Wednesday, January 23, 2008
Satyam, Ranbaxy, Bharat Forge, Bombay Dyeing
Satyam computer
CMP: Rs 354.65
Target price: Rs 500
Merrill Lynch has maintained its buy rating on Satyam Computer, while downgrading its price Target to Rs 500 from Rs 550, after the company suggested bullish outlook next quarter.
“Next quarter could see a 180 basis point margin expansion as wage hike gets further absorbed and RSU (restricted stock unit) charge decreases, implying 11.6% qoq (quarter on quarter) EPS growth,” the investment bank said.
“However, due to higher SG&A (selling general & administration expenses) than earlier envisaged and acquisition related costs (acquired a consulting firm for $35m this quarter), Satyam has guided to a 175bps to 200bps margin decline, up from 175bps earlier,” Merrill added.
Ranbaxy
CMP: Rs 340.60
Target price: Rs 505
Citigroup has maintained its buy rating on Ranbaxy, with a price Target of Rs 505, citing strong earnings guidance for calendar year 2008.
“A strong FTF (file-to-file) pipeline, tie-ups to augment its product pipeline and leverage its strong front end and efforts to move to a more capital efficient model make us positive on Ranbaxy’s short as well as long-term prospects,” the investment bank said. “We believe the stock price now factors in most negatives like difficult global market dynamics, manufacturing related issues with the FDA, slowdown in product approvals, and loss of the Pravastatin 80mg opportunity,” it added.
Bharat Forge
CMP: Rs 284
Target price: NA
ICICI Securities has reiterated its buy rating on Bharat Forge citing accelerated earnings growth over the next couple of years. “Post a muted FY08E (estimate), we expect accelerated revenue and net profit CAGR (compounded annual growth rate) of 14.1% and 28.4%, respectively over FY08E-11E (net profit CAGR of 21.5% over FY07-11E),” the brokerage said.
Such expectations are based on improved outlook for business from India and the US, new long-term contracts moving into commercial production stage, initiatives in the non-automotive space, and margin improvement, it said.
Bombay Dyeing
CMP: Rs 734.20
Target price: Rs 1,500
Motilal Oswal Securities has reiterated its buy rating on Bombay Dyeing, with a price Target of Rs1,500, while valuing the real estate business at Rs1,400 per share and textile business at Rs1,00 per share. “The capital value of Bombay Dyeing’s erstwhile textile plants in Mumbai, located at Dadar and Worli, has witnessed an unprecedented jump over past two years due to sharp appreciation of rentals in Mumbai and drop in capitalisation rates for commercial properties in India,” the brokerage said. Motilal Oswal expects the company’s textile business to turnaround in 2008-09, enabled by its ongoing restructuring exercise.
Nagarjuna Cons
CMP: Rs 396
Target price: Rs 257.20
Prabhudas Lilladher has upgraded rating for Nagarjuna to buy (from outperformer), while raising price Target to Rs396 per share, after a recent meeting with the company. “Given the strong order book and potential, both growth in order book and its composition as well as margin expansion, we have valued the core construction business at 26 times FY09E (estimated) earnings (against 17x previously), which is a 25% premium to its peers.
The premium is on account of faster diversification into newer value accretive segments,” the brokerage said. “Our one-year forward discounted cash flow value works out to Rs 360/share for the core business. We have a value of Rs17/share for the build, operate, transfer portfolio and a value of Rs 28/share for real estate ventures by NCC Urban Infra and Rs 37/share for the Telapur Township project,” it added.
Power off, cheque de!!
The public issue of Reliance Power closed for subscription last week. However, the buzz around it is far from over. According to bankers who are associated with the deal, there have been quite a few withdrawals in the non-institutional segment, which is also popularly known as the HNI (for high net worth individual) category.
Market players said the withdrawals have been on account of two factors: the huge oversubscription and a steady decline in the grey market premium. The massive fall in the secondary market has also played a major role, they said.
“There are enough reasons to believe that many HNIs have issued stop-payment instructions,” said a banker on conditions of anonymity. “It happened in the case of Cairn and now it is happening in R-Power.
The huge oversubscription (in the HNI category) will lead to small allotments, which will make life difficult for people who have leverage to invest in the issue,” he added. The number of people issuing such instructions could not be ascertained.
Nor could the value be obtained. An official who works with one of banks involved in collection of escrow amounts said there have been stop-payment instructions for bids worth around Rs 4 crore. An R-Power official declined to comment on an email questionnaire on this issue.
HNIs typically borrow money at 17-20% to invest in public issues. So, the number of shares allotted and the listing gains play an important role. If both go down, it becomes a loss-making proposition, as the cost of borrowing money or leveraging becomes more than the listing gains.
R-Power’s public issue closed on Friday last week and the HNI category was subscribed more than 190 times. This means an investor bidding for 10 lakh shares would get a little over 5,200 shares. The low allotment is a big blow to HNIs who have borrowed money for one lakh shares.
Such investors could still manage high gains if the stock lists at a massive premium to the issue price, which in this case is Rs 450. If the grey market premium is anything to go by, then the stock is likely to list at a premium of around Rs 200. This is much below the earlier projections of more than Rs 500.
A section of market players are of the view that the recent massive fall could also have triggered a lot of withdrawals, as investors would have preferred to buy stocks at lower levels. In the last one week, the Sensex has lost more than 3,500 points, or 17.4%. Most large-cap stocks have lost anything between 10% and 20%, which provides an excellent buying opportunity with much less risks involved.
Investors looking for a share of R-Power can now may look at Reliance Energy, say dealers. “The stock has fallen by nearly 30% in the last one week and provides excellent buying opportunity,” said a dealer.
Some banks in Ahmedabad are believed to have received calls asking for stop-payment on Reliance Power. Tentative estimates peg the amount of stop- payment cheques at over Rs 100 crore. The final figure would be available by January 23. A few co-operative and public sector banks in Gujarat said that that their branches received instructions for stop-payment for cheques issued in favour of Reliance Power.
The list of public sector banks included Central Bank of India, Dena Bank, Bank of Baroda and Punjab National Bank, while many co-operative banks like Kalupur Bank and Nutan Nagrik Bank also received stop-payment instructions.
An official at Kalupur Bank, which has 33 branches spread across the state, said its Ashram Road branch has received 25 applications. A Nutan Nagrik Bank official confirmed that each of its 18 branches have received three to 15 applications with similar instructions.
Nikunj Patel, a bank employee, said as he was suffering from financial stringency, he preferred to stop payment on the cheque issued in favour of the Futures group.
via Economic Times
Reliance Power "investors" panic - try to stop cheques
Investors queued up outside several banks to issue stop cheque instructions in an effort to retrieve their money put into the Reliance Power IPO.
Poll Results - Mega discount sale over - for now..
Are you buying at these levels?
Yes, juicy! 75 (61.9%)
No, Yeh dil maange more blood! 46 (38.1%)
Total Votes: 121
Tuesday, January 22, 2008
FII sell big
Outflow of Rs 2425.70 crore on 21 January 2008
Foreign institutional investors (FIIs) sold shares worth net Rs 2425.70 crore on Monday, 21 January 2008, compared to their selling of Rs 1356.10 crore on Friday, 18 January 2008.
FII outflow of Rs 2425.70 crore on 21 January 2008 was a result of gross purchases Rs 4896.90 crore and gross sales Rs 7322.50 crore. The 30-share BSE Sensex declined 1408.35 points or 7.41% to 17,605.35 on that day, its biggest single-day point fall on a closing basis.
FII outflow in January 2008 totaled Rs 5187.60 crore (till 21 January 2008).
There are a total of 1,262 FIIs registered with the Securities & Exchange Board of India (Sebi).
Market fall - IPO fun over!
Initial public offerings (IPOs) hitting the market over the next few weeks could face subdued response, analysts said, after the Bombay Stock Exchange’s benchmark index, Sensex, witnessed its biggest intra-day fall in absolute terms.
“Ultimately, IPO pricing depends on market conditions,” said Devesh Kumar, managing director of Mumbai-based boutique financial services firm Centrum Broking Ltd. “There are two options for new public issues—to delay or to reprice. The success of an IPO, in terms of bids received, also depends on its marketing power,” he added, explaining the success of the IPOs of Reliance Power Ltd and Future Capital Holdings Ltd last week. The benchmark index has shed 16.9% since its lifetime high recorded early this month.
IPOs, which are generally looked at as safe investments, have been giving large and rapid returns in recent times, in line with the stock markets that experienced an extended bull run. That’s resulted in a huge appetite for IPOs among investors, but with bears taking over the street in recent days, new offerings are less likely to get the same response.
Many recent offerings, all listed at a considerable premium, are now trading at a significant discount to their offer prices. Nine out of 14 stocks that got listed in December are now trading at a discount to their listing prices and six of them are even trading below their offer prices.
Mankasia Ltd and Renaissance Jewellery Ltd closed at more than a 40% discount to their listing prices while two more stocks that entered the market last month have lost more than 37% since their listing. Porwal Auto Components Ltd, Precision Pipes and Profiles Co. Ltd and Manaksia Ltd are all down more than 32% from their offer prices.
“Reliance Power and Future Capital listings are very crucial at this time. It they list at considerable premiums, the interest in the IPO market will (be) sustain(ed). Till then it is expected to be very subdued,” said Deepak Jasani, head of retail research at HDFC Securities.
The Rs11,700 crore Reliance Power IPO was subscribed close to 73 times and Future Capital’s float was subscribed 132 times.
“Investors have very short memories; if, say, the eighth IPO from now gives good returns, they will jump on the IPO bandwagon again,” Jasani added.
In 2007, 106 IPOs raised Rs48,329 crore from the market. Investment bankers expect at least Rs1 trillion to be raised from the primary market through public issues in 2008.
IPOs that are set to hit the market over the next fortnight include those of Emaar MGF Ltd, Bang Overseas Ltd and IRB Infrastructure Developers Ltd. Emaar MGF is offering 102.6 million shares at a price band of Rs610-690. The $1.8 billion float opens on 1 February.
“If the market continues to fall, some of the firms that are planning to enter the market may decide to wait. We will advise them to do so. They can delay the float even after they receive the nod of the capital market regulator. This has happened in the past...,” said a senior executive of a domestic brokerage who did not wish to be named.
Via Mint
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