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Wednesday, June 15, 2005
Geometric Software - Motilal Oswal - BUY
Geometric Software - Motilal Oswal - BUY -
Target >> 670 in 12 months
Tuesday, June 14, 2005
Equitymaster - YES Bank IPO - Snippet
We believe that the bank holds potential for effectively catering to a niche corporate segment (especially due its novel strategy) and utilising the low operating overhead approach (by not focusing too much on retail) to bolster its operating margins. Besides given the credibility of its management and commitment of Rabo Bank (which has one the highest credit ratings in the world), Yes Bank seems to have a lot coming its way. All said, it would be a matter of time before the bank's credentials are established. Also, despite catering to the high-end customers, inability to garner low cost deposits has dampened the bank's business per employee ratio as compared to that of its peers. The valuations of the bank (at the higher end of the band) look attractive when compared to its peers in the private banking space. But for long-term investment we would put it in the high-risk category.
Sunday, June 12, 2005
Weekly Technicals - Hindu Business Line
SBI (Rs 680.4): The stock failed to close above the resistance level of Rs 690. This resulted in a sharp drop on Friday. The recent price patterns suggest that the downward move witnessed on Friday could continue. A decline to the Rs 655-660 range appears likely. Holders of long position may consider dilution of holdings while short positions may be considered on intra-day rally, with a stop-loss at Rs 696. A close below Rs 650 would impart further weakness and would push the stock to the Rs 620-625 range.
Reliance Ind (Rs 566.8): The stock ruled firm as anticipated last week. It managed to move closer to the target zone of Rs 575-580. The share price appears on course to move to this target zone. Hold with a stop-loss at Rs 540 for a portion of the holding and at Rs 520 for the balance. Partial profit booking may be considered on a move to the Rs 575-580 range. Fresh exposures may be avoided for the moment. A close below Rs 540 would be an early sign of weakness and a drop below Rs 520 would impart weakness.
Tata Steel (Rs 334.4): The share price ruled weak in line with the view outlined last week. It dropped below the negative trigger level of Rs 343, which has imparted weakness. The short-term outlook remains bearish and a drop to the Rs 305-310 range appears likely. Short positions may be considered with a price target of Rs 305-310 and a stop-loss at Rs 345. The weak outlook would be negated on a close above Rs 345. A close above this level would warrant liquidation of short positions.
Satyam Computer (Rs 463.8): The price movement last week was marked by a high degree of volatility. The price action was devoid of any significant momentum during the week. The near-term outlook would depend on the price movement in the next few days. A close above Rs 478 would impart bullishness and would help the stock move to the Rs 485-490 band. A drop below Rs 455 would have negative implications that would push the stock down to the Rs 430-435 range.
Infosys (Rs 2213.3): Except for a sharp upward move on Wednesday, the stock did not display any significant momentum during the week. The near-term outlook is bearish and a drop to the Rs 2160-2170 range appears likely. Long positions may be considered on price weakness, with a stop-loss at Rs 2170. Shareholders may remain invested with a stop-loss at Rs 2120. The positive view would be negated if the share price closes below Rs 2100.
Nicholas Piramal (Rs 254.1): Contrary to expectations, the stock ruled weak and also moved closer to the stop-loss level of Rs 249. Investors may remain invested with a stop-loss at Rs 249 (on closing basis) as the stock appears to have the potential to bounce back to the target zone of Rs 315-320.
The positive long-term view would be negated if the stock closes below the stop-loss level at Rs 249. A weekly close below this level would indicate that the stock could drop further to the Rs 220-225 band. Fresh exposures may also be considered on close above Rs 278, with a stop-loss at Rs 254. Exposures may be enhanced on a close above Rs 295.
Aztec Software (Rs 123.2): After a sharp upward move on Monday, the stock failed to make any headway on either direction. The outlook remains bullish and the stock appears on course to move to the target zone of the Rs 145-150 range. Long positions may be considered on weakness, with a stop-loss at Rs 100.
Investors who have entered at fairly lower levels may hold with a stop-loss at Rs 100. Exposures may also be enhanced on a close above Rs 131, with a stop-loss at Rs 115. While a close below Rs 115 would an early sign of weakness, a close below Rs 100 would almost negate the positive outlook.
Hindu Businessline Recommendations
Buy >> Amar Raja Batteries, Bharti Shipyard
Hold >> Gateway Distripaks
Saturday, June 11, 2005
If India were a stock...
…would you buy? This is indeed a grueling question. However, to answer this in a clear manner is even perplexing. We have tried, in this article, to put forth the reasons to buy and not to buy India, if it were listed as a stock on a stock exchange. The points mentioned hereunder are only illustrative and not exhaustive.
Note: Hereunder, 'India ' will be used to refer to as a diversified company and a listed stock.
More >> here
Provogue - Equitymaster - Snippet
We are enthused by the industry in which Provogue operates, owing to the huge growth potential in RTW and of organised retailing in India. Each Provogue store has an average of 1,800 customers per day with a 50% conversion ratio and an average transaction size of Rs 1,600, which is above the industry average. Also, the time to market from ramp to rack is around 45 days, as compared to 100 days even for International major GAP, which is a big positive. Currently, the company outsources 50% of its work and going forward, plans to manufacture only 15% in house, which is a good strategy, as it will make it a focused designer house. Provogue contributes 1.5% to Shoppers Stop's revenues on 0.25% of retail space, which shows the company's brand strength. Also, inspite of roping in Bollywood stars, the advertising to sales ratio is a decent 8%, which is quite sedate, considering the industry the company operates in.
Unfortunately, there is no other listed company, whose business model is exactly same to that of Provogue's. In our view, the company is likely to clock over 25% revenue CAGR growth over the next two years, with revenues increasing to over 1.5 times its current size. This will be primarily led by its expansion plans. Also, as the company plans to increase its own stores, where it reaps higher margins, this is likely to reflect in atleast maintaining current profitability. The stock trades at a market cap/sales of 2x currently and based on our assumption, we anticipate it to be between 1x to 1.3x on FY07E revenues. In contrast, other retail companies are trading higher, which means that there is room for the stock to appreciate.
We believe organised retail is the future and going forward policy decisions like a central uniform VAT and allowing FDI in retail space will fasten the industry momentum. In our view as the issue is steeply valued based on current earnings, the company has left little on the table for the investors. Thus in totality, if one is looking for listing gains, there might me some, but fundamentally too, the stock looks good from a 2 year investment horizon. However, the company's business format is too dependent on up-market clients' and hence may get affected in an economic downturn. Thus, if you have a high-risk appetite, the issue is worthwhile to invest.
Thursday, June 09, 2005
Retirement Planning - Business Today
...And They Lived Happily Ever After Life after retirement can be blissful or miserable, depending on how well you plan for it. Here's what you need to do.
Elderly models are suddenly the flavour of the season. Pick up any newspaper or magazine or switch on any TV channel; chances are you'll find grandfatherly and grandmotherly figures lounging by poolsides, paragliding across exotic beaches and generally enjoying lifestyles that seem like straight lifts from the lives of the rich and famous. All the ads are hawking variations of the same product: retirement solutions. Indians, it seems, are planning for retirement like never before. And feeding this demand frenzy is a slew of financial products-from practically every financial institution in the country-"tailored to suit every individual's unique needs". These ads address a very real fear all of us have: of an abrupt descent into hardship after retirement.
And standing between those two old-age extremes is one eight-letter word: planning. As the Americans say, there's no free lunch. After all, for post-retirement life to be comfortable, you'll need money; and with your regular income drying up, you'll have to depend on what-and how well-you have prepared for it. Most people opt for the easy way out: they stash away a part of their income every month in a bank. In an age when practically everything (house, car, furniture, electronic gadgets and even personal accessories) can be-and are-bought through EMIs (equated monthly instalments), tucking away a fixed amount every month works like just another EMI. However, there are other options as well. Here's a detailed look at some of them.
Planning For Retirement
First, you need to know how much money you'll need every month after retirement. For this, sit with your investment planner and work out an estimate; issues such as your age, salary, lifestyle, inflation and expenditure on dependents have to be factored into this equation. The next step is deciding what investments you need to make to generate that amount after you retire.
Most retirement planners advise you to save 30-35 per cent of your annual income. The first priority for investments, according to Nilesh Shah, President, Kotak Asset Management, should be life insurance. It offers two benefits: it ensures that you get an assured amount after a given time period; and it also ensures that your dependents are financially covered in case of your accidental demise. The next investment option is a mix of public provident fund (PPF), employee provident fund (EPF), post-office schemes, ULIPs (unit-linked insurance plans, which have a combination of equity and insurance components) and mutual funds or stocks.
How you allocate your resources between debt and equity depends entirely on your risk appetite. Investments in equities give average annual returns of about 15 per cent, but carry huge downside risks. Debt instruments are safer but give only 7-9 per cent annual returns. It's your call, and you have to weigh the pros and cons carefully before deciding. The thumb rule says younger people can afford to lean towards equity, simply because they have more time to recover in case an investment goes horribly wrong. Women are increasingly joining the workforce and, consequently, adding to the family income. Says Kapil Mehta, Vice President (Strategic Intiatives and Business Development) at Max New York Life: "I see the intent (in planning for retirement) in women. They are also more aggressive while saving, but need to be more savvy." Women have more or less the same savings options as their male counterparts, give or take some. For instance, life insurance is cheaper for women than men (because women on average live longer and need to pay less premia), but pension plans are more expensive for them (because companies have to pay out money over a longer period of time). So, a working couple can optimise returns if the wife invests in insurance and the husband in pension plans.
Investing in property (second house or commercial property) is arguably the best option, though. Real estate, typically, gives 15-20 per cent annualised returns over a 10-15 year horizon. The rental income can be used to pay off the EMIs (if you've taken a loan to buy the property), during the term of the loan and provide additional cash flows thereafter. Alternatively, you can sell the property after a few years and invest the lump sum you receive elsewhere. But even here, Mehta of Max New York Life offers a word of caution. "People should be very careful about where they invest, because property prices in several areas are artificially inflated and, therefore, bound to fall," he warns.
Now, let us analyse the retirement plans of three individuals who belong to different age groups, and determine what they need to do. These can then serve as benchmarks for your own retirement plans.
Age-group Analysis
It's never too early to start planning for retirement; experts say the best time to start is in your late 20s or early 30s, when most people have settled down in their careers. John James, 30, belongs to this category. James, a senior training manager with BPO firm Vertex India in Gurgaon, lives with his wife Monisha, 29, an hr consultant with Aviva Life Insurance, son Joshua, 5, and daughter Myra, 2. His annual family income is Rs 15.5 lakh, and his investments include a Rs 20-lakh retirement policy, and a Rs 25-lakh life insurance policy, both from Life Insurance Corporation (LIC). He has also bought a Rs 28-lakh property in Gurgaon, which is likely to give him handsome returns in future.
V. Rajagopalan, Chief Actuary, ICICI Prudential Life Insurance, feels that given James' lifestyle and a 5 per cent rate of inflation, he will need at least Rs 1 lakh per month after retirement in 2030. To achieve this, James needs to save 25-30 per cent of his income every month for the next 25 years. The insurance policies are not hefty enough, feels Rajagopalan; they should be ramped up by another Rs 80-90 lakh. James also needs to increase his risk appetite and invest in stocks or ULIPs. And finally, he should review his financial status every three years.
The next age group we consider is 40-49, when you need to increase the tempo of your retirement planning. Some of your earlier investments should be maturing by this time. You can use this to pay for your children's education, for any big ticket items you might want to purchase, or you can re-invest this amount. At this stage in life, health insurance is also a must. Nitin Asthana, 43, Manager (Industry Affairs) at ITC in Bangalore, fits the bill. Asthana-who lives with his wife Seema, 42, a housewife, and teenage sons Shavang and Sharang, and has an annual family income of Rs 12 lakh (plus Rs 5 lakh in perks)-appears more inclined towards equity than James, and has invested in stocks that are now worth a neat Rs 22 lakh. He also has an insurance policy from LIC worth Rs 5 lakh, and has accumulated Rs 17 lakh in EPF and PPF. Further, he's bought a plot of land in Bangalore that's now worth Rs 12 lakh.
Asthana, according to ICICI's Rajagopalan, will require around Rs 70,000 per month after retirement in 2017. For this, he needs to save 30-35 per cent of his income, increase insurance investments to Rs 25 lakh, and scale down his exposure to equity now when the going is good. He also needs to choose a balanced ULIP with appropriate life cover, go in for health insurance, and review his financial status every two years.
The third age group we'll consider is the 50s. When you're in your 50s, all the planning should have been done already. Some really big-ticket expenses, such as children's marriage, or their education abroad, may be around the corner. Here, we'll analyse the investment profile of Ravi Grover, 53, Vice President (Sales), Eveready Industries, who's based in Kolkata. Grover has an annual family income of Rs 16 lakh plus perks, and his family consists of wife Vrinda, 52, a housewife, and son Dhruv, who's pursuing a PhD from the University of Southern California. Grover's investments-a life insurance policy from LIC worth Rs 1.5 lakh (an amount he has already received), stocks worth Rs 5 lakh, and Rs 10 lakh accumulated in PPF-look inadequate. The only plus is a plot he's bought in Gurgaon that's now worth Rs 35 lakh; its value is likely to escalate further by the time he retires. Rajagopalan reckons Grover will require around Rs 40,000 per month after retirement, assuming he does so at 58. To tide over the shortfall he's likely to face, Grover has to invest around 60 per cent of his savings in ULIPs that have high debt content, invest in post-office schemes, government bonds, and go in for medical insurance with a critical illness rider.
These examples should help you get a fix on what you need to do to ensure a comfortable retired life. Remember, starting early is the key. If you haven't done that already, you can't afford to delay any further.
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