Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Retail equity investors are in a difficult situation. The Indian stock market, in a downtrend for more than a year, has lost over 25% and figures among the world's worst performers. The bad news is far from over though. Apart from macroeconomic troubles like the slowing economic growth and mounting budget deficit, a sharp depreciation in the rupee over last three months has opened up another avenue of woes for Corporate India. Analysts are already sceptical about India Inc's performance in the second half of FY12.
These uncertain times call for retail investors to adopt defensive strategies. It is important to focus more on avoiding capital erosion now, rather than looking at spectacular returns. Investors should look for potential delisting candidates -fundamentally strong scrips that won't fall too much in a weak market, but offer potential for opportunistic gains.
Some recent examples demonstrate how investors stand to gain even in times of economic uncertainty when companies decide to buy back their own shares in a bid to voluntarily delist. UTV Software, Alfa Laval, Carol Info, Patni Computers and Ineos ABS have all generated hefty returns for longterm investors defying the overall market weakness in the second half of 2011.
Is it possible to predict delisting candidates?
Delisting shares from the stock exchanges is a unique decision in a company's life. And it is almost impossible to forecast. These decisions depend greatly on the owners and management and their way of thinking. At least, one can't predict the timing of a delisting offer.
We at the ET Intelligence Group have therefore put together a group of companies with certain common parameters that make them more likely to opt for delisting than others. These are MNC associates with parent companies operating overseas. Secondly, and most importantly, the promoters hold more than 80% in the Indian arms. Thirdly, they don't need to raise capital in India.
Or, in other words, being listed in India doesn't serve them much purpose. With market regulator Sebi or the Securities and Exchange Board of India mandating that all listed companies have to increase public shareholding to a minimum 25% by June 2013, these companies have to take a conscious call sooner or later on whether to reduce promoter holding or go for delisting.
Why MNCs are more likely to delist
Compared to domestic companies MNC associates in India are more likely to choose to delist when faced with the dilemma of whether to dilute promoter stake to meet local regulations or delist.
Most of these companies were listed in India not due to a need to raise capital, but more to meet the then prevailing FDI norms. For such companies complying with the cumbersome and timeconsuming rules and regulations of Sebi and the stock exchanges makes little sense. Be it fund raising or M&As, any major decision takes substantial time for a listed company compared to an unlisted one. Finally, the current depressed market conditions offer an ideal opportunity to delist.
This is not to say MNCs are the only delisting candidates. In fact, over a period of time a number of unexpected Indian companies such as Nirma and Binani Cements have gone ahead with delisting processes. In a number of cases, acquisition by a foreign player has proved a prelude to delisting. For example, Sparsh BPO. However, MNCs are the more predictable candidates.
Ongoing offers
A number of companies have already begun the process of voluntarily delisting their shares from Indian stock exchanges. In most cases ETIG analysts recommend that the shareholders should avail of the attractive prices and tender their shares in the open offer.
After all, a retail shareholder won't have much use for shares in a company once it delists. At the same time, the profits booked here can be invested in other avenues.
If one does not already hold shares in these companies, buying right now, however, may not be a correct strategy. It is true that the shares can still generate some 5-10% return by the time delisting takes place. However, the risks involved that don't justify buying now. If the delisting offer fails due to any reason, the stocks could correct heavily.
How does a delisting offer work?
The process of voluntary delisting begins when promoters of a company inform it of their intention to buy all outstanding shares and delist the company. The board of directors approve the same and inform the stock exchanges.
Subsequently, the shareholders, excluding the promoters, have to approve the delisting process with a two-third majority.
Once the approvals are in place, the delisting process takes place in a reverse book building format. Under this the shareholders convey the price at which they are willing to sell their shares to the company. For this purpose, the company sets a 'floor price' in accordance with Sebi rules, above which the bidding takes place.
In a number of cases, companies voluntarily offer a higher price to draw investor interest. This is called 'indicative offer price'. However, the shareholders are free to bid at whatever price is reasonable according to them. To successfully delist the shares, the promoters need to acquire at least 50% of the outstanding shares and take their holding beyond 90% of the paidup capital.
Once the shareholders submit their bids, the company finds the price point at which the requisite number of shares can be acquired. This is called the 'discovered price'. Finally, it is the prerogative of the promoters whether to accept the discovered price. There have been instances where aggressive bidding by retail shareholders has taken the discovered price beyond the promoters' acceptance limit. As a result the delisting failed.
It is impossible to predict what the promoters will accept finally. In several cases, the promoters have given a substantial premium over the floor price to make the delisting offer successful.
If the promoters accept the 'discovered price', or the delisting offer succeeds, the same price becomes applicable to all shareholders tendering their shares. This is followed by cessation of trading for the scrip on bourses. The company has to offer the same price to any shares tendered to it up to one year after the delisting date.
Ongoing Delisting Offers
UTV Software
Start Date: 16 Jan, 2012
End Date: 20 Jan, 2012
UTV Software Communications has interests in movie production, broadcasting, television and games. A major chunk of its total revenues comes from film production, which is characterised by uncertainties. In recent times, most its releases were not received well at the box office, which has impacted its performance.
It doesn't have any major release planned for the rest of FY12 either, which will keep its numbers depressed. The company's balance sheet is also not very strong with debt-to-equity ratio of 1.34 while its peer Zee Entertainment is almost debt free.
The recent spurt in UTV's share price is solely due to the buyback offer from its promoters. Investors need to make the most of this offer, failing which the scrip may correct substantially.
Alfa Laval
Start Date: N/A
End Date: N/A
Alfa Laval's scrip is trading at a price-earning multiple (P/E) of nearly 39, which is not only at a premium to its peers but also to its highest valuation during the 2007 boom. This is solely due to the buyback offer and indicative price of Rs 2,850 per share.
Alfa Laval manufactures industrial equipment such as separators, decanters and sanitary flow equipment apart from distillery and vegetable oil refinery projects.
It had a tough year in 2010, but is back on track in 2011. It remains debt-free, cash-rich with a long dividend-paying record. Still, considering the premium valuation retail investors should consider participating in the offer.
Carol Info Services
Start Date: 16 Jan, 2012
End Date: 20 Jan, 2012
Carol Info Services, a sister concern of Wockhardt, provides contract manufacturing services for nutraceutical and milkbased products. Its adjusted profit has remained stable over the last three years. However, its major revenue comes from renting out its large property in the Bandra Kurla Complex, Mumbai.
Besides, the company has signed a deal to sell its nutraceutical manufacturing facility to Danone for over Rs 350 crore. Considering the value of the land and the cash flow from the deal, the indicative buyback price of Rs 160 per share appears less. The stock is already trading at a higher price indicating anticipation of a higher revised offer - something that appears imminent since a major part of the public shareholding is consolidated.
Patni Computers
Start Date: N/A
End Date: N/A
The new management led by iGATE Global Solutions and Pan-Asia iGATE Solutions has obtained investors' nod to delist Patni Computer Systems in which they had acquired a controlling stake by paying Rs 503 per share a year ago.
After touching a high of Rs 485 in April, Patni's stock had plummeted to the low of Rs 250 in August following the company's lacklustre financial performance. Since then the stock has regained momentum following the delisting buzz. It now trades at around Rs 465.
Patni's stock is likely to approach the price at which iGATE bought the majority stake in the coming weeks, which is 8% above the current level.
Ineos ABS
Start Date: 16 Jan, 2012
End Date: 6 Feb, 2012
The open offer in Ineos ABS is primarily due to change in its promoter group and hence not technically a delisting offer. However, since the promoters already hold 83.33% its effect would be similar.
After two exciting years in 2009 and 2010, the company had a flattish 2011 due to a steady transfer of profits to contingency reserves. In addition, a forex loss hurt its September quarter profits. Still the company's business in specialty highend engineering plastics remains lucrative. Its valuations at P/E of 15.5 and price-to-bookvalue of 2.8 appear reasonable.
Investors are advised to forego the current open offer at Rs 606.8 per share in anticipation of a more lucrative delisting offer in months to come.
Potential Delisting Candidates
Oracle Fin Services
Oracle Fin's financial performance has been sound over the years. Its revenue grew at a compounded annual growth rate of 16% and net profit at 36% in the five years to FY11. The margin levels improved due to higher product penetration in the core banking vertical.
In recent quarters, however, the rate of growth has tapered down due to the lumpy nature of its product business, which is impacted by delay in clients' decision-making. Its headwinds are likely to continue considering the uncertainties in its key markets like the US and Europe.
Those already invested may continue to hold, but fresh investments may wait until clarity emerges on business growth. The management has denied any possibility of a delisting in the past.
Gillette India
The company's performance has been poor for the last four quarters. The sales growth has been steadily slowing down and the operating profit and net profit have dropped by more than 50% in each of the last four quarters.
The company has reduced prices of its products to beat intensifying competition. However, the strategy has not been successful as high input costs and the heavy spend on advertisement and promotion has affected its bottom line.
There is little that investors can look forward to except for any possible gains made in case the company announces a plan to delist.
Blue Dart Express
Being the market leader in express delivery services, Blue Dart Express has been able to maintain a consistent profit margin of over 7% for the last two years.
The company has a fuel surcharge mechanism linked with aviation turbine fuel (ATF) prices. Hence any price rise in ATF is passed on to the customers.
The company is growing at a CAGR of 23% for the last five years. It is debt free and has Rs 205 per share of cash on its book. On a trailing twelve month basis, the stock is trading at a P/E of 30.7, which is high compared to its peers but is fair considering the company's growth and dominant position.
Astrazeneca Pharma
Astrazeneca Pharma is the Indian arm of the UK-based pharma MNC Astrazeneca. The company has been facing a slowdown in its performance since the last three quarters with a declining growth in its revenues, operating profit and net profit.
Its parent company is also facing an array of challenges like drying up of its product pipeline, pricing pressure in European markets and competition from generic players. It also announced big job cuts in its US and European operations.
In such a condition, whether the parent may want to delist the Indian arm remains a moot question. However, the recent historic high levels of Astrazeneca Pharma stock suggest that investors are already buying into the stock on hopes of the company delisting. The company has previously tried to delist on two occasions.
BOC India
Kolkata-based BOC India is a leading industrial gas manufacturer owned by Linde Group of Germany. The company was one of the first MNCs to attempt delisting after Sebi notified the 25% public holding rule in 2010.
The offer failed due to lack of investor participation. The company has been investing aggressively to diversify its portfolio from traditional oxygen. It also makes large oxygen generating plants for steel companies and borrows from its parent to fund the projects.
BOC India's shares have spectacularly recovered from the nadir after the failure of delisting offer last year and are currently trading at a price-to-earnings multiple above 28. Longterm investors can stay invested for a potential delisting offer.
Fresenius Kabi
Formerly known as Dabur Pharma, Fresenius Kabi Oncology is predominantly present in the generic oncology segment in the developed markets. The company has recently changed its strategy under which it will provide contract research and manufacturing services to its German parent Fresenius Kabi.
The divestment of its loss making UKbased subsidiary to the parent company has helped the company to improve its operational performance in the quarter ended September 2011. The stock has been witnessing active investor interest since the beginning of the year.
Given the growth prospects of the company, the stock can be a good investment proposition even without the incentive of a possible delisting.
Honeywell Auto.
Honeywell Automation is a leader in providing integrated automation and software solutions in India. In the five-year period between 2004 and 2009 the company's profits grew at a cumulative annualised growth rate of 73%, while revenues grew at 33.5%.
However, it faced headwinds in 2010 resulting in a 21% fall in profits. The performance has remained subdued in the first nine months of 2011 as well. The company remains debt-free and cash-rich with operating cash flows exceeding capex requirements.
The scrip has lost heavily in the last few months and is trading near its 52-week low. However, that has only made its valuations more attractive. Investors should buy and hold the scrip.
Kennametal India
Kennametal India is a leading manufacturer of hard metal products and machine tools for manufacturers in industries such as transportation, engineering, aerospace etc.
After a difficult time in FY09 the company grew its profits at a cumulative annualised growth rate of 75% in the last two years.
The company paid a dividend of Rs 35 per share last year, which translates into a dividend yield of 4.5% on the current market price. Considering this, its current valuation doesn't appear expensive.
The company's promoters had attempted a delisting in December 2010, which couldn't proceed because retail shareholders didn't approve of such a move with the requisite majority.
Elantas Beck
The share price of specialty chemicals maker Elantase Beck has been ruling high for over one year, despite a flat 2010 and dismal first three quarters of 2011.
This has taken its price-to-earnings valuation beyond 40 - too expensive for a chemicals maker. This excessive exuberance seems to stem from an expectation that the company plans to delist. The company had previously attempted to delist in 2009.
The company remains a cash-rich, debt-free company with annual cash flows exceeding capital expenditure. In the first three quarters of 2011, its profits fell 24% while sales grew 5.8%.
Timken India
Timken India manufactures antifriction bearings, components and related parts. Over the past five years, the company's sales have grown at 75%, while its profits have grown at 81%, when compounded annually.
Its operating profit margins have remained in the range on 12-22%. But the last two quarters have proved flattish for the company. It is currently valued at 17.7 times its earnings for the trailing 12 months, which is somewhat higher than its peers.
But given its strong balance sheet and cash flows, this premium is justified.
Earlier a joint venture between US-based Timken and Tata Steel, it is now 80% owned by the US company after it bought out the Tatas' stake.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Retail equity investors are in a difficult situation. The Indian stock market, in a downtrend for more than a year, has lost over 25% and figures among the world's worst performers. The bad news is far from over though. Apart from macroeconomic troubles like the slowing economic growth and mounting budget deficit, a sharp depreciation in the rupee over last three months has opened up another avenue of woes for Corporate India. Analysts are already sceptical about India Inc's performance in the second half of FY12.
These uncertain times call for retail investors to adopt defensive strategies. It is important to focus more on avoiding capital erosion now, rather than looking at spectacular returns. Investors should look for potential delisting candidates -fundamentally strong scrips that won't fall too much in a weak market, but offer potential for opportunistic gains.
Some recent examples demonstrate how investors stand to gain even in times of economic uncertainty when companies decide to buy back their own shares in a bid to voluntarily delist. UTV Software, Alfa Laval, Carol Info, Patni Computers and Ineos ABS have all generated hefty returns for longterm investors defying the overall market weakness in the second half of 2011.
Is it possible to predict delisting candidates?
Delisting shares from the stock exchanges is a unique decision in a company's life. And it is almost impossible to forecast. These decisions depend greatly on the owners and management and their way of thinking. At least, one can't predict the timing of a delisting offer.
We at the ET Intelligence Group have therefore put together a group of companies with certain common parameters that make them more likely to opt for delisting than others. These are MNC associates with parent companies operating overseas. Secondly, and most importantly, the promoters hold more than 80% in the Indian arms. Thirdly, they don't need to raise capital in India.
Or, in other words, being listed in India doesn't serve them much purpose. With market regulator Sebi or the Securities and Exchange Board of India mandating that all listed companies have to increase public shareholding to a minimum 25% by June 2013, these companies have to take a conscious call sooner or later on whether to reduce promoter holding or go for delisting.
Why MNCs are more likely to delist
Compared to domestic companies MNC associates in India are more likely to choose to delist when faced with the dilemma of whether to dilute promoter stake to meet local regulations or delist.
Most of these companies were listed in India not due to a need to raise capital, but more to meet the then prevailing FDI norms. For such companies complying with the cumbersome and timeconsuming rules and regulations of Sebi and the stock exchanges makes little sense. Be it fund raising or M&As, any major decision takes substantial time for a listed company compared to an unlisted one. Finally, the current depressed market conditions offer an ideal opportunity to delist.
This is not to say MNCs are the only delisting candidates. In fact, over a period of time a number of unexpected Indian companies such as Nirma and Binani Cements have gone ahead with delisting processes. In a number of cases, acquisition by a foreign player has proved a prelude to delisting. For example, Sparsh BPO. However, MNCs are the more predictable candidates.
Ongoing offers
A number of companies have already begun the process of voluntarily delisting their shares from Indian stock exchanges. In most cases ETIG analysts recommend that the shareholders should avail of the attractive prices and tender their shares in the open offer.
After all, a retail shareholder won't have much use for shares in a company once it delists. At the same time, the profits booked here can be invested in other avenues.
If one does not already hold shares in these companies, buying right now, however, may not be a correct strategy. It is true that the shares can still generate some 5-10% return by the time delisting takes place. However, the risks involved that don't justify buying now. If the delisting offer fails due to any reason, the stocks could correct heavily.
How does a delisting offer work?
The process of voluntary delisting begins when promoters of a company inform it of their intention to buy all outstanding shares and delist the company. The board of directors approve the same and inform the stock exchanges.
Subsequently, the shareholders, excluding the promoters, have to approve the delisting process with a two-third majority.
Once the approvals are in place, the delisting process takes place in a reverse book building format. Under this the shareholders convey the price at which they are willing to sell their shares to the company. For this purpose, the company sets a 'floor price' in accordance with Sebi rules, above which the bidding takes place.
In a number of cases, companies voluntarily offer a higher price to draw investor interest. This is called 'indicative offer price'. However, the shareholders are free to bid at whatever price is reasonable according to them. To successfully delist the shares, the promoters need to acquire at least 50% of the outstanding shares and take their holding beyond 90% of the paidup capital.
Once the shareholders submit their bids, the company finds the price point at which the requisite number of shares can be acquired. This is called the 'discovered price'. Finally, it is the prerogative of the promoters whether to accept the discovered price. There have been instances where aggressive bidding by retail shareholders has taken the discovered price beyond the promoters' acceptance limit. As a result the delisting failed.
It is impossible to predict what the promoters will accept finally. In several cases, the promoters have given a substantial premium over the floor price to make the delisting offer successful.
If the promoters accept the 'discovered price', or the delisting offer succeeds, the same price becomes applicable to all shareholders tendering their shares. This is followed by cessation of trading for the scrip on bourses. The company has to offer the same price to any shares tendered to it up to one year after the delisting date.
Ongoing Delisting Offers
UTV Software
Start Date: 16 Jan, 2012
End Date: 20 Jan, 2012
UTV Software Communications has interests in movie production, broadcasting, television and games. A major chunk of its total revenues comes from film production, which is characterised by uncertainties. In recent times, most its releases were not received well at the box office, which has impacted its performance.
It doesn't have any major release planned for the rest of FY12 either, which will keep its numbers depressed. The company's balance sheet is also not very strong with debt-to-equity ratio of 1.34 while its peer Zee Entertainment is almost debt free.
The recent spurt in UTV's share price is solely due to the buyback offer from its promoters. Investors need to make the most of this offer, failing which the scrip may correct substantially.
Alfa Laval
Start Date: N/A
End Date: N/A
Alfa Laval's scrip is trading at a price-earning multiple (P/E) of nearly 39, which is not only at a premium to its peers but also to its highest valuation during the 2007 boom. This is solely due to the buyback offer and indicative price of Rs 2,850 per share.
Alfa Laval manufactures industrial equipment such as separators, decanters and sanitary flow equipment apart from distillery and vegetable oil refinery projects.
It had a tough year in 2010, but is back on track in 2011. It remains debt-free, cash-rich with a long dividend-paying record. Still, considering the premium valuation retail investors should consider participating in the offer.
Carol Info Services
Start Date: 16 Jan, 2012
End Date: 20 Jan, 2012
Carol Info Services, a sister concern of Wockhardt, provides contract manufacturing services for nutraceutical and milkbased products. Its adjusted profit has remained stable over the last three years. However, its major revenue comes from renting out its large property in the Bandra Kurla Complex, Mumbai.
Besides, the company has signed a deal to sell its nutraceutical manufacturing facility to Danone for over Rs 350 crore. Considering the value of the land and the cash flow from the deal, the indicative buyback price of Rs 160 per share appears less. The stock is already trading at a higher price indicating anticipation of a higher revised offer - something that appears imminent since a major part of the public shareholding is consolidated.
Patni Computers
Start Date: N/A
End Date: N/A
The new management led by iGATE Global Solutions and Pan-Asia iGATE Solutions has obtained investors' nod to delist Patni Computer Systems in which they had acquired a controlling stake by paying Rs 503 per share a year ago.
After touching a high of Rs 485 in April, Patni's stock had plummeted to the low of Rs 250 in August following the company's lacklustre financial performance. Since then the stock has regained momentum following the delisting buzz. It now trades at around Rs 465.
Patni's stock is likely to approach the price at which iGATE bought the majority stake in the coming weeks, which is 8% above the current level.
Ineos ABS
Start Date: 16 Jan, 2012
End Date: 6 Feb, 2012
The open offer in Ineos ABS is primarily due to change in its promoter group and hence not technically a delisting offer. However, since the promoters already hold 83.33% its effect would be similar.
After two exciting years in 2009 and 2010, the company had a flattish 2011 due to a steady transfer of profits to contingency reserves. In addition, a forex loss hurt its September quarter profits. Still the company's business in specialty highend engineering plastics remains lucrative. Its valuations at P/E of 15.5 and price-to-bookvalue of 2.8 appear reasonable.
Investors are advised to forego the current open offer at Rs 606.8 per share in anticipation of a more lucrative delisting offer in months to come.
Potential Delisting Candidates
Oracle Fin Services
Oracle Fin's financial performance has been sound over the years. Its revenue grew at a compounded annual growth rate of 16% and net profit at 36% in the five years to FY11. The margin levels improved due to higher product penetration in the core banking vertical.
In recent quarters, however, the rate of growth has tapered down due to the lumpy nature of its product business, which is impacted by delay in clients' decision-making. Its headwinds are likely to continue considering the uncertainties in its key markets like the US and Europe.
Those already invested may continue to hold, but fresh investments may wait until clarity emerges on business growth. The management has denied any possibility of a delisting in the past.
Gillette India
The company's performance has been poor for the last four quarters. The sales growth has been steadily slowing down and the operating profit and net profit have dropped by more than 50% in each of the last four quarters.
The company has reduced prices of its products to beat intensifying competition. However, the strategy has not been successful as high input costs and the heavy spend on advertisement and promotion has affected its bottom line.
There is little that investors can look forward to except for any possible gains made in case the company announces a plan to delist.
Blue Dart Express
Being the market leader in express delivery services, Blue Dart Express has been able to maintain a consistent profit margin of over 7% for the last two years.
The company has a fuel surcharge mechanism linked with aviation turbine fuel (ATF) prices. Hence any price rise in ATF is passed on to the customers.
The company is growing at a CAGR of 23% for the last five years. It is debt free and has Rs 205 per share of cash on its book. On a trailing twelve month basis, the stock is trading at a P/E of 30.7, which is high compared to its peers but is fair considering the company's growth and dominant position.
Astrazeneca Pharma
Astrazeneca Pharma is the Indian arm of the UK-based pharma MNC Astrazeneca. The company has been facing a slowdown in its performance since the last three quarters with a declining growth in its revenues, operating profit and net profit.
Its parent company is also facing an array of challenges like drying up of its product pipeline, pricing pressure in European markets and competition from generic players. It also announced big job cuts in its US and European operations.
In such a condition, whether the parent may want to delist the Indian arm remains a moot question. However, the recent historic high levels of Astrazeneca Pharma stock suggest that investors are already buying into the stock on hopes of the company delisting. The company has previously tried to delist on two occasions.
BOC India
Kolkata-based BOC India is a leading industrial gas manufacturer owned by Linde Group of Germany. The company was one of the first MNCs to attempt delisting after Sebi notified the 25% public holding rule in 2010.
The offer failed due to lack of investor participation. The company has been investing aggressively to diversify its portfolio from traditional oxygen. It also makes large oxygen generating plants for steel companies and borrows from its parent to fund the projects.
BOC India's shares have spectacularly recovered from the nadir after the failure of delisting offer last year and are currently trading at a price-to-earnings multiple above 28. Longterm investors can stay invested for a potential delisting offer.
Fresenius Kabi
Formerly known as Dabur Pharma, Fresenius Kabi Oncology is predominantly present in the generic oncology segment in the developed markets. The company has recently changed its strategy under which it will provide contract research and manufacturing services to its German parent Fresenius Kabi.
The divestment of its loss making UKbased subsidiary to the parent company has helped the company to improve its operational performance in the quarter ended September 2011. The stock has been witnessing active investor interest since the beginning of the year.
Given the growth prospects of the company, the stock can be a good investment proposition even without the incentive of a possible delisting.
Honeywell Auto.
Honeywell Automation is a leader in providing integrated automation and software solutions in India. In the five-year period between 2004 and 2009 the company's profits grew at a cumulative annualised growth rate of 73%, while revenues grew at 33.5%.
However, it faced headwinds in 2010 resulting in a 21% fall in profits. The performance has remained subdued in the first nine months of 2011 as well. The company remains debt-free and cash-rich with operating cash flows exceeding capex requirements.
The scrip has lost heavily in the last few months and is trading near its 52-week low. However, that has only made its valuations more attractive. Investors should buy and hold the scrip.
Kennametal India
Kennametal India is a leading manufacturer of hard metal products and machine tools for manufacturers in industries such as transportation, engineering, aerospace etc.
After a difficult time in FY09 the company grew its profits at a cumulative annualised growth rate of 75% in the last two years.
The company paid a dividend of Rs 35 per share last year, which translates into a dividend yield of 4.5% on the current market price. Considering this, its current valuation doesn't appear expensive.
The company's promoters had attempted a delisting in December 2010, which couldn't proceed because retail shareholders didn't approve of such a move with the requisite majority.
Elantas Beck
The share price of specialty chemicals maker Elantase Beck has been ruling high for over one year, despite a flat 2010 and dismal first three quarters of 2011.
This has taken its price-to-earnings valuation beyond 40 - too expensive for a chemicals maker. This excessive exuberance seems to stem from an expectation that the company plans to delist. The company had previously attempted to delist in 2009.
The company remains a cash-rich, debt-free company with annual cash flows exceeding capital expenditure. In the first three quarters of 2011, its profits fell 24% while sales grew 5.8%.
Timken India
Timken India manufactures antifriction bearings, components and related parts. Over the past five years, the company's sales have grown at 75%, while its profits have grown at 81%, when compounded annually.
Its operating profit margins have remained in the range on 12-22%. But the last two quarters have proved flattish for the company. It is currently valued at 17.7 times its earnings for the trailing 12 months, which is somewhat higher than its peers.
But given its strong balance sheet and cash flows, this premium is justified.
Earlier a joint venture between US-based Timken and Tata Steel, it is now 80% owned by the US company after it bought out the Tatas' stake.
i like your blog you provide very informative news for business ,really its helpful,thanks for sharing
ReplyDeleteEquity market tips