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In light of demerger of Hexa Tradex (investment arm) from Jindal Saw
(JSAW) we are revising down our target price to INR200/share
(INR238/share earlier). We are incorporating a 50% holding company
discount to JSAW’s investment value. We expect the stock to trade at
~INR95/share post demerger, after accounting for 10% illiquidity discount
for the demerged company. The stock is attractively valued at post
demerger valuations, hence, we reiterate ‘BUY’.
JSAW to trade ex-investment holdings from November 22
JSAW’s investment arm, Hexa Tradex, is being demerged and the former will be trading exinvestment
holdings from November 22, 2011. Existing JSAW investors will get one share of
the new demerged company against five shares held; record date for the same is November
23, 2011. Shares of the new company are likely to be allotted to existing shareholders
within three-six months, depending on pace of approvals from SEBI and stock exchanges.
Holding company discount at 50%; new TP at INR200/share
Based on CMP, the NAV of holdings per JSAW share comes at INR76. We peg the holding
company discount at 50.0% based on simple average of three companies (Nalwa Sons, JSW
Holdings and Bajaj Holdings) in the portfolio. Consequently, we are revising down our target
price by INR38/share to INR 200/share.
Stock to trade at ~INR95/share post demerger
We believe that since the shares of the new demerged company are likely to be less liquid,
we have pegged a 10% illiquidity discount to compensate investors for their risk bearing.
Thus, we believe the stock will trade at INR95/share (CMP of INR129/share – INR 38 *90%)
ex-investments on November 22, 2011.
Outlook and valuations: Attractive; maintain ‘BUY’
The expected post demerger stock price of INR95/share implies attractive valuations of 5.6x
on FY13E EPS. We will incorporate any further changes to our new target price after
analyzing the balance sheet of the demerged company. Triggers for the stock: (a) start of
iron ore mines; (b) increased earnings from Jindal ITF; and (c) start of Abu Dhabi DI plant.
We maintain ‘BUY/Sector Outperformer’. At INR129, JSAW trades at 10.6x and 7.7x our
FY12 and FY13 EPS estimates, respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
In light of demerger of Hexa Tradex (investment arm) from Jindal Saw
(JSAW) we are revising down our target price to INR200/share
(INR238/share earlier). We are incorporating a 50% holding company
discount to JSAW’s investment value. We expect the stock to trade at
~INR95/share post demerger, after accounting for 10% illiquidity discount
for the demerged company. The stock is attractively valued at post
demerger valuations, hence, we reiterate ‘BUY’.
JSAW to trade ex-investment holdings from November 22
JSAW’s investment arm, Hexa Tradex, is being demerged and the former will be trading exinvestment
holdings from November 22, 2011. Existing JSAW investors will get one share of
the new demerged company against five shares held; record date for the same is November
23, 2011. Shares of the new company are likely to be allotted to existing shareholders
within three-six months, depending on pace of approvals from SEBI and stock exchanges.
Holding company discount at 50%; new TP at INR200/share
Based on CMP, the NAV of holdings per JSAW share comes at INR76. We peg the holding
company discount at 50.0% based on simple average of three companies (Nalwa Sons, JSW
Holdings and Bajaj Holdings) in the portfolio. Consequently, we are revising down our target
price by INR38/share to INR 200/share.
Stock to trade at ~INR95/share post demerger
We believe that since the shares of the new demerged company are likely to be less liquid,
we have pegged a 10% illiquidity discount to compensate investors for their risk bearing.
Thus, we believe the stock will trade at INR95/share (CMP of INR129/share – INR 38 *90%)
ex-investments on November 22, 2011.
Outlook and valuations: Attractive; maintain ‘BUY’
The expected post demerger stock price of INR95/share implies attractive valuations of 5.6x
on FY13E EPS. We will incorporate any further changes to our new target price after
analyzing the balance sheet of the demerged company. Triggers for the stock: (a) start of
iron ore mines; (b) increased earnings from Jindal ITF; and (c) start of Abu Dhabi DI plant.
We maintain ‘BUY/Sector Outperformer’. At INR129, JSAW trades at 10.6x and 7.7x our
FY12 and FY13 EPS estimates, respectively.
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