Allied Digital Services

Investors with a two-year horizon can buy the shares of Allied Digital Services, a provider of IT infrastructure management and technical support outsourcing services.

Strong growth in its high-margin services business, a healthy domestic presence in the solutions segment and deal-wins from the US that continue to accrue from its acquisition of En Pointe Global, are key positives.

Allied Digital Services

Allied Digital Services

Allied Digital Services

Allied Digital Services

Attractive Midcap Stocks

By Sanjay Chhabria

Autoline Industries Ltd (Rs 128)

(BSE Code- 532797 NSE Code- AUTOIND)

(P/E- 7.6, Market Cap - 156 cr., FY10 Sales- Rs451 cr)

Allied Digital Services

Allied Digital Services

Allied Digital Services

Investors with medium-term investment perspective can consider buying the stock of Allied Digital Services (Rs 259.8). The company provides IT infrastructure management and technical support outsourcing services. After recording a life-time low of Rs 73 in March 2009 the stock reversed direction and has commenced an up-move.

However within this trend, it was on a medium-term corrective downtrend from late August 2009 peak of Rs 279 to late March levels of Rs 210. The stock has recently breached its 21- and 50-day moving average and then down trend-line emphatically.

We notice that there has been an increase in volumes over the past three trading sessions. As the daily relative strength index is nearing the overbought levels and the stock price is facing immediate resistance at Rs 265, investors should exercise caution over the short-termThe weekly RSI has entered into the bullish zone and weekly moving average convergence and divergence crossover signals a buy.

We believe that the stock has the potential to move upwards to our price target of Rs 295 in the mediumterm, following a minor pause around Rs 270. Investors with medium-term horizon can consider accumulating the stock in the zone between Rs 247 and Rs 255, with stop-loss at Rs 223.

FOLLOW UP: ITD CEMENTATION INDIA (RS 239)

The stock gained Rs 5 or 2 per cent over last week.We reiterate our medium-term bullish forecast on the stock. Investors can stay invested with the target and stop-loss mentioned last week. (This recommendation is based on technical analysis. There is a risk of loss in trading.)

via BL

Allied Digital Services

Allied Digital Services

Allied Digital Services

Allied Digital Services

Allied Digital Services

Allied Digital Services

Allied Digital Services Ltd

nvestors with a two-year horizon can buy the shares of Allied Digital Services (Allied Digital), given a healthy change in its business-mix towards services and synergies from acquisition of En Pointe Global Services.

At Rs 423, the stock trades at eight times its likely 2009-10 per share earnings, leaving reasonable scope for capital appreciation.

Allied Digital provides IT infrastructure management and technical support outsourcing services. It primarily acts as a support-partner for IT infrastructure products — desktops, laptops, servers, network software, routers and the like.

Allied delivers its services through its own facilities and centres spread across 132 cities and follows a ‘direct’ model rather than a franchisee model. Through the inorganic route, the company has also made a significant entry into the US market.

Domestically too, the company has a list of clients across verticals such as BFSI, telecom and manufacturing, which increasingly and constantly require considerable hardware maintenance and technical support services, providing further opportunities for Allied Digital.

This is supported by the fact that PC and laptop shipments have increased in India even as the growth, worldwide, continues to be sluggish. Government, Education and Banking verticals have helped sustain growth, according to a recent report from IDC.

The domestic hardware industry is set to grow at a compounded annual rate of 11.4 per cent to Rs 98,816 crore by 2013. IT and IT-enabled services are expected to grow at a compounded annual rate of 22.5 per cent to Rs 86,517 crore by 2013.

Growth in IT infrastructure will entail delivery of technical support and services as well as IT infrastructure management, a good portion of it remotely, thus benefiting players such as Allied Digital.
Changing business-mix

The company has witnessed a rapid change in its business-mix over the last couple of years.

From having 70 per cent of its revenues coming from hardware-intensive deals, Allied Digital now derives 55 per cent of its revenues from services and the rest from delivering solutions that have huge hardware components.

This is reflective of the fact that the company has been able to go up the value chain in terms of its offering.

There are multiple benefits from this shift that could accrue for Allied Digital. One, this component of revenues enjoys better margins through better billing rates.

Two, most of the services for clients abroad are being delivered remotely, through its network operation centre, security operation centre, help desk and technical BPO. This optimises costs for the company.

Finally, most of the services revenues turn out to be annuity revenues by virtue of long-term annual maintenance contracts signed with clients, lending revenue visibility over the long-term.
Inorganic growth

In 2008, Allied Digital acquired an 80.5 per cent stake in En Pointe Global Solutions, a US-based IT infrastructure management and remote management services provider for $30 million.

Apart from strengthening its remote services offering, the acquisition allows Allied Digital to cross-sell to En Pointe’s many clients.

A strategic entry into the US, the biggest outsourcer, has also been made possible through this acquisition. This is evident from a couple of large deals that the company has managed in the US. En Pointe is expected to contribute $60-62 million in revenues to the company in the current fiscal.

Much of the work carried on by En Pointe is also being offshored to India. Over time, the entire operations are envisaged to be transitioned to India. This drastically optimises costs for Allied Digital.

The company has had a 30-32 per cent increase in call volumes to its BPO over the earlier quarter and its order book executable over the next two-three quarters indicates a higher services component. This suggests that the company is poised to maintain a fairly healthy margin profile.

Since its listing in 2007, Allied Digital has witnessed healthy growth rates in both revenues as well as profits. For the 2008-09, the company saw its revenues grow by 90 per cent to Rs 565 crore, while net profits grew by 83 per cent to Rs 79.6 crore.

In the recent June quarter, Allied Digital witnessed a 72 per cent growth in revenues to Rs 158.9 crore over the same period last year, while net profits grew 44 per cent to Rs 22.7 crore.

Competition from more integrated players such as CMC and HCL Infosystems may, however, pose pricing pressures.

via BL

Allied Digital Services

Allied Digital Services

Allied Digital

Allied Digital

Today's Pick - Allied Digital Services

We recommend a buy in Allied Digital Services from a short-term horizon. It is apparent from the charts of the stock that it has been consolidating sideways in a broad range between Rs 700 and Rs 920 since late January. The support at Rs 700 is cushioning the declines while it is unable to get past the resistance at Rs 920.The stock failed to surpass this level in May and again in July. In late August, the counter took support at around Rs 700 and commenced a short-term up move. This reversal was supported by a positive divergence in the daily relative strength index (RSI). The RSI has entered in to the neutral region from the bearish zone and the weekly RSI has reversed taking support at the 40 levels. The stock has crossed over its 21-day moving average recently. The moving average convergence and divergence is also indicating a buy. We are bullish on the stock from a short-term perspective. We anticipate the stock’s short-term up move to prolong further until it hits our price target of Rs 830 in the forthcoming trading sessions. Traders with short-term perspective can buy the stock while maintaining a stop-loss at Rs 714.

via BL

Allied Digital Services

Allied Digital Services

Allied Digital Services

Allied Digital Services

Allied Digital

Allied Digital

Allied Digital Services

Allied Digital Services

Allied Digital Services, Indoco Remedies

Allied Digital Services, Indoco Remedies

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Allied Digital 190 135 to 140

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Alpa Labs. 62 to 68 No premium - trading at discount

Simplex Projects 170 to 185 155 to 160

Spice Communication 46 9.50 to 10

Surychakra Power 20 2 to 3

HDIL 500 31 to 32

Celestial Labs 60 11 to 12

Omaxe Ltd. 265 to 310 55 to 60

Omnitech Info 90 to 105 160 to 165

Zylog System Ltd. 330 to 350 200 to 210

Central Bank 85 to 102 15 to 20

Allied Digital Services Subscription Details

Qualified Institutional Buyers (QIBs) - 74.0398 times

Non Institutional Investors - 88.6939 times

Retail Individual Investors (RIIs) - 38.0776 times

Employee Reservation - 0.8215 times

OVERALL - 60.87 times