Stock report on Gateway Distriparks Ltd. A mid cap stock from logistics sector.
Company
Gateway Distriparks Ltd. is a joint venture promoted by a consortium (NTSC, Parameshwara Holdings Ltd, Windmill International Pvt Ltd and Thakral Corporation Ltd) to conduct the business of Warehousing, Container Freight Stations, providing handling and clearance of sea borne Exim Trade in containerized form.
The company operates container freight stations (CFS) at Navi Mumbai, Chennai, Vishakapatnam and Inland Container Depot at Garhi Harsaru. The CFS at Navi Mumbai, spread over 14 hectares, has a capacity to handle 216,000 TEU’s per annum.
The CFS at Chennai spread over 7.5 hectares, having a capacity to handle 40000 TEU’s, is situated at a distance of 16km from Chennai Port. (TEU is Twenty Foot Equivalent). The CFS at Vishakapatnam, commissioned in August 2005, has a capacity to handle 30000 TEU’s per annum and would cater to the traffic movement at the new container terminal at Vishakapatnam.
GDL receives import and export cargo from its clients at its CFS located close to ports and they are suitably transported to their final destination.
Its subsidiary, GRF (Gateway Rail Freight) had commenced container rail operations during the year ended March 2008, with the deployment of eight container trains. And by the end of March 2010, GRF owned and operated 18 container trains and 235 road trailers for meeting the needs of customers in the domestic and the export-import segment.
GRF had posted a net loss of Rs 12.7 crore on consolidation after minority basis for year ended March 2010. In addition, GDL through its subsidiary Snowman Frozen Foods (SFF) is one of the few pan-India cold chain logistics players. Gateway Distriparks has a 48.9% stake in Snowman Frozen Foods at the end of March 2010.
Stock financial details
With India's external trade growing, company's CFS volumes grew 5.6% year-on-year to 83, 500 TEUs in the second quarter. Average realizations improved 6.5% per TEU. It helped the company’s standalone operating profit margin improve 80 basis points year-on-year to 49.8% in the September 2010 quarter. Its net sales also rose 6.1% in the quarter.
Gateway Distripark is a consistently dividend paying stock for past 4 years. Dividend yield has been 3-4%. In year 2010, dividend yield was Rs. 4.5 (>4% at current stock price) which makes it one of the best dividend paying stock.
Stock Valuations
Gateway Distriparks is at Rs 107 per share and has a P/E of 15.06 on a trailing four quarter basis. Considering expansion plans and robust economic prospects in the country, investors may consider to buy stocks of Gateway Distriparks for long term investment portfolio.
Correction in Indian stock markets - Have we reached bottom yet?
On 11Th January 2011, I had written in my article “Stock market India : correcting now, what's next?", about further correction in Indian stock markets. SENSEX was at 19,196 that time, I had mentioned 18,500 to 18000 levels for correction. We are at 18396 today, have we reached the bottom yet?
As far as SENSEX earnings levels goes, right now, at 18,396 we are near to the 16 multiple of earnings which is a norm of good levels for stock markets. So does that mean we are done with correction and we should start buying stocks now? NO! Let’s look at some of the important factors in 2011 before you rush for investing in stocks and mutual funds at these levels.
As I had talked about American stock markets in above mentioned article, American companies are reviving from recession slowly and they are expected to show good if not superb financial numbers in 2011. For FII’s who have been investing heavily in Indian stock markets, this could be a better opportunity to find some gains at home, and they are going there. So when FII money goes out of Indian stock markets, Indian stocks are not going to fly on their own or on only domestic money. Overall macro economics are still not good in Europe and US. America and China are fighting silent currency wars. Definitely not a good sign.
We are very close to our budget session. UPA government is already facing heat on account of many scams, political events and corruption charges. Opposition is using every opportunity to make government unstable. And UPA itself is not performing well at all. Inflation control, corruption, political unrest, UPA government has failed in every area. I just read a news that a consortium of biggest corporate honchos have written a letter to government about bad governance they are experiencing. UPA government doesn’t looks like in place to get the finance bill passed which could be a big unrest for stock markets too.
Inflation. Everyone, from pan wala, rikshawala to big corporate are talking (crying?) about rising rates of commodities and food. How is government going to control this? It seems they do not have any answer, at least as of now! It will be interesting to see budget and provisions government makes to tackle inflation. Interest rates are rising and they are going to only rise for some time.
Crude oil is going up, up and up. It is the only direction it knows as it seems. OPEC is of opinion that crude oil at even $120 is reasonable. Right now it’s in 90’s. Oil prices are going to only increase in future pressurizing again transportation, inflation and so commodities.
Although stock markets at these levels look reasonable, they look like they have already factored in the growth numbers for this and next year. So stocks are definitely not cheap at these levels. It is quite possible that we might witness further correction in next few weeks/months before market reaches reasonable valuations. One may start to buy stocks in small quantities at every dip for long term investment horizon form hereon. Start making your list of stocks to buy and be ready!
As far as SENSEX earnings levels goes, right now, at 18,396 we are near to the 16 multiple of earnings which is a norm of good levels for stock markets. So does that mean we are done with correction and we should start buying stocks now? NO! Let’s look at some of the important factors in 2011 before you rush for investing in stocks and mutual funds at these levels.
As I had talked about American stock markets in above mentioned article, American companies are reviving from recession slowly and they are expected to show good if not superb financial numbers in 2011. For FII’s who have been investing heavily in Indian stock markets, this could be a better opportunity to find some gains at home, and they are going there. So when FII money goes out of Indian stock markets, Indian stocks are not going to fly on their own or on only domestic money. Overall macro economics are still not good in Europe and US. America and China are fighting silent currency wars. Definitely not a good sign.
We are very close to our budget session. UPA government is already facing heat on account of many scams, political events and corruption charges. Opposition is using every opportunity to make government unstable. And UPA itself is not performing well at all. Inflation control, corruption, political unrest, UPA government has failed in every area. I just read a news that a consortium of biggest corporate honchos have written a letter to government about bad governance they are experiencing. UPA government doesn’t looks like in place to get the finance bill passed which could be a big unrest for stock markets too.
Inflation. Everyone, from pan wala, rikshawala to big corporate are talking (crying?) about rising rates of commodities and food. How is government going to control this? It seems they do not have any answer, at least as of now! It will be interesting to see budget and provisions government makes to tackle inflation. Interest rates are rising and they are going to only rise for some time.
Crude oil is going up, up and up. It is the only direction it knows as it seems. OPEC is of opinion that crude oil at even $120 is reasonable. Right now it’s in 90’s. Oil prices are going to only increase in future pressurizing again transportation, inflation and so commodities.
Although stock markets at these levels look reasonable, they look like they have already factored in the growth numbers for this and next year. So stocks are definitely not cheap at these levels. It is quite possible that we might witness further correction in next few weeks/months before market reaches reasonable valuations. One may start to buy stocks in small quantities at every dip for long term investment horizon form hereon. Start making your list of stocks to buy and be ready!
Stock analysis : Oriental Bank Of Commerce (OBC)
Stock analysis of Oriental Bank of Commerce (OBC) along with target price.
OBC has one of the widely spread networks in northern part of India. At the same time, bank is increasing its network in other parts of country as well. As in March 2010, OBC has a network of 1,508 branches and it has plans to add 175 branches by march 2011.
OBC is a public sector bank with market capitalization of Rs. 8821 crores as on date. One of the important factor for profitability of a banking sector stock is it's net interest margin i.e NIM. It is basically difference between the interest rate at which bank accepts deposits from customers and interest rate at which bank disburses loans. OBC bank's NIM was around 3.3% for last 3 quarters which is not bad. But going forward, with interest rates increasing every few months, NIM might get affected.
During the period FY06-FY10, advances and deposits grew at a CAGR of 20% and 19% respectively. The management is expecting 22%-23% business growth in FY11.
Another important criteria for evaluation of bank's performance is it's Non Performing Assets i.e. NPA. OBC's NPA stands below 1% which is good for bank.
At the P/E ratio of 6.45 at current stock price, OBC is certainly at attractive stock valuation level compared to it's peers from banking sector. Price to book value ratio stands at 1.2 which is very good. Dividend yield for OBC is at 2.58% which makes it one of the good dividend yielding stocks from banking sector.
Looking at growth expected and stock valuations, at current stock price of Rs. 352, OBC is available at attractive level and one may buy stocks at any dips/current price for medium term to long term investment. Medium term target could be Rs. 410-415.
OBC has one of the widely spread networks in northern part of India. At the same time, bank is increasing its network in other parts of country as well. As in March 2010, OBC has a network of 1,508 branches and it has plans to add 175 branches by march 2011.
OBC is a public sector bank with market capitalization of Rs. 8821 crores as on date. One of the important factor for profitability of a banking sector stock is it's net interest margin i.e NIM. It is basically difference between the interest rate at which bank accepts deposits from customers and interest rate at which bank disburses loans. OBC bank's NIM was around 3.3% for last 3 quarters which is not bad. But going forward, with interest rates increasing every few months, NIM might get affected.
During the period FY06-FY10, advances and deposits grew at a CAGR of 20% and 19% respectively. The management is expecting 22%-23% business growth in FY11.
Another important criteria for evaluation of bank's performance is it's Non Performing Assets i.e. NPA. OBC's NPA stands below 1% which is good for bank.
At the P/E ratio of 6.45 at current stock price, OBC is certainly at attractive stock valuation level compared to it's peers from banking sector. Price to book value ratio stands at 1.2 which is very good. Dividend yield for OBC is at 2.58% which makes it one of the good dividend yielding stocks from banking sector.
Looking at growth expected and stock valuations, at current stock price of Rs. 352, OBC is available at attractive level and one may buy stocks at any dips/current price for medium term to long term investment. Medium term target could be Rs. 410-415.
Small cap stock to buy : Agre Developers
Ashish Chugh, author of Hidden Gems, recently talked about two multibagger small cap stocks to buy on CNBC-TV18. Agre Developers is one of the two small cap stocks he recommended.
Below is transcript of his discussion on channel CNBC-TV18 outlining merits of Agre Developers as a "small cap stock to buy".
Agre Developers is a new company which came into existence just about 20-25 days back. It is a Pantaloon group company where there was a scheme arrangement wherein the mall management and mall development business of Pantaloon Retail was demerged and put into a separate company called Agre Developers. Shareholders of Pantaloon Retail were given one share of Rs 10 of Agre Developers for every 20 shares of face value of Rs 2.
As things stand today, the equity of Agre Developers is about Rs 11 crore and the shareholders of Pantaloon Retail became the shareholders of Agre Developers via the scheme of arrangement. The idea behind this demerger was to enable growth of the mall development and mall management business as a separate entity.
The current price is about Rs 48-49, equity of Rs 11 crore which means that the marketcap of the company is about Rs 50-55 crore. So you have a Pantaloon group company available at a marketcap of about 50-55 crore. Now, if you see the financials, for the first six months of the current financial year, the revenues are about Rs 45 crore, the company made a net loss of about Rs 1 crore. With annualized revenues of about Rs 90 crore, the marketcap is just about Rs 55 crore, which is not even one time of revenue.
If you take a look at the balance sheet, the equity is about Rs 11 crore and reserves are close to Rs 250 crore, which means a book value of about Rs 240. As against the book value of Rs 240, you have the stock available at less than Rs 50, which is just about 20% of the book value.
If you see it in totality, they have a debt of about Rs 85 crore on the balance sheet, which means an enterprise value of about Rs 130-140 crore. As against the enterprise value of Rs 140 crore, the company has got a gross block of about Rs 215 crore and also capital work in progress of Rs 40 crore. Out of this gross block of Rs 215 crore, about Rs 80 crore is hard asset in the form of land and building. This is something which gives a lot of comfort as far as the downside in the stock is concerned.
Other small cap stocks discussed recently
They also currently manage about six malls while they have about 24 malls, which will be operational in FY12. In the next one-two years, you can see a massive scalability of operations. Now, this is probably the only listed company involved in mall management business which is a niche business. Being the only listed company and not having any peer group comparison, the valuation, I believe, is just a perception.
From these levels, the downside looks extremely restricted but given the scalability and the management behind it, this could indeed turn to be a real multibagger if held on for maybe three-five years. If you see the shareholding pattern of the company, promoters hold close to 44%. There is a huge amount of institutional holding in the company - institutions hold close to 37% of the company. A lot of these institutional investors may not be interested in a Rs 50-55 crore marketcap company.
It is possible that you may see unloading from some of those institutional investors, which maybe an opportunity for the HNI and retail investors. From these levels, the downside looks extremely restricted. There is scalability, which is going to come in the next couple of years and from these levels, the probability of going wrong in the stock seems to be very little.
Another hidden gem by Ashish Chugh - Fedders Lloyd
Below is transcript of his discussion on channel CNBC-TV18 outlining merits of Agre Developers as a "small cap stock to buy".
Agre Developers is a new company which came into existence just about 20-25 days back. It is a Pantaloon group company where there was a scheme arrangement wherein the mall management and mall development business of Pantaloon Retail was demerged and put into a separate company called Agre Developers. Shareholders of Pantaloon Retail were given one share of Rs 10 of Agre Developers for every 20 shares of face value of Rs 2.
As things stand today, the equity of Agre Developers is about Rs 11 crore and the shareholders of Pantaloon Retail became the shareholders of Agre Developers via the scheme of arrangement. The idea behind this demerger was to enable growth of the mall development and mall management business as a separate entity.
The current price is about Rs 48-49, equity of Rs 11 crore which means that the marketcap of the company is about Rs 50-55 crore. So you have a Pantaloon group company available at a marketcap of about 50-55 crore. Now, if you see the financials, for the first six months of the current financial year, the revenues are about Rs 45 crore, the company made a net loss of about Rs 1 crore. With annualized revenues of about Rs 90 crore, the marketcap is just about Rs 55 crore, which is not even one time of revenue.
If you take a look at the balance sheet, the equity is about Rs 11 crore and reserves are close to Rs 250 crore, which means a book value of about Rs 240. As against the book value of Rs 240, you have the stock available at less than Rs 50, which is just about 20% of the book value.
If you see it in totality, they have a debt of about Rs 85 crore on the balance sheet, which means an enterprise value of about Rs 130-140 crore. As against the enterprise value of Rs 140 crore, the company has got a gross block of about Rs 215 crore and also capital work in progress of Rs 40 crore. Out of this gross block of Rs 215 crore, about Rs 80 crore is hard asset in the form of land and building. This is something which gives a lot of comfort as far as the downside in the stock is concerned.
Other small cap stocks discussed recently
They also currently manage about six malls while they have about 24 malls, which will be operational in FY12. In the next one-two years, you can see a massive scalability of operations. Now, this is probably the only listed company involved in mall management business which is a niche business. Being the only listed company and not having any peer group comparison, the valuation, I believe, is just a perception.
From these levels, the downside looks extremely restricted but given the scalability and the management behind it, this could indeed turn to be a real multibagger if held on for maybe three-five years. If you see the shareholding pattern of the company, promoters hold close to 44%. There is a huge amount of institutional holding in the company - institutions hold close to 37% of the company. A lot of these institutional investors may not be interested in a Rs 50-55 crore marketcap company.
It is possible that you may see unloading from some of those institutional investors, which maybe an opportunity for the HNI and retail investors. From these levels, the downside looks extremely restricted. There is scalability, which is going to come in the next couple of years and from these levels, the probability of going wrong in the stock seems to be very little.
Another hidden gem by Ashish Chugh - Fedders Lloyd
Small Cap Stock To Buy : Fedders Lloyd
Ashish Chugh, author of Hidden Gems, recently talked about two multibagger small cap stocks to buy on CNBC-TV18. Fedders Lloyd is one of the two small cap stocks he recommended.
Below is transcript of his discussion on channel CNBC-TV18 outlining merits of Fedders Lloyd as "small cap stock to buy".
Fedders Lloyd is a Delhi based company which is primarily into three business segments. They are into refrigeration and air-conditioning, engineering and structural steel business and also operate in the power transmission and distribution business. As far as the air-conditioning and refrigeration business is concerned, they provide air-conditioning solutions mainly for commercial establishments. They cater to institutions like railways, mining, defense segments and corporate sector.
In the engineering and steel structural business, they provide turnkey fabrication solutions for large industrial projects. In the power transmission and distribution business they provide EPC solutions for power transmission and distribution projects.
If you look at the financials of the company, FY10 sales were close to Rs 700 crore which were up by 50% compared to FY09. Profit after tax (PAT) was about Rs 40 crore, up from about Rs 11 crore which the company did in FY09. The financial year for this company is from July to June. In Q1 ended September of 2010, they have done sales of close to Rs 190 crore, up by about 18% over the same period last year. Profit after tax was about Rs 11.5 crore, up by about 35%.
EPS on trailing 12 months basis is close to Rs 15 which means at a current price of about Rs 75-76 the stock is traded at a P/E multiple of just about 5-5.5. If you compare this company with their peer group namely Blue Star and Voltas Ltd, you find a significant undervaluation to the peer group. Voltas and Blue Star, both command a P/E of close to 18-20 times and they have a marketcap of about 1.5 times of their sales.
Other small cap stocks discussed recently
The major concern about this company is the low dividend payout. Even though this company makes an earning of about Rs 15, this company pays only Re 1 dividend to the shareholders. That is a bit of a concern. The rerating for the stock could be on account of increased investor friendliness of the company. If they are able to sustain its earnings and grow at the same pace for which it has been growing for the past couple of quarters, I think we could see a rerating of the stock.
Another hidden gem by Ashish Chugh - Agre developers
Below is transcript of his discussion on channel CNBC-TV18 outlining merits of Fedders Lloyd as "small cap stock to buy".
Fedders Lloyd is a Delhi based company which is primarily into three business segments. They are into refrigeration and air-conditioning, engineering and structural steel business and also operate in the power transmission and distribution business. As far as the air-conditioning and refrigeration business is concerned, they provide air-conditioning solutions mainly for commercial establishments. They cater to institutions like railways, mining, defense segments and corporate sector.
In the engineering and steel structural business, they provide turnkey fabrication solutions for large industrial projects. In the power transmission and distribution business they provide EPC solutions for power transmission and distribution projects.
If you look at the financials of the company, FY10 sales were close to Rs 700 crore which were up by 50% compared to FY09. Profit after tax (PAT) was about Rs 40 crore, up from about Rs 11 crore which the company did in FY09. The financial year for this company is from July to June. In Q1 ended September of 2010, they have done sales of close to Rs 190 crore, up by about 18% over the same period last year. Profit after tax was about Rs 11.5 crore, up by about 35%.
EPS on trailing 12 months basis is close to Rs 15 which means at a current price of about Rs 75-76 the stock is traded at a P/E multiple of just about 5-5.5. If you compare this company with their peer group namely Blue Star and Voltas Ltd, you find a significant undervaluation to the peer group. Voltas and Blue Star, both command a P/E of close to 18-20 times and they have a marketcap of about 1.5 times of their sales.
Other small cap stocks discussed recently
In the case of Fedders Lloyd, this company trades at a P/E multiple of about 5-5.5 and as a marketcap to sales of just about 0.35. The marketcap of this company is just about Rs 235 crore and does sales of around Rs 700-750 crore. If you see the balance sheet, this company is asset rich. Out of the total gross block of about Rs 150 crore, they have a freehold land of about Rs 38 crore, a five acre plot which is located at a prime place in South Delhi which maybe very valuable as of now. The main trigger for rerating of Fedders Lloyd is not going to be the property but it is going to be sustainability of earnings.
The major concern about this company is the low dividend payout. Even though this company makes an earning of about Rs 15, this company pays only Re 1 dividend to the shareholders. That is a bit of a concern. The rerating for the stock could be on account of increased investor friendliness of the company. If they are able to sustain its earnings and grow at the same pace for which it has been growing for the past couple of quarters, I think we could see a rerating of the stock.
Another hidden gem by Ashish Chugh - Agre developers
How to buy stocks Warren Buffett way
I came across discussion about "How to buy stocks Warren Buffett way" on CNBC TV-18's special presentation "RD 360 - Money making maxims". A show anchored by Ramesh Damani.
This show discusses on the ways and wisdom of Warren Buffett to better understand his investments and find out "How to buy stocks Warren Buffett way".
You may read the verbatim transcript of this entire show here.
OR
You may watch the entire recorded TV show here.
This show discusses on the ways and wisdom of Warren Buffett to better understand his investments and find out "How to buy stocks Warren Buffett way".
You may read the verbatim transcript of this entire show here.
OR
You may watch the entire recorded TV show here.
TATA Steel FPO launch on Jan 19 - should you subscribe?
Tata Steel FPO (follow-on public offer) is hitting the stock markets between January 19 to 21. Should you subscribe?
Issue Open: January 19, 2011
Issue close: January 21, 2011
Price Band: Rs. 594 - Rs. 610 Per Equity Share
Minimum Bid Size: 10 Equity Shares
Face Value: Rs. 10 Per Equity Share
Issue Type: 100% Book Building
Maximum Subscription Amount for Retail Investor: Rs. 200000
Incorporated in 1907, Tata Steel Ltd is India’s largest steel companies with a steel production capacity of approximately 27.2 mtpa. The Company has a presence across the entire value chain of steel manufacturing, including producing and distributing finished products as well as mining and processing iron ore and coal for its steel production.
According to WSA, the company was the seventh largest steel company in the world in terms of crude steel production volume in 2009. Tata Steel's operations are primarily focused in India, Europe and other countries in Asia Pacific.
In Financial Year 2010, the Company’s operations in Europe and India represented 62.9% and 28.8%, respectively, of its total steel production.
The company said out of the total FPO proceeds, Rs 1,875 crore will be used to "part-finance the capital expenditure for expansion of its existing works at Jamshedpur". The expansion work at the Jamshedpur plant, which is scheduled for completion by March this year, will augment the steel production capacity of the plant to 10 million tonnes per annum.
Should you subscribe FPO?
At FY 12E EV/EBITDA of 4.8x and 4.9x at upper band of FPO and CMP respectively, the stock looks attractively valued. The stock price can see levels of 800 in next 1 year. So at upper band of Rs. 610, there is room for appreciation and one may invest in FPO with 1 year time frame.
Issue Open: January 19, 2011
Issue close: January 21, 2011
Price Band: Rs. 594 - Rs. 610 Per Equity Share
Minimum Bid Size: 10 Equity Shares
Face Value: Rs. 10 Per Equity Share
Issue Type: 100% Book Building
Maximum Subscription Amount for Retail Investor: Rs. 200000
Incorporated in 1907, Tata Steel Ltd is India’s largest steel companies with a steel production capacity of approximately 27.2 mtpa. The Company has a presence across the entire value chain of steel manufacturing, including producing and distributing finished products as well as mining and processing iron ore and coal for its steel production.
According to WSA, the company was the seventh largest steel company in the world in terms of crude steel production volume in 2009. Tata Steel's operations are primarily focused in India, Europe and other countries in Asia Pacific.
In Financial Year 2010, the Company’s operations in Europe and India represented 62.9% and 28.8%, respectively, of its total steel production.
The company said out of the total FPO proceeds, Rs 1,875 crore will be used to "part-finance the capital expenditure for expansion of its existing works at Jamshedpur". The expansion work at the Jamshedpur plant, which is scheduled for completion by March this year, will augment the steel production capacity of the plant to 10 million tonnes per annum.
Should you subscribe FPO?
At FY 12E EV/EBITDA of 4.8x and 4.9x at upper band of FPO and CMP respectively, the stock looks attractively valued. The stock price can see levels of 800 in next 1 year. So at upper band of Rs. 610, there is room for appreciation and one may invest in FPO with 1 year time frame.
RNRL & Reliance Infra punished by SEBI : Would Rpower be affected?
SEBI has passed a consent order regarding the Reliance Infra, RNRL investigation which showed misrepresentation of investments.
Reliance Infra, RNRL, Anil Ambani and four other directors have paid settlement fees of Rs 50 crore towards the consent order.
Reliance Infra and RNRL can't make investments in the secondary markets up to December 2012 following this order by SEBI. And Anil Ambani and four other directors have been barred from investing in secondary market until December 2011.
This is bad for reputation of the group (Anil Ambani comanies) of course. RNRL has been barred for 2 years for making investments in secondary markets. Similarly, Anil Ambani has been barred for 1 year, directors getting barred is definitely not a good sign. Group has been facing problems for raising money mainly because of high valuations and this incidence could make matters more difficult for companies like Reliance Power.
Reliance power has a program to reach the capacity of 15,000 MW by 2015. It needs to raise at least 100,000 crores for this. So it will be interesting to see if this punishment comes in way of RPower as RNRL has got merged into Reliance Power now.
Interestingly, RNRL has been barred from secondary markets but not from primary markets. It might give some relief to company for fund raising plans. Company still have access to primary market.
If investors react negatively to this incidence, there are chances that Rpower shares may correct on back of this. Rpower investors who are ready to wait for 4 - 5 years might want to consider to buy stocks of company once the picture gets clearer on Rpower front and if stock is available at cheaper valuations.
Reliance Infra, RNRL, Anil Ambani and four other directors have paid settlement fees of Rs 50 crore towards the consent order.
Reliance Infra and RNRL can't make investments in the secondary markets up to December 2012 following this order by SEBI. And Anil Ambani and four other directors have been barred from investing in secondary market until December 2011.
This is bad for reputation of the group (Anil Ambani comanies) of course. RNRL has been barred for 2 years for making investments in secondary markets. Similarly, Anil Ambani has been barred for 1 year, directors getting barred is definitely not a good sign. Group has been facing problems for raising money mainly because of high valuations and this incidence could make matters more difficult for companies like Reliance Power.
Reliance power has a program to reach the capacity of 15,000 MW by 2015. It needs to raise at least 100,000 crores for this. So it will be interesting to see if this punishment comes in way of RPower as RNRL has got merged into Reliance Power now.
Interestingly, RNRL has been barred from secondary markets but not from primary markets. It might give some relief to company for fund raising plans. Company still have access to primary market.
If investors react negatively to this incidence, there are chances that Rpower shares may correct on back of this. Rpower investors who are ready to wait for 4 - 5 years might want to consider to buy stocks of company once the picture gets clearer on Rpower front and if stock is available at cheaper valuations.
Stock market India : correcting now, what's next?
In the article "BSE SENSEX & Small Cap Stocks In 2011", I had talked about correction in Indian stock market at those levels before rising further (BSE SENSEX was at 20,389 on 30th December).
After touching 20,560 on December 31st, SENSEX has corrected to 19,196 as on 10th January. A correction of 1365 points or 6.6% in one week. It might correct even further. How much? No one knows. But you can make an educated guess.
India's macroeconomic conditions have not changed much and Indian businesses are on long term growth trajectory. What's causing the uncertainty are a few important issues like FII Money, better investment opportunities for FII, India's political conditions, interest rates and of course valuations of stock market.
Interest rates are rising in order to control rising inflation and so the credit available in market is shrinking. Politically, opposition parties in India are making survival a lot difficult for congress formed government to function on the issues of spectrum and bofors scam. They have threatened to shut the budget session (February) of parliament as they did in winter session. This certainly destabilizes political environment.
Chinese and American economies are expected to emerge from recession in 2011 with good numbers. 2010 was certainly a flat year for these two giants and these markets would pull some FII money for investment in 2011 reducing the FII money flow in Indian stock market.
Valuations in Indian stock market were quite a high at 20,500 - 21,000 levels. With some correction in large caps and more correction in mid cap and small cap stocks, as mid and small cap stocks correct more in such stock market corrections, stocks would be available at attractive levels and valuation if stock market corrects further. If markets correct to 18,500 or even worst 18,000 levels, that could be the best opportunity to buy stocks of good companies.
You should be ready with a list of stocks to buy in 2011 in this correction from mid to long term investment horizon. I am compiling and researching on best sectors to invest and stocks to buy for 2011 for which you can suggest the stocks. I would analyze the stocks suggested by you, put up my recommendations on it and publish it here on Indian Stocks News.
After touching 20,560 on December 31st, SENSEX has corrected to 19,196 as on 10th January. A correction of 1365 points or 6.6% in one week. It might correct even further. How much? No one knows. But you can make an educated guess.
India's macroeconomic conditions have not changed much and Indian businesses are on long term growth trajectory. What's causing the uncertainty are a few important issues like FII Money, better investment opportunities for FII, India's political conditions, interest rates and of course valuations of stock market.
Interest rates are rising in order to control rising inflation and so the credit available in market is shrinking. Politically, opposition parties in India are making survival a lot difficult for congress formed government to function on the issues of spectrum and bofors scam. They have threatened to shut the budget session (February) of parliament as they did in winter session. This certainly destabilizes political environment.
Chinese and American economies are expected to emerge from recession in 2011 with good numbers. 2010 was certainly a flat year for these two giants and these markets would pull some FII money for investment in 2011 reducing the FII money flow in Indian stock market.
Valuations in Indian stock market were quite a high at 20,500 - 21,000 levels. With some correction in large caps and more correction in mid cap and small cap stocks, as mid and small cap stocks correct more in such stock market corrections, stocks would be available at attractive levels and valuation if stock market corrects further. If markets correct to 18,500 or even worst 18,000 levels, that could be the best opportunity to buy stocks of good companies.
You should be ready with a list of stocks to buy in 2011 in this correction from mid to long term investment horizon. I am compiling and researching on best sectors to invest and stocks to buy for 2011 for which you can suggest the stocks. I would analyze the stocks suggested by you, put up my recommendations on it and publish it here on Indian Stocks News.
Selan Exploration : Stock to buy in 2011
I had published a post Selan Oil Exploration: Soaked in Crude almost three years back as stock analysis for investment. It was at Rs. 150 at that time. The stock trades at around 400 now. I just thought to research a bit on it for current scenario and I found it recently recommended as multibagger stock to buy in 2011 by Ashish Chugh on CNBC-TV18. Let's see what he says.
Ashish Chugh believes that even at the current price this stock may turnout to be a potential multi-bagger stock.
The financials of Selan Exploration for the past two years have been almost flat. There was not much increase in either production. This is mainly because of the fluctuating oil prices. The revenues and profits are inline with the oil prices but there has not been any substantial increase in production in the last two years.
Selan exploration is doing 3D contour mapping for past 2 years of not just the Bakrol field, which is giving them major production as of now but for some other fields also. The new technologies which are available enables the company to identify the reservoirs where if drilling is done will give them about 10-15 times more oil than what the current wells are producing.
To calculate roughly, the company is doing about 2.5 lakh barrels every year from about 20 wells, which means that each well is giving them close to 12,000-13,000 barrels, and the new wells are capable of producing 1-1.5 lakh barrels per year, this could translate (if the company starts drilling two new wells) to double their production.
If company starts drilling wells in next 3-6 months, 10 wells would almost quadruple their oil production. This thing may get start reflecting in the company’s topline and the bottom line in probably year 2011-12. If you see the valuations at which the recent deals have taken place, if you look at Cairn-Vedanta deal, if you apply just 50% of that valuation to only the Bakrol field where we have the data for 2P reserves you get a mind boggling figure.
At the current valuation it may just be a fraction of the valuation for the Bakrol field and leave aside the other fields which are still virgin where no data has been declared and I believe this is a stock where institutional investors will find value even when the stock goes to four figure mark because by that time the production would have got ramped up significantly. Probably the 2P reserves data for the other fields might also get announced by the company and the financial numbers would start looking a lot better than what they are now. This is a company where the drilling is happening or the production is happening just in one field, which is a Bakrol field—operating margins are anywhere between 80-85%.
Once the ramp-up happens and with oil prices being steady and at higher numbers, I think this maybe a stock to watch out for in the years to come. The only thing is that as of now there are a few unknowns; the first is that when they start drilling is something, which nobody knows about but I believe that since they have already spent about two years in data acquisition drilling can happen in the next probably three to six-months. Oil exploration by nature is a risky business but I think the risk is getting mitigated because of the fact that all the fields are proven fields. So, in the years to come, we may see a massive scale up in the production of the company. This makes Selan exploration a stock to buy or at least a stock to watch out for, for the future.
Any correction in stock price towards Rs. 350 would definitely be a nice opportunity to buy stocks of Selan exploration.
Ashish Chugh believes that even at the current price this stock may turnout to be a potential multi-bagger stock.
The financials of Selan Exploration for the past two years have been almost flat. There was not much increase in either production. This is mainly because of the fluctuating oil prices. The revenues and profits are inline with the oil prices but there has not been any substantial increase in production in the last two years.
Selan exploration is doing 3D contour mapping for past 2 years of not just the Bakrol field, which is giving them major production as of now but for some other fields also. The new technologies which are available enables the company to identify the reservoirs where if drilling is done will give them about 10-15 times more oil than what the current wells are producing.
To calculate roughly, the company is doing about 2.5 lakh barrels every year from about 20 wells, which means that each well is giving them close to 12,000-13,000 barrels, and the new wells are capable of producing 1-1.5 lakh barrels per year, this could translate (if the company starts drilling two new wells) to double their production.
If company starts drilling wells in next 3-6 months, 10 wells would almost quadruple their oil production. This thing may get start reflecting in the company’s topline and the bottom line in probably year 2011-12. If you see the valuations at which the recent deals have taken place, if you look at Cairn-Vedanta deal, if you apply just 50% of that valuation to only the Bakrol field where we have the data for 2P reserves you get a mind boggling figure.
At the current valuation it may just be a fraction of the valuation for the Bakrol field and leave aside the other fields which are still virgin where no data has been declared and I believe this is a stock where institutional investors will find value even when the stock goes to four figure mark because by that time the production would have got ramped up significantly. Probably the 2P reserves data for the other fields might also get announced by the company and the financial numbers would start looking a lot better than what they are now. This is a company where the drilling is happening or the production is happening just in one field, which is a Bakrol field—operating margins are anywhere between 80-85%.
Once the ramp-up happens and with oil prices being steady and at higher numbers, I think this maybe a stock to watch out for in the years to come. The only thing is that as of now there are a few unknowns; the first is that when they start drilling is something, which nobody knows about but I believe that since they have already spent about two years in data acquisition drilling can happen in the next probably three to six-months. Oil exploration by nature is a risky business but I think the risk is getting mitigated because of the fact that all the fields are proven fields. So, in the years to come, we may see a massive scale up in the production of the company. This makes Selan exploration a stock to buy or at least a stock to watch out for, for the future.
Any correction in stock price towards Rs. 350 would definitely be a nice opportunity to buy stocks of Selan exploration.
Automobile : Best Sectors & Stocks To Buy In 2011
I received good number of comments and emails in response to series "Best Sectors & Stocks To Buy For 2011". Here is the first sector and stocks from it we should be buying in 2011. Listed top stocks in this series have a basic objective to preserve the investment and achieve good capital appreciation.
Investors may build their investment portfolio buying stocks listed in series ""Best Sectors & Stocks To Buy For 2011".
First sector in this series I would like to highlight today is Automobile sector in India.
Indian automobile sector is experiencing immense growth for past 15 years or so now. It is one of the essential core industry of economy. Lots of auto companies are launching new car/vehicle models every month looking at country's ever growing middle class which is one of the largest in world. There is great demand for small and mid size cars in India by consumers. Along with this demand, auto companies are even exporting cars produced in India to abroad, thus making India a car manufacturing hub.
Indian automobile industry is expected to grow immensely in next 5 - 10 years. Indian economy is constantly growing at above 8.5% GDP and it is expected to do even better in times to come. This means growth and rising incomes for middle class and expansion of middle class itself which would translate in more and more buying power. This would only boost the demand for four wheelers and two wheelers so automobile sector looks one of the very promising sector to perform better and better in coming years.
The first stock to buy that comes to my mind from automobile sector is Maruti. Maruti is continuously launching new models to keep the market share intact and grow further in value segment. Slowly, Maruti has started focusing on luxury cars segment too which is a high margin segment.
Another stock looks good to me is Escorts. How is it related to automobile? It is one of the largest auto component maker in India. The growth of automobile sector would only add to demand for company's products.
One of the biggest indirect beneficiaries of growing small car markets in India would be ... Exide industries. More than 60% small car batteries in India are made by Exide industries. So growing automobile sector would help Exide grow further. Addition to this could be electric scooters and cars in future.
I would be posting stock analysis of each of these companies in detail very soon. Keep following Indian Stocks News for updates on Best sectors and stocks to buy in 2011.
Investors may build their investment portfolio buying stocks listed in series ""Best Sectors & Stocks To Buy For 2011".
First sector in this series I would like to highlight today is Automobile sector in India.
Indian automobile sector is experiencing immense growth for past 15 years or so now. It is one of the essential core industry of economy. Lots of auto companies are launching new car/vehicle models every month looking at country's ever growing middle class which is one of the largest in world. There is great demand for small and mid size cars in India by consumers. Along with this demand, auto companies are even exporting cars produced in India to abroad, thus making India a car manufacturing hub.Indian automobile industry is expected to grow immensely in next 5 - 10 years. Indian economy is constantly growing at above 8.5% GDP and it is expected to do even better in times to come. This means growth and rising incomes for middle class and expansion of middle class itself which would translate in more and more buying power. This would only boost the demand for four wheelers and two wheelers so automobile sector looks one of the very promising sector to perform better and better in coming years.
The first stock to buy that comes to my mind from automobile sector is Maruti. Maruti is continuously launching new models to keep the market share intact and grow further in value segment. Slowly, Maruti has started focusing on luxury cars segment too which is a high margin segment.
Another stock looks good to me is Escorts. How is it related to automobile? It is one of the largest auto component maker in India. The growth of automobile sector would only add to demand for company's products.
One of the biggest indirect beneficiaries of growing small car markets in India would be ... Exide industries. More than 60% small car batteries in India are made by Exide industries. So growing automobile sector would help Exide grow further. Addition to this could be electric scooters and cars in future.
I would be posting stock analysis of each of these companies in detail very soon. Keep following Indian Stocks News for updates on Best sectors and stocks to buy in 2011.
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