decline. Subsequently, it resumed the intermediate-term uptrend and breached 21- and 50-day moving average by surging 7 per cent on December 22. This upmove persists reinforcing the uptrend. We observe that there is an increase in volumes over the past two trading sessions. The daily relative strength index has entered the bullish zone from the neutral region and weekly RSI is on the brink of entering this zone. Besides, the daily moving average convergence and divergence indicator have indicated a buy and also entered positive territory. We are bullish on the stock from a short-term horizon. We anticipate its rally to continue until it hits our short-term price target of Rs 102. Traders with short-term perspective can buy the stock while maintaining a stop-loss at Rs 88.

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3i Infotech, GAIL, KPIT Cummins, India Telecom, Steel

3i Infotech, GAIL, KPIT Cummins, India Telecom, Steel

3i Infotech

3i Infotech

3i Infotech

Investors with a one/two-year horizon can buy the shares of 3i Infotech.

The stock trades at a modest valuation despite a blended business model, a favourable geographic-mix and strong deal wins in recent times.

The current price of Rs 71 discounts the company’s likely 2009-10 per share earnings by four times, leaving ample scope for capital appreciation.
Service-mix

3i Infotech has three different kinds of offerings — software products, regular IT services and transaction processing. IT products contribute 31 per cent of the revenues, while services and transaction processing contribute 36 per cent and 33 per cent respectively. This model, with a blend of margins- and volume-based services, makes for a holistic service-mix.

Such a service-mix may also insulate the company from cuts in IT discretionary spends, as services and transaction processing address critical operations such as payment processing, mutual funds transactions, insurance payments and basic banking operations.

A more integrated offering becomes necessary in the current environment where clients are engaged in vendor consolidation and may look for vendors with end-to-end offerings in a given vertical. Despite the move away from software products to lower-margin services, 3i Infotech’s operating profit margin continues to sustain at 20 per cent levels.
Geographic mix

Geographically, the company’s footprint in the US has improved to contribute 53 per cent of revenues, largely due to the acquisition of Regulus Group, with much of the rest contributed from India, West Asiant and Asian countries (Europe contributes only six per cent of revenues). Most Indian IT players have experienced an increase in contribution from the US geography over the past year. The National Association of Software and Services Companies (Nasscom) has indicated that the US market and the financial services vertical are stabilising; this makes for a favourable geographic mix for 3i Infotech.

In the recent June quarter, the revenues grew 27.7 per cent over the June 2008 quarter, to Rs 602 crore while net profits grew 8.3 per cent to Rs 63 crore. A slower growth in net profits may be attributable to the steep increase in interest and depreciation. The company may take up a QIP offering to reduce its debt burden; it has already bought back a significant portion of outstanding FCCBs. Valuations appear modest even after factoring in possible equity dilution.

Recent large deal wins span a range of offerings - with orders for anti-money laundering solutions for State Bank of India, banking and treasury products for primary dealers in India and West Asia and domestic e-governance solutions. The company has an order book of Rs 1,450 crore as of June 2009 -about 63 per cent of 2008-09 revenues.

3i Infotech has an equal split between fixed-price and time & material billing modes, which ensures optimal resource planning and realisations.

The company maintains a negligible bench at any point in time

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3i Infotech

3i Infotech

3i Infotech - Annual Report - 2008-2009

3i Infotech - Annual Report - 2008-2009

3i Infotech

3i Infotech

3i Infotech

3i Infotech

3i Infotech

3i Infotech

3i Infotech, Renuka Sugars

3i Infotech, Renuka Sugars

3i Infotech, Navneet Publications, Andhra Bank, Tata Motors

3i Infotech, Navneet Publications, Andhra Bank, Tata Motors

3i Infotech

3i Infotech

3i Infotech: Buy

Investors with a one-two year perspective can consider buying the shares of 3i Infotech in the light of its good business prospects and reasonable valuations.

At Rs 126, the stock trades at 13 times its current year earnings and 10 times its estimated FY-09 earnings. This is a discount to MindTree Consulting and Polaris Software, but a slight premium to Zylog Systems and Hexaware Technologies, all of which have substantial banking and financial services industry (BFSI) exposure. But a niche BFSI focus and superior earnings before tax, depreciation and amortisation (EBITDA) margin (25 per cent) make the stock an attractive ‘buy’ among Tier-2 IT players.

3i Infotech has a robust business model because of a high-margin product-driven business, a healthy geographic spread that includes a significant domestic focus and selective acquisitions to tap new clientele.

A lower dependence on the US and a presence in the critical aspects of the BFSI industry will lead to 3i Infotech being minimally affected, certainly less than its Tier-2 peers, due to the sub-prime crisis.
Business drivers

Products expand margins: 3i Infotech has a near-equal products-services mix in its IT offerings. Product software generates higher margins than traditional volume-based services such as application development and maintenance.

The company also offers products and services spanning the entire gamut of IT requirements for financial services companies to cater to banks, insurance companies, mutual funds and capital markets. It also has offerings in the enterprise resource-planning segment.

This 50-50 mix (between products and services) and end-to-end offering for the BFSI segment gives 3i Infotech an edge over other Tier-2 IT services companies in terms of service offerings and margin profile.

Increasing presence in domestic e-governance and telecom: In domestic markets, 3i Infotech has been able to increase its presence in Government-initiated projects, going by the large-scale deals that it has managed to win recently. The company has won a Haryana Government project for the establishment of e-Disha Ekal Seva Kendra Project.

As a part of the project, the company will set up over 322 citizen service centres. Single-window delivery of services such as issue of land record certificates and ration cards, pension schemes, public grievance redress and payment of telephone and electricity bills, among other services, are envisaged to be provided. 3i Infotech will provide the IT infrastructure and a Web interface to enable these services.

This deal follows a similar one from the Goa Government that entails the setting up of 208 citizen service centres by the company.

The nature and scale of these projects mean that 3i Infotech can be expected to generate a stable revenue stream over a multi-year period. Considering that government spend on providing IT and IT-enabled services is on the rise, scaling up of operations in these service centres can provide the company with additional revenues.

Also, the company has won deals in the telecom space in India. These include provision of IT and BPO services. Although this segment is a small contributor to revenues, a presence in the fastest growing mobile services market in the world makes it well-placed to scale up operations and become a key revenue driver.

Geographic spread: The company has a wide geographic spread in its revenue mix. It generates as much as 56 per cent of its revenues from India, Asia-Pacific and West Asia. The US contributes to about 25 per cent of its revenues, which is significantly lower than other peers in this space.

The company claims that its exposure to banking clientele in the US accounts for only 5 per cent of its global revenues and, even here, its presence is in the cheque and payment processing areas, which are essential operations for banks.

Overall, this spread may help 3i Infotech to be minimally impacted by the appreciation of the rupee against the dollar. West Asia and the Asia Pacific regions are also fast growing ones in terms of IT infrastructure spending and offer opportunities that 3i Infotech may be well-placed to tap.

Acquisitions to enhance growth: 3i Infotech’s acquisition of the US-based J&B Software (J&B) Inc signals its move to expand inorganically and augment its software products offering.

The deal is valued at $25.25 million and 3i has indicated that the acquisition would be immediately EPS-accretive.

J&B is a product software company for functions such as processing and managing automated electronic payment transactions of banks, insurance companies, mutual fund providers, credit-card processors and even telecom companies.

This acquisition creates several advantages for 3i Infotech. First, it would enable the company to expand its North American footprint by tapping J&B’s clientele.

Second, J&B’s product software would be a significant addition to 3i Infotech’s product portfolio in the BFSI segment.

Third, with J&B’s offering, which is mainly on open architecture platforms, 3i would be better placed to tap other high-potential markets such as Asia-Pacific.

3i had earlier entered the European markets through the acquisition of Rhyme Systems in late 2006. This appears to have worked for the company as Europe now contributes significantly to 3i Infotech’s revenues.
Risks

Though the company’s direct exposure to the US loan market is limited, vulnerability to the sub-prime crisis could arise from an indirect exposure, what with investment banking players across the US and Europe announcing huge write-offs.

Operating in the Asian region, especially India, could lead to deal sizes and margins being lower compared to other geographies such as the US. An increasing governmental client base could extend the receivables cycle.

3i Infotech

3i Infotech

3i Infotech , Shivvani, SBI, Marico, BHEL

3i Infotech
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs180
Current market price: Rs130

Results ahead of expectations

Result highlights

• For Q3FY2008 3i Infotech has reported a revenue growth of 14.2% quarter on quarter (qoq) and 84.9% year on year (yoy) to Rs317.3 crore. The sequential growth was aided by incremental revenues of around Rs16 crore (or around a 6% sequential growth) from its recent acquisitions with the bulk contribution coming from J&B Software (around Rs15 crore).
• The operating profit margin (OPM) improved by 40 basis points qoq to 24.7%, despite the increase in the selling, general and administration (SG&A) cost as a percentage of the sales to 22.2% as compared with 21.9% in Q2FY2008. The margin improvement was largely driven by the 65-basis-point improvement in the gross margin due to a favourable revenue mix. The higher margin product business contributed 52% of the total revenues as compared with 46.7% in Q2FY2008. Consequently, the operating profit grew by 15.9% qoq and 83.9% yoy to Rs78.5 crore.
• Moreover, the steep sequential decline in the minority interest to Rs1.2 crore also aided the growth in the earnings. The consolidated earnings grew by 20.9% qoq and 75.5% yoy (after adjusting for the one-time items) to Rs48.5 crore, ahead of our expectations of around Rs45.5 crore.
• In terms of operational highlights, the order backlog continued to show a growth of 7.7% qoq to Rs784.5 crore which was largely contributed by a 13% sequential growth in the order backlog in the product business. The company added 150 employees (net of employee addition from acquisitions) in Q3, taking the total strength to around 6,500 employees. The revenues from the top ten clients (excluding ICICI Bank) declined sharply by 20.1% on a sequential basis.
• The company has maintained its revenue guidance at Rs1,150-1,250 crore and the earnings guidance at Rs165-175 crore. In terms of outlook, the company is not witnessing any change in the demand environment and has limited exposure to the US geography (around 30-32% billing in US Dollars) and banking sector. It exposure to the US banking sector is around 20% (largely due to the acquisition of J&B Software) that is largely related to cheque and payment processing, and would not be affected by the current uncertainties.
• At the current market price the stock trades at 13.7x FY2008 and 10.9x FY2009 earnings estimates. The stock has outperformed the tech index and the other tech stocks in the last quarter and we believe that it would continue to do so. That's because of the company's limited billing in US Dollars and exposure to the US banking sector. We maintain our Buy call on the stock with the price target of Rs180 (14x FY2009E earnings).

Shiv-Vani Oil & Gas Exploration Services
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs670
Current market price: Rs611

Price target revised to Rs670

Result highlights

• Shiv-vani Oil & Gas Exploration Ltd (SOGEL) reported a healthy growth of 73.6% in its consolidated revenues to Rs126.7 crore in the quarter ended December 2007. In addition to an increased fleet base and higher realisations, the growth was partially contributed by incremental revenues of around Rs20 crore from the coal bed methane project.
• The operating profit margin (OPM) improved by 560 basis points to 41.5% primarily driven by the improvement in realisations and better utilisation of its fleet. The positive impact of the higher realisations is clearly reflected in the 390-basis-point decline in the drilling expenses (and other operational expenses) as a percentage of the sales. The operating profit grew by 100.8% to Rs52.6 crore.
• The decline in the depreciation charges as a percentage of the sales and the lower effective tax rate enabled the company to report a relatively higher growth of 178.7% in its earnings to Rs26.7 crore in Q3FY2008.
• In the first four quarters, the consolidated revenues and earnings have grown by 42.8% and 104% respectively. The OPM has improved by 350 basis points to 38.5% during the same period. The company was able to more than make up for the steep increase of 50% in the staff cost by scale benefits (savings of 120 basis points in the overheads cost as a percentage of the sales) and higher realisations (saving of 290 basis points in drilling expenses as a percentage of the sales).
• In term of operational highlights, the company bagged an order worth Rs261 crore to deploy four onshore rigs with Oil India for a period of two years. The average day rate works out to around $22,600, which is around 10-15% higher than the recent contracts with day rates in the range of $18,000-20,000. The contract has further boosted the company's existing order backlog of over Rs3,000 crore, thereby improving its revenue growth visibility.
• To factor in the higher than expected margins, we are revising upwards the earnings estimates for FY2009 and FY2010 by 5.4% and 8.6% respectively. At the current market price the stock trades at 16.9x FY2009 and 12.8x FY2010 estimated earnings. We maintain our Buy call on the stock with a revised price target of Rs670 (14x FY2010E earnings).

State Bank of India
Cluster: Apple Green
Recommendation: Buy
Price target: Rs2,680
Current market price: Rs2,405

Q3FY2008 results: First-cut analysis

Result highlights

• The public sector behemoth State Bank of India (SBI) reported a profit after tax (PAT) of Rs1,808.6 crore for Q3FY2008, beating our estimate of Rs1,413 crore. The PAT was up 69.8% year on year (yoy) and 12.3% quarter on quarter (qoq) on the back of a strong all-round growth. On a consolidated basis, the Q3FY2008 PAT stood at Rs2,442.3 crore, up 55.1% yoy and 10.8% qoq.
• The net interest income for the quarter stood at Rs4,256 crore, registering a robust growth of 23.8% yoy on the back of a strong growth in the advances and an improvement in the net interest margin (NIM).
• The NIM during the quarter improved by eight basis points sequentially on the back of an improvement in the yield on assets, which was partially offset by the higher cost of funds. On the year-on-year (y-o-y) basis, the NIM continued to remain under pressure. However, we expect the NIM to improve going forward as the high-cost bulk deposits raised earlier get repriced at lower rates.
• The non-interest income witnessed a whooping growth of 48% yoy to Rs2,697 crore on the back of jump in treasury income and foreign exchange (forex) income. The treasury income was up 107% yoy to Rs644 crore while, the forex income tripled yoy to Rs431 crore. Meanwhile, the core fee income growth was robust at 19% yoy.
• The operating expenses during the quarter grew by 13.2% yoy to Rs3,294 crore. The growth was mainly due to a 25.2% y-o-y increase in the other operating expenses as the bank expanded the coverage of its core-banking solution (CBS) platform aggressively. Meanwhile, the staff expenses grew by a moderate 8% yoy. Going forward, we expect the other operating expenses to taper down as the bank has been able to bring ~95% of its branches under the CBS. The core operating profit for the quarter stood at Rs3,016 crore, up a strong 48% yoy and 32.4% qoq.
• During the quarter, the provisions increased significantly to Rs804 crore compared with Rs85 crore for the previous quarter. While the non-performing asset (NPA) provisions increased in line with the strong credit growth, the provisions on investments declined to Rs57.5 crore compared with Rs166.6 crore for the year-ago period.
• Net advances at the end of the quarter reached Rs390,312 crore indicating a growth of 26% yoy and 8.8% qoq. In line with the industry trend, the advances experienced an uptick during the quarter after a moderate growth in the previous quarter (6% qoq for SBI). The uptick in advances was mainly driven by a strong growth in corporate segment, while retail and other advances continued to clock a moderate growth. Meanwhile, the deposits at the end of the quarter stood at Rs510,132 crore, up 26.2% yoy primarily due to the high-cost deposits. The low-cost deposits (current & savings) reached Rs202,642 crore. Owing to a lower current account and saving account (CASA) growth relative to high-cost deposits, the CASA ratio declined to 39.7% from 42.3% a year ago.
• Asset quality continued to improve further during the quarter as evidenced by a sequential reduction of Rs220 crore in the net non-performing assets (NNPA), while the gross non-performing assets (GNPA) were largely stable at Rs10,641. In percentage terms, the GNPA as percentage of advances reached 2.7% compared with 3.3% for the year-ago period, while the NNPA as percentage of advances reached 1.4% compared with 1.6% for the year-ago period.
• The capital adequacy ratio at the end of December 2007 stood at a comfortable 12.3% compared with 12.8% for the previous quarter and 11.9% for the year-ago period. During the quarter, the bank raised Rs916 crore by issuing perpetual bonds to boost its Tier- I capital. In addition, the bank has lined up a mega rights issue to raise Rs16,730 crore, which would further boost the capital adequacy for the bank.
• Besides the strong stand alone performance, SBI's various subsidiaries and associate banks continued to clock a healthy growth. Notably, SBI Life, the life insurance arm of the bank, reported a PAT of Rs37.7 crore compared with a loss of Rs 33.5 crore for the year-ago period.
• Following the bank's announcement of its plans to merge the associate banks in itself, the labour unions for the public sector banks have declared their strong opposition against the merger plan. A recent meeting between the Indian Bankers Association and the labour unions on their demands has not yielded any results. Meanwhile, the proposed merger of the State Bank of Saurashtra has received a nod from the boards of both the banks.
• At current market price of Rs2,405, SBI trades at 22.5x its 2009E earnings per share, 8.9x its 2009E pre-provisioning profit and 2.6x its 2009E book value. Currently we are reviewing our earnings model following the significantly higher than expected results.

Marico
Cluster: Apple Green
Recommendation: Buy
Price target: Rs70
Current market price: Rs62

Momentum continues

Result highlights

• Marico Industries Ltd's (Marico) sales growth in Q3FY2008 was in line with our expectations. The company posted a strong top line growth of 23.7% year on year (yoy) to Rs506.2 crore aided by an impressive performance across the businesses. The stirring top line growth was a result of a 19% organic growth and a 5% inorganic growth.
• Affected by a hefty 34% year-on-year (y-o-y) increase in the staff cost and a higher-than-expected increase in the other expenses (up 32.9% yoy to Rs81.2 crore) the operating profit margin (OPM) declined by 79 basis points to 12.68%. The operating profit thereby grew by 16.4% yoy to Rs64.2 crore.
• The raw material cost was under check as copra prices during the quarter were lower by about 10-12% yoy. However, the input cost for edible oils continued to rise and was up by 20-30% across categories. Thereby the adjusted net profit grew by 57.1% to Rs 43.53 crore.
• The company changed its method of charging the depreciation on the factory building that led to a one-time charge of Rs4.29 crore. There was a one-time exchange rate gain of Rs 7.8 crore. After this the reported net profit stood at Rs45.9 crore, which was up 61.5% yoy.
• Marico continued to implement its three-pronged growth strategy of enhancing the existing products, introducing new products and achieving inorganic growth through acquisitions. During the quarter it entered the South African ethnic hair care and health care markets by acquiring the consumer division of Enaleni Pharmaceuticals, which has an annual turnover of ~Rs53 crore.
• We remain positive on Marico's businesses and maintain our Buy recommendation on the stock with a price target of Rs70. At the current market price of Rs62, the stock trades at 18.5x our FY2009E earnings per share (EPS) of Rs3.30.

Bharat Heavy Electricals
Cluster: Apple Green
Recommendation: Buy
Price target: Rs3,289
Current market price: Rs2,165

Q3FY2008 results: First-cut analysis

Result highlights

• For Q3FY2008, Bharat Heavy Electricals Ltd (BHEL) has reported a growth of 14.4% yoy in its net sales to Rs4,964.2 crore. The growth is below expectations.
• On segmental basis, the power business of the company has reported a growth of 18.8% in revenues to Rs4,204.6 crore. The revenues of the industry business have grown by 12.7% to Rs1,435.4 crore. A slowdown in the revenue growth was witnessed in both the businesses. The profit before interest and tax margin for the power business has declined by 340 basis points year on year (yoy) to 20.5% while that of the Industry business has expanded by 490 basis points yoy to 17.2%.
• The operating profit has grown by a meagre 7.4% to Rs997.6 crore as against Rs929.4 crore in Q3FY2007. The operating profit margin has declined by 130 basis points yoy to 20.1% mainly on account of a higher staff cost. The staff cost has been high due to the provisioning made by the company in anticipation of a wage hike in the Sixth Pay Commission. The operating performance has been largely in line with our expectation.
• The other income has grown by 42.8% to Rs264.9 crore vs Rs185.5 crore in the corresponding quarter of the last year.
• The interest cost has declined by 18.3% to Rs9.8 crore while, the depreciation charge has risen by 15.1% to Rs76.2 crore.
• The net profit has grown by 15.6% to Rs771.9 crore against our expectation of Rs859.2 crore. The lower than expected revenue growth has led to a lower profit growth.
• At the end of Q3FY2008 the unexecuted orders book of the company stood at Rs78,000 crore, that is a growth of a whopping 67% yoy. The order flows continue to be robust for the company.
• We shall bring to you a detailed analysis of the results and discuss the reasons for the dismal performance of the company subsequent to its analyst conference. However the growth outlook for the company is robust and we remain bullish on the stock.

Nitin Fire Protection, NIIT Technologies, Shivvani Oil, 3i Infotech

Nitin Fire Protection, NIIT Technologies, Shivvani Oil, 3i Infotech

Kotak Mahindra Bank, Titan Industries, Salora Intl, 3i Infotech, Colgate Pamolive

Kotak Mahindra Bank
CMP: Rs 1,122.35
Target Price: Rs 1,363
Motilal Oswal Securities has initiated coverage on Kotak Mahindra Bank with a buy rating and a price target of Rs 1,363. “Kotak (Bank) is aggressively building up its banking franchise, with focus on affluent customers and retail services. Its asset management business should see exponential growth,” the Motilal Oswal note to clients said.

“Though its insurance business has been losing market share, we expect better utilisation of Kotak’s distribution strength to change this. We believe KMB deserves premium valuations, given the strong growth expected across its businesses, fast traction in earnings, and quality management,” the note added.

Titan Industries
CMP: Rs 1,531.70
Target Price: Rs 1,850

Merrill Lynch has initiated coverage on Titan Industries with a buy rating and a price target of
Rs 1,850, terming it a “high growth domestic consumption story.” “We expect Titan’s watch business to benefit from mix up-trading and distribution moving more towards high margin channel of ‘World of Titan’”.

“In jewellery, we expect volume growth to remain explosive at around 40% as Titan forays into second-tier cities with the new value format “Gold Plus”,” the Merrill note to clients said. “In the premium “Tanishq” format, larger stores and higher efficiencies should drive margins. Lastly, we expect the new venture of prescription eyewear to take off and account for 4% of EBITDA (earning before interest, taxes, depreciation and amortisation) FY10,” the note added.


Salora Intl
CMP: Rs 223
Target Price: Rs 312

Parag Parikh Financial Advisory Services has assigned a buy rating to Salora International with a price target of Rs 312. “The company derives 85% of its revenues from the telecom & infocom distribution business and more than 90% of the EBIT (earnings before interest and taxes) from the business of distribution, thus making it a clear contender for a re-rating from a CTV components manufacturer to a full-fledged distributor,” the PPFAS note to clients said.

“The company has active plans to get into retailing of products that it is already distributing; the modalities of the same will be out very shortly. The company is very well placed to show a topline growth of above 35% for some time in our expectations,” the note further said, adding that the recently initiated restructuring of the CTV components business will keep overall profitability intact.


3i Infotech
CMP: Rs 134.60
Target Price: Rs 175

ICICI Securities (I-Sec) has initiated coverage on 3i Infotech with a buy rating and a price target of Rs 175. “3i Infotech, with a balanced mix of software products and services (~1:1), has differentiated itself from peers by adopting a diversified business model with a strong foothold in high-growth areas.

With software services providing stability to revenue stream, products add non-linearity to the overall business model,” the I-Sec note to clients said. Additionally, the sharp rupee appreciation, which has baffled the whole software sector, is relatively a lesser concern for 3i Infotech as it derives around 31% revenues from the domestic market and the net dollar exposure is estimated to be less than 10%. Also, 3i Infotech remains comparatively aloof from other sectoral worries such as the subprime issue, impending economic slowdown in the US, wage inflation, attrition,” the note added.

Colgate Palmolive
CMP: Rs 410.35
Target Price: Rs 482

Citigroup Global Markets has assigned a buy rating to Colgate Palmolive with a price target of Rs 482. “Colgate’s business has demonstrated strong growth over the eight quarters, with sales growing in excess of 15%. It has gained share in rural areas through its ‘Cibaca’ brand and has also rolled out innovative toothpaste variants at the higher end, which have gained strong acceptance and helped accelerate growth,” the Citigroup note to clients said.

“With major capital expenditure behind it, and incremental tax and excise savings from its new plants, cash generation is likely to accelerate. We estimate about Rs 1,230 crore of free cash generation over the next three years, more than two times of what was generated over the previous three years and as such, dividend payout could increase,” the note added.