Education Sector and our Business Insight recommendation for this month

I came across this report in economic times that, "EDUCATION’ has done a world of good for equity investors who chose to bet on the sector. These stocks have delivered robust returns over the past one year, outperforming their counterparts in most sectors."

What I think is that Education sector is going to do really well over the next many years, and the oppurtunities are immense. It is all about finding the right investment option in this space. These days Education providers like Aptech, Educomp Solutions, Everonn Education, Core Projects and NIIT are being lapped by investors in large numbers. All these companies are definitely good, however, from what I have researched, there are a few immensely good companies in the Penny stock and Micro cap segment, which have been completely ignored by the investor community on account of their sheer size. Here I would not mention the name of the company, as it has been suggested under "Business Insight" recommendation to our paid subscribers.

However I would like to mention that the company works on PPP model, and does ICT implementation in various govt. schools under Sarva shiksha abhiyaan. Yesterday Educomp Solutions came out with a similar announcement regarding implementation of ICT in govt. schools, however no one really knows about the Penny stock, which has a dedicated itself towards the same work, and has been reaping benfits for 2-3 years.

Investment in such a company can give massive returns over a period of time. This is because the govt. has become more active in this space, and has allocated huge amount of money for the same.

Here are a few facts related to Education market

According to a McKinsey report, the current US GDP would have been higher by 9% to 16%, that is, $1.3 to 2.3 trillion, if the high school pass outs had been equipped with the requisite skills.

A national average dropout rate of 50% means about $15 billion spent annually on education is unproductive, if not a complete waste. Each percentage reduction in this rate can add our GDP —some say, at least a 25%.

The Eleventh five year plan is mooted as 'National Educational Plan by the Prime Minister with allocation of over 19% of the gross budgetary support for the sector. In the 11th plan, the government has budgeted Rs.411 billion to set up ICT labs for computer-aided learning and Edusat centers for distance learning programs. The government has also proposed Rs.310 billion for the National Skill Development Programme in the plan period, for training through virtual centers. This can really catapult into a huge opportunity for our "Business Insight" recommendation for this month.

If one goes by a CLSA Asia Pacific report (released in 2008), the Indian education market is estimated at $40 billion — with the kindergarten segment valued at about $20 billion, private professional colleges at $7 billion, tutoring at $5 billion, vocational training at $1.4 billion, test preparation at $1.7 billion and pre-schools at $1 billion. As per unofficial estimates, private spending in education is growing at a CAGR of 14% and will touch $80 billion by 2012.

I would like to re-iterate that considering the above factors and the involvent of private companies by the govt., an early entry into this company might turn around the life of many investors.

To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) atEkansh@hbjcapital.com

Sesa Goa - One can exit it at this point of time

Sesa Goa has been in news for some time. Earlier it was in news for the 5x gains it has given from its lows and now it is in news for not so good reasons.

The government has ordered the SFIO to probe into mismanagement and financial irregularities in Vedanta Group-owned Sesa Goa and its subsidiary Sesa Industries (SIL),

The scope of (SFIO) investigations include looking into the state of affairs of the company and its subsidiary Sesa Industries Ltd, in respect of mismanagement, malpractices, financial and other irregularities

The company did come into news earlier for some similar reasons

Vedanta Aluminium Ltd had been accused of falsely encashing a Bank Guarantee of Rs 64 crs provided in 2007 by Maytas Infra when signing the MOU to develop a Rs 232 crs township in Jharsuguda in Orissa…a Police Investigation is on

In February 2009,a division bench of the Mumbai High Court in Goa set aside a December 2008 single bench sanction for amalgamation of subsidiary, Sesa Industries with Sesa Goa on the grounds that the Scheme was in violation of the mandatory provisions of Sec 394 of the Companies Act.The appellant,a shareholder of Sesa Industries, told the court that Sesa Industries had suppressed information to shareholders that an investigation was going on against the company and it even had an adverse report against it ,when applying to the court for sanction of the Amalgamation Scheme in 2005/6.Sesa Industries has filed a Special Leave Petition in the Supreme Court against this order

S K Tamotia,ex chief of Nalco was sentenced to three years in prison for corruption and holding disproportionate assets.It was a CBI case that related to his tenure at Nalco.After exiting Nalco he held top positions at Hindalco and the Vedanta Group

Looking into the way, the things have turned out, I would suggest readers to exit Sesa Goa. This is because I feel that there are numerous good companies available, and thus one may need not run after it no matter how good the prospects may seem. An incidence of the order that has taken place, does not put the management in good books.

Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.

To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) atEkansh@hbjcapital.com

Spanco Ltd. - A reasonable investment option

Spanco provides telecommunications solutions and business process outsourcing (BPO) solutions. The company's services include network engineering services and software sales. Spanco is an active player in the field of Information and Communication Technology (ICT) with dedicated System Integration. The BPO services focuses on both domestic and international call center operations.

The BPO operations of the company do not generate much interest, but its the System integration and implementation of ICT, that makes it worth considering. The company has been an active player in the implementation of ICT for various e-governance initiatives of the govt.

A brief review of the Projects under implementation

During the year under review, Spanco has been awarded various projects valued at over Rs. 800 Crores of the multi-crore, mega, e-Governance project pie. To name a few, these include SWAN projects in Orissa and Maharashtra, Community Service Center project in Maharashtra, modernization of jails and Judiciary System in Bihar and Disaster Management system Project in Andhra Pradesh. It is in the middle stages of the execution of the Rs. 250 Crores modernization of the Public Distribution System in Maharashtra.

The company has also won the Orissa State Data Center (SDC) project. As per the company this is the first SDC order in the country and is the part of the core infrastructure under the National e-Governance Program (NeGP) instituted by the Department of Information Technology, Government of India. The order value is about Rs 30 crores and will be implemented over a period of 4 months.

Performance

In terms of performance, Spanco did well till 2008, and registered almost a two-fold jump in its revenues from Rs 216 cr in FY2005-06 to Rs 565 Cr in FY2007-08. Even the bottom-line improved from Rs 20 Cr to Rs 40 Cr.

But for FY2008-09 the Company’s income from operations stood at Rs. 667.14 cr as compared to Rs. 565.44 cr in the previous year, registering a growth of 17.98%. Profit before interest & finance charges, depreciation & taxation was Rs. 78.78 cr as against Rs. 91.86 cr in the previous year. Profit after tax was Rs. 19.60 cr as compared to Rs. 38.26 cr in the previous year. Thus, it was like back to square one.

The decline in the operating margin and profitability was mainly because of foreign exchange fluctuation which resulted in higher cost of imported raw materials. Further provision against receivables to the tune of about Rs. 2,716.08 Lacs and higher interest cost further impacted their profitability.

However, Spanco's net profit rose 82.3% to Rs 9.28 crore on a 68.9% increase in sales to Rs 186.84 crore in Q1 June 2009 over Q1 June 2008. The results look good, but part of the reason for them looking good is a low-base effect of poor performance during June 2008.

Conclusion

If one is to look at opportunities in the E-Governance sector, then they are definitely limit-less. The use of Information and Communication Technologies (ICTs) to modernize the state; the creation of data repositories for MIS, computerization of records, attempt to bring the state closer to the citizens requires the deployment of IT for furthering the priorities and goals of e-governance.

The future outlook for the company seems bright especially with the order book on hand, and also proposed order book, if it gets the approval from BSNL. The company suffered high interest cost during FY2008-09, but the management recently allotted 34 lakh shares to themselves to fund the working capital facility.

The good thing about the management has been that they have been issuing non convertible redeemable debentures, and have been able to successfully redeem them. Even they could generate Rs 25 cr (pre-tax) positive cash-flow from operating activities.

The market cap of the company stands at Rs 153 cr. Looking at the prospects and the current price of Rs 53.90 discounting the company's Q1 June 2009 annualized EPS of Rs 13.22, by a PE multiple of 4, one can expect reasonable return over next 2 years.

Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.

To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com

Info Edge India - The business looks promising

Info Edge (India) ltd., is a name which you may not be able to recognize. However, if I mention some portals like naukri.com, 99acres.com, jeevansathi.com, then you will definitely recognize at-least one out of the three mentioned. So, what is the link b/w the mentioned portals and Info Edge (India) ? Info Edge (India) is the owner of these portals, and this is its business.

Business

Info Edge (India) Limited (Info Edge) is a leading provider of online recruitment, matrimonial, real estate and educational classifieds and related services in India. Their business is managed primarily through five divisions, which comprise online recruitment classified division (operating through www.naukri.com) , online matrimonial classified division (operating through www.jeevansathi.com) , online real estate classified division (operating through www.99acres.com), offline executive search division (operating through Quadrangle division, www.quadranglesearch.com) and online educational classifieds division (www.shiksha.com).

In addition to these specific business verticals, Info Edge also undertakes, strategic investments in companies and start-up ventures. In 2007-08 the Company had made commitments to invest in Studyplaces Inc (a well known company in the field of education), USA. In 2008-09, it increased its investments by committing to take a stake in Applect Learning Systems (Pvt.) Limited, which operates the kindergarden to class 12 (K-12) www.meritnation.com, an assessment based learning portal; and Etechaces Marketing & Consulting Private Limited, which operates the insurance sales portal www.policybazaar.com.

IPO and its proceeds

The company got listed in November, 2006, when it issued 53.24 lacs equity shares of Rs 10 at a premium of Rs 310 per share. It had raised Rs 170 Cr through the Initial Public offer. However, the company has till now not been able to utilize all its funds and has parked most of it in Mutual Fund schemes. A part of the reason for not being able to utilize the funds is that the business done by it is not at all capital intensive, and a very high margin one. Thus it is able to generate enough cash from its operations to fund its requirements.

Performance

Their primary business remains online recruitment classifieds and related services through naukri.com, naukrigulf.com and quadrangle business divisions. Revenues from the recruitment solutions business increased by 7.75% from Rs. 196.4 crore in 2007-08 to Rs. 211.6 crore in 2008-09. This business generated around 86.33% of the companys net sales in 2008-09. However, it is important to note that with net sales from other verticals (mainly jeevansathi.com and 99acres.com) increasing by 49% to Rs.33.5 crore in 2008-09.

By now, everyone is aware that Indian IT services sector was hit hard during the meltdown, and the recruitment process was either deffered or in some cases large lay-offs took place. Thus, companies that were earlier dominant in the Indian recruitment space significantly curtailed their activities. As a result, Info Edge also suffered and could not record the pace of growth, it had been witnessing earlier. Its main revenue generator naukri.com faced a slump in activity, especially the recruitment of the IT and BPO companies.

The margins of the company stand very high at around 25%. It recorded a net profit of Rs 57 Cr on total income of Rs 239 Cr.

Valuations and outlook

If one is to consider the valuations, then they look extremely stretched by any standards. The market cap of the company stands at Rs 1850 Cr, which to me is definitely very high considering that its total revenue for FY2008-09 stood at Rs 239 Cr, and a net profit of Rs 57 Crore. However, there are numerous factors that contribute to it being valued at a P/E of 30-35. Margins of course are very high with the company being almost debt-free. Also, Naukri.com continues to be India's No.1 job site, enjoying over 50% share of page views across the top three job sites.

The outlook for the company looks very positive. The job market is again gaining momentum, even the matrimonial search has gained pace with increasing awareness and internet penetration. Property related deals are again happening at a faster pace, thus culminating in better prospects for 99acres.com. The company maintains a healthy cash position. As of 31 March 2009,the cash and bank balances with the company were Rs. 3,22.9 crore deployed conservatively mostly in bank fixed deposits.

So, the prospects are bright w.r.t both organic and inorganic growth. However, I would consider it as a better investment option, at slightly lower valuations of P/E of 20-22, which is mostly the case with other high end IT companies.

Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.

To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com

TTK Prestige - A domestic demand driven growth story

TTK Prestige operates in the Kitchen Appliances segment with a range of product categories consisting of Pressure Cookers, Non-stick Cookware, Gas Stoves and Domestic Kitchen Appliances. The key product category of the company is Pressure Cookers which is also the single largest pressure cooker brand in the country. Against the 8 per cent growth reported by the industry last year, TTK Prestige reported a 17 per cent growth in its sales volumes.

TTK Prestige now offers complete kitchen solutions with a product range comprising non-stick cookware, rice cookers, gas stoves, kitchen hoods, kettles, sandwich toasters and many other small electrical appliances. The company is also into the modular kitchen segment, and for marketing the same and other auxillary products, the company has established a network of retail outlets under "Prestige Smart Kitchen" brand, with total number of outlets running into a figure of 196.

Performance

TTK Prestige’s net profit for the second quarter (Q2) ended September 30, 2009, zoomed 134% to Rs 16.93 crore on the back of robust sales and an extraordinary income of Rs 2.84 crore. The company posted Rs 7.25-crore net profit in the comparable period of FY08. Income from operations in Q2FY10 was Rs 139.35 crore (Rs 108.81 crore). There was a sharp drop in the interest cost which stood at Rs 17 lakh (Rs 1.55 crore). For the half-year ended September 30, 2009, TTK Prestige had a net profit of Rs 24.32 crore (Rs 12.35 crore) while income from operations stood at Rs 237.7 crore (Rs 194.47 crore).

Going forward the interest outgo for the company will almost be nil. This is because the company has repaid all outstanding loans. In 2008-09, the company repaid Rs 26 crore of outstanding loans and another Rs 20.7 crore since April this year.

This speaks something of the capabilities of the management. They have been able to generate positive cash flows from their operating activities, thus enabling them to repay their loans, and also embark upon expansion plans.

Expansion Plans

The company is setting up a new manufacturing unit at Roorkee in Uttarakhand for manufacturing of kitchen electrical appliances and stoves. With a proposed investment of Rs 11 crore, the plant is expected to be operational in the fourth quarter of the current fiscal. This unit may lift margins due to excise duty and tax savings.

TTK Prestige also has 6.5 acres of surplus land in Bangalore. This area is now being developed into a residential and office space, rentals from which will start flowing from 2012. Cash flows could be furthered strengthened from these rental incomes in the coming years.

Conclusion

The stock is currently trading at a trailing twelve months PE of 11, which is not high considering the fact that the company is almost debt free, and is a market leader in case of Kitchenware. Going forward, one should see improvement in sales figure, with accompanied improvement in margins.

TTK Prestige is basically a India based growth story, and has monopolized the business in its favor at the end higher end of Kitchenware. We have an expanding working population in urban areas and that augurs well for the company, for at-least a decade or so.

Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.

To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com

Updates on Instant Profit Stock Reco : Omega Interactive Technologies Ltd. (BSE Code : 511644)

Dear Subscribers,

We had suggested Omega Interactive at around Rs 5.6-5.8, and had updated the target price to Rs 7-7.05.

The stock price ended the Muhurat trading day at Rs 7.07 (there was an increase in volume on account of profit booking by our subscribers) , and thus the position stands closed at a gain of 25%.

- Team MPS

Euro Multivision - One car learn something from this IPO

I just hope that our daily visitors must not have made the same mistake as thousands of other short term investors did when they subscribed for the shares of Euro Multivision. We have often repeated that one should not put in money in the IPOs as most of the they are aggressively priced.

We had also mentioned that those who put in money, do it for the sole purpose of making 10-20% gain on the day of listing, by selling it at a premium. However we had cautioned that one should be aware that it can turn out the other way around, and can badly hurt the money put in (article can be accessed here).

So, let's go into the details of what happened with Euro. This might help us validate our point of avoiding IPOs.

Euro Multivision raised Rs 66 crore from an initial public offering (IPO) of 88 lakh equity shares, which remained open between 22 and 24 September 2009. The company had priced the IPO at the top end of the Rs 70- 75 per share price band. The IPO was subscribed 1.81 times.

Euro Multivision is mainly into manufacturing of compact discs (CDs) as well as digital versatile discs (DVDs).

The company intends to foray into solar energy space and the proceeds of the IPO would be used to fund the company's photovoltaic solar cell manufacturing unit in a special economic zone (SEZ) at Bhachau in Gujarat's Kutch district. The plant, being built at a cost of Rs 178.03 crore, will have a capacity of 40 megawatts (MW) per year.

Now, some very important figures which clearly tells us that how lavishly the IPO was priced.

The company's net profit plunged 79.71% to Rs 1.83 crore on 19.46% decline in net sales to Rs 73.22 core in the year ended March 2009 over the year ended March 2008. So, the current price of Rs 44.20 discounts the company's year ended March 2009 EPS of Rs 0.8, by a PE multiple of 55.25, which by any standards is very high. If this is high, then what would one say of a PE multiple of 94, because the issue was priced at Rs 75 per share.

I read somewhere that analysts expect FY10E EPS at Rs 1 while management expects to make Rs 4-5 EPS. The management is targeting FY11 EPS between Rs 10-12. One can assess the claims of the management by keeping note of the fact that the bellwether Moser baer (in both CDs manufacturing and Solar cell manufacturing) could break even only in the latest June quarter, and how badly has XL telecom performed.

This was about aggressive pricing. Lets now look into the motives of Qualified Institutional buyers

The company has lost more than 40% of its market cap since it got listed, and that's largely because QIBs motivated by short term gains subscribed the issued, and when they saw their bet going the other way, sold off heavily.

Now QIBs were allotted about 50% of the total issue, there were five of them who were given stake and four of them have reduced it. First one is Credo Fund, they were allotted about 17.8% of the issue and they have halved their stake. The second one is India Max Investment Fund, they have exited completely, they were allotted about 6.2%. The third one is Emerging India Focus Fund, they have sold just a small part of their allotted amount. The fourth one is Tejal Merchantile, they have sold about 75% of the allotted one. The only one which didn’t is Taib Fund.

This is what usually happens, however its been highlighted in this case on account of precipitous fall, wherein institutional buyers are able to exit, and retail investors are left scratching their heads.

Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.

To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com

Penny Stocks - Life changing opportunities

There’s a lot of debate as to what is the fastest path to making millions in the stock market. If you’re starting with just a little capital, penny stock investment/trading can certainly pay huge rewards.

A penny stock is basically any stock that trades under 10.00 per share. For many brokers, this is a threshold limit where they will not spend money on research, and will not loan against the value of the stock. Therefore, there is great potential as these large firms are not paying attention to these stocks. Because of that fact, it can be harder to get information on them.

While these smaller stocks are riskier than their larger brothers, they have a tremendous reward potential if you can find the good companies. While some small companies have gone from 50 Paisa to zero, some have also gone from 50 Paisa to Rs.50 or even Rs 100 which is almost 100-200 times returns!!!

More recently, investors are quickly learning that these penny stocks are the future companies of India and the world and have great potential. The greatest potential of a penny stock is its ability to move a large amount in a short amount of time. Think of a large company such as Infosys with a stock price near Rs.1,500 per share. It would take a modern miracle for Infosys's stock price to double to Rs. 3,000 per share - even after several years. However, a small company with a stock price at Rs 2.00 could see its stock double to Rs 4.00 much more easily in a month. In fact, we have seen many stocks with prices like these double in just days or weeks. That is where the great profit potential lies.

Even companies like Praj Industries Ltd, Unitech Ltd, Bliss GVS Pharma Ltd, Gujarat NRE Coke Ltd, Gemini Communications Ltd, Lakshmi Energy and Foods Ltd, Texmaco Ltd, ICSA India Ltd, NMDC Ltd. used to be penny stocks in 2001.

However, researching penny stocks is more vital than anything else

Whether you’re buying a hot tech stock, penny stock or a well-known stock, do your research always.
It doesn’t matter if you’re investing Rs 5,000 or Rs 10 lakhs. You need to do your research. Want to know the secret of truly wealthy people? They value each and every rupee they have.

For details on our short term calls, explore our previous posts, wherein we were mostly successful (with a few exceptions). For our most popular "Business Insight" report, follow the link

So, if you wish to make huge money, and lead a luxurious life, well-researched Penny/Micro Cap stocks might be an appropriate investment option for you.

Subscribe for "Penny stock package" from MPS and, and see your self as a millionaire in next 2-3 years

-Team MPS

Stock picks for Mahurat trading on Oct 17th (6:15 - 7:15pm)

Pls visit www.hbjcapital.com for more info...

Celebrate the festival of lights with special discount offer on all the packages of HBJ Capital

Also visit : http://www.hbjcapital.com/ for more details!!!

Notice : IP and VP recommendations in your mail boxes

Dear MPS subscribers,

From now on, you will be receiving Instant Profit (along with updates) and value pick recommendations, directly into your mail boxes.

-Team MPS

Updates on Instant Profit Stock Reco : Omega Interactive Technologies Ltd. (BSE Code : 511644)

Dear Subscribers,

We had suggested Omega Interactive at around Rs 5.6-5.8.

Many could not buy (on account of volume being low), but for those who could buy small quantities, I would like to revise the target to Rs 7-7.05, a gain of almost 22-25%. Plz book all your profits in the specified range.

-Team MPS

Updates on Instant Profit Stock Reco : Apcotex Industries Ltd. (BSE Code : 523694)

Dear Subscribers,

We had suggested a buy at around Rs 72-76. The CMP is Rs 79.20.

Latest News

Apcotex Industries Ltd has informed BSE that the Board of Directors of the Company at its meeting held on October 16, 2009, inter alia, have approved the proposal for Buy back of equity shares of Rs 10/- each of the fully paid up equity share capital of the Company, from open market through Stock Exchange mechanism, at a price not exceeding Rs 90/- per equity share aggregating to Rs. 360 lacs from equity shareholders other than the Promoters and persons in control of the Company

Conclusion

We revise our target to Rs 85. Plz book complete profit at Rs 85

- Team MPS

Instant Profit Stock Reco : CNI Research Ltd. (BSE Code : 512018)

Buy CNI Research Ltd. (BSE Code : 512018) around Rs 27 - 28.35; SL @25.5; First TGT Rs 31.5-32

As on Sept 13th : CMP = 27 & Volume = 1-1.2lakh Shares

Latest News :

CNI Research Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on October 31, 2009, to consider issue of bonus shares.

- Team MPS

Could I plz have your views on Austin Engineering Company Ltd. - Rahul Somani, Goa

Austin Engineering company in its long 36 years of existence, has been only able to grow to a very modest size of just Rs 26 Cr, so in terms of growth, its been disappointing. If one is to look at valuations, and the balance sheet, then the balance sheet of the company looks clean, and even the valuations look cheap at a P/E of about 4, but there's a reason to it and that is lack of growth.

Markets value company lavishly, only in the case there appears some growth ahead, whereas in case of Austin, it has not done superbly to justify high valuations, and thus it is being valued cheaply. Also, the sector (bearings) in which the company operates is highly fragmented, and thus I cannot foresee much growth going forward.

So, if you are a growth seeker, then I would not suggest you to hold on to it. However, if you are looking for stability, then Austin can definitely provide some stability, with its stream of dividends, and also on account of its largely stable performance.

Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.

To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com

Dollar carry trade - What is it ?

These days you might be hearing a lot of carry trade and excess liquidity driving the market
beyond reasonable valuations. Well, Yen carry trade was the rage during the bull run in 2006-7 , and now it appears to be the dollar carry trade that is fuelling stock prices across emerging markets, including India.

With the stock bubble and the real estate bubble in Japan leading to it’s currency,the Yen becoming the Carry Trade Currency for over a decade we’re now seeing Yen giving way to the the World’s (yet) Reserve Currency,the US Dollar, in becoming the preferred Currency for Carry Trade !

Now, what is carry trade ?

A carry trade basically means borrowing in a currency with very low interest rates and deploying the funds in assets offering higher yields. These days, the currency is the dollar and the high yielding assets are emerging market equities.

In the past decade, the Japanese yen and the Swiss franc were favorites for the carry trade because of their low yields. But now, the U.S. dollar presents the same opportunity due to the likelihood that rates will stay low for a long time to come.

Why not borrow in dollars where interest rates are low and invest elsewhere where yields are high? This is what is known as the carry trade.

Why is it that dollar is depreciating, and the rates are low?

For the first time since 1993,the three month LIBOR (London Inter Bank Offered Rate) for the US Dollar slipped to 0.292 %below that of the Japanese Yen rate of 0.352%.

The depreciation is happening largely on following accounts :

USA Debts and Deficits balloon to unmanageable proportions…I mentioned about it in my earlier posts.

Fed keeps the rate low,towards Zero and has little choice but to continue to print more and more of the US Dollar Currency. After continuous Rate Increases in 2004 (5),2005(8) and 2006(4),the Fed dropped rates thrice in 2007 and SEVEN times in 2008,with the last drop of a huge 0.75% in December 2008 bringing the Rate close to Zero,leaving little place to drop further.

Scenario ahead

Countries like China begins exiting US Dollar Investments…US $ 800 Billion of it’s FX Reserves of near $ Two Trillion are in US Treasury Bonds….Countries will begin dumping the Dollar once they realise that they do not need them

This potential Depreciation of the US Dollar will bring in an additional benefit for those who have borrowed in US Dollars at low Interest rates…they stand to make currency gains over and above the interest differential….The fall is already being evidenced…In the last six months the US Dollar Index (DXY) has dropped near 15% from 89 to 76.This Index measures the performance of the US Dollar against six major currencies….Euro,Canadian Dollar,Swedish Krona,Swiss Franc,Japanese Yen and the Sterling Pound

So, keeping the above points in mind, one can expect Dollar to depreciate further against other currencies, and those who have borrowed, will gain both in terms of interest differential and currency gain.

To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com

Instant Profit Stock Reco : Apcotex Industries Ltd. (BSE Code : 523694)

Buy Apcotex Industries Ltd. (BSE Code : 523694) around Rs 72 - 76; SL @65; First TGT Rs 83

As on Sept 13th : CMP = 72.35 & Volume = 10-12K Shares

Latest News :

Trivikram Investments and Trading Company Ltd (belonging to Promoter group) informed BSE that they purchased 36,702 shares of the Apcotex Industries Ltd on September 10, 2009. Prior to the acquisition of above shares Trivikram Investments and Trading Company Ltd holding 9,40,933 (17.02%) which is increased to 9,77,635 (17.68%) shares of the target Company.

Apcotex Industries Ltd has now informed BSE that the meeting of Board of Directors of Company interalia for considering the Buyback of Equity shares of the Company is scheduled for October 16, 2009.

Outcome

The Promoters are showing confidence in the overall working of the company, as reflected by the acquisition of shares and also by its contemplation of buying back the equity shares of the company.

We feel, that there should be an up move till the outcome of the meeting on account of anticipation of buy-back price being higher than the CMP, and therefore one can enter at the CMP to reap benefits.

NOTE :

One should place the order as soon as the trading starts, with preferably 75.95 being the buy price.


-Team MPS

Bonus shares and the exuberance around it

Reliance Industries shares were seen rising 3% in early trade on Thursday, following the announcement of a 1:1 bonus share issue. It's usually observed, that whenever a bonus issue is announced, there's a sense of euphoria in the shareholders, with an upside in the stock price movement.

But, the important question that emerges is whether shareholders get something extra out of
such an issue, as many a times companies try and assuage investors by using a bonus issue.

The answer to this question lies in the basic understanding of what actually bonus shares are....

Bonus Shares

Bonus shares are allotted by the company to existing shareholders. The company does this by capitalising its free reserves. Assume a company with a equity capital of Rs 500 crore and free reserves of Rs 1000 crore. If this company issues a 1:1 bonus (one free share for every held), its equity capital will double to Rs 1000 crore. The extra Rs 500 crore is shifted from the free reserves to the equity capital, and the shareholders given the bonus shares.

The company's equity capital is now Rs 1000 crore and its free reserves Rs 500 crore.

The effects of bonus issue

Fundamentally speaking, bonus issues do not change the overall wealth of the shareholders, as is generally perceived. This is because following the bonus issue, the stock price will correct to the extent of bonus ratio. For instance, if the ratio is 1:1, the stock price will halve.

Actually, bonus issue is nothing more than a bookish entry. Even before the capitalization of reserves, the free reserves belonged to shareholders, and thus after the issuance of new shares, they do not gain anything out of it (just a change in name from free reserves to equity capital).

However, bonus shares do improve the liquidity in a stock (by increasing the number of shares that can be traded), and thus its one of the methods (apart from share split) employed by many companies to improve the tradeability of the stock.

To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com

Updates on Instant Profit Stock Reco : Omega Interactive Technologies Ltd. (BSE Code : 511644)

Dear Subscribers,

Our Instant profit recommendation#2 moved as was expected. The liquidity in this stock is relatively low, so those who missed out today can buy on Monday in the price range of Rs 5.56-5.83.

The no. of shares traded in the early hours of the day remain less, however the volume increases towards the end of the trading period (as observed in the last two trading days). Thus, one should continue with the buy order, in order to acquire some quantity, and reap profits in the short term.

- Team MPS

Instant Profit Stock Reco : Omega Interactive Technologies Ltd. (BSE Code : 511644)

Buy Omega Interactive Technologies Ltd. (BSE Code : 511644) around Rs 5.00 - 5.60; SL @4.73; First TGT Rs 7.20

As on Sept 8th : CMP = 5.30 & Volume = 10-12K Shares

Latest News : Open Offer

The Acquirers are making an Open Offer to the public Shareholders (i.e. Shareholders other than the Acquirers, Promoter Group Shareholders of Target Company and parties to the Agreement) of Target Company to acquire 10,00,000 Equity Shares of Rs 10/- each representing 20% of issued, subscribed, paid up and voting Capital of Target Company. The Offer is at a price of Rs 7/25 (Rupees Seven & Paise Twenty Five only) per Equity Share fully paid up ("Offer Price"), payable in cash ("Offer"), subject to the terms and conditions mentioned in PA.

- Team MPS

Updates on Instant Profit Stock Reco : Vision Corporation Ltd. (BSE Code : 531668)

Dear Subscribers,

Our Instant Profit recommendation #1 has not performed the way we had expected.However, the decline in the price has been on lower volumes. Also, as evident from the chart, there's a strong support at Rs 7.5.

We expect the price to rebound from these levels, however, we would still like you to keep a strict stop-loss at Rs 7.5.

- Team MPS

Marsons Ltd. - A slew of positive developments

Marsons Limited is a company engaged in the manufacturing of transformers, and has been in this business for over 5 decades. They manufacture Power and Distribution Transformers ranging from 10 KVA to 100 MVA 132 KV Class, Furnace Transformers, Dry type Transformers and various types of special Application Transformers. So, just like any other transformer manufacturing company, even they manufacture a whole lot of them. Even their results are not very impressive. Then what is it, that makes me write on it?

Well, there have been a few recent developments, and they might augur well for the company. They being :

The company has taken steps to upgrade its facility for manufacturing of transformers upto 160 MVA 220 KV Class from the present capacity of 100 MVA 132 KV Class. A new facility to manufacture EHV power Transformers up to 315 MVA 400 KV Class is under implementation.

4432100 equity shares of Rs 2/- each were allotted to Mrs. Charu Kotia, Executive Director of the Company on Preferential basis at an exercise price of 3.20 each on February 23, 2009 for expansion of Company´s activities.

The Scheme of Amalgamation of M/s. Marsons Transformers Limited with the Company was approved by the Hon’ble High Court at Calcutta and 31567900 equity shares of Rs 2/- each of the Company were allotted on August 01, 2008 consequent to such amalgamation. This has increased promoters stake in the Co. to 46.8% from just 16% a year back.

Company received allotment advice dtd. April 09, 2009 from Advance Power Technologies Ltd on April 09, 2009 for allotment of 5,00,000 equity shares of Rs 10/- each on March 31, 2009 and accordingly the Company's investment in that Company has gone upto 53.33% and accordingly henceforth Advance Power Technologies Ltd has become a subsidiary Company of the Company.

All these developments have a positive bearing. Allotment of shares to promoters is always a positive sign, and their stake has increased to 46.8%, which is quite good. Also with the slew of power projects line up, transformers will be great demand. So, Marsons limited is one counter, whose performance should be tracked for a new beginning in the form of good results ahead.

Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.

To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com

Info Edge India - The business looks promising

Info Edge (India) ltd., is a name which you may not be able to recognize. However, if I mention some portals like naukri.com, 99acres.com, jeevansathi.com, then you will definitely recognize at-least one out of the three mentioned. So, what is the link b/w the mentioned portals and Info Edge (India) ? Info Edge (India) is the owner of these portals, and this is its business.

Business

Info Edge (India) Limited (Info Edge) is a leading provider of online recruitment, matrimonial, real estate and educational classifieds and related services in India. Their business is managed primarily through five divisions, which comprise online recruitment classified division (operating through www.naukri.com) , online matrimonial classified division (operating through www.jeevansathi.com) , online real estate classified division (operating through www.99acres.com), offline executive search division (operating through Quadrangle division, www.quadranglesearch.com) and online educational classifieds division (www.shiksha.com).

In addition to these specific business verticals, Info Edge also undertakes, strategic investments in companies and start-up ventures. In 2007-08 the Company had made commitments to invest in Studyplaces Inc (a well known company in the field of education), USA. In 2008-09, it increased its investments by committing to take a stake in Applect Learning Systems (Pvt.) Limited, which operates the kindergarden to class 12 (K-12) www.meritnation.com, an assessment based learning portal; and Etechaces Marketing & Consulting Private Limited, which operates the insurance sales portal www.policybazaar.com.

IPO and its proceeds

The company got listed in November, 2006, when it issued 53.24 lacs equity shares of Rs 10 at a premium of Rs 310 per share. It had raised Rs 170 Cr through the Initial Public offer. However, the company has till now not been able to utilize all its funds and has parked most of it in Mutual Fund schemes. A part of the reason for not being able to utilize the funds is that the business done by it is not at all capital intensive, and a very high margin one. Thus it is able to generate enough cash from its operations to fund its requirements.

Performance

Their primary business remains online recruitment classifieds and related services through naukri.com, naukrigulf.com and quadrangle business divisions. Revenues from the recruitment solutions business increased by 7.75% from Rs. 196.4 crore in 2007-08 to Rs. 211.6 crore in 2008-09. This business generated around 86.33% of the companys net sales in 2008-09. However, it is important to note that with net sales from other verticals (mainly jeevansathi.com and 99acres.com) increasing by 49% to Rs.33.5 crore in 2008-09.

By now, everyone is aware that Indian IT services sector was hit hard during the meltdown, and the recruitment process was either deffered or in some cases large lay-offs took place. Thus, companies that were earlier dominant in the Indian recruitment space significantly curtailed their activities. As a result, Info Edge also suffered and could not record the pace of growth, it had been witnessing earlier. Its main revenue generator naukri.com faced a slump in activity, especially the recruitment of the IT and BPO companies.

The margins of the company stand very high at around 25%. It recorded a net profit of Rs 57 Cr on total income of Rs 239 Cr.

Valuations and outlook

If one is to consider the valuations, then they look extremely stretched by any standards. The market cap of the company stands at Rs 1850 Cr, which to me is definitely very high considering that its total revenue for FY2008-09 stood at Rs 239 Cr, and a net profit of Rs 57 Crore. However, there are numerous factors that contribute to it being valued at a P/E of 30-35. Margins of course are very high with the company being almost debt-free. Also, Naukri.com continues to be India's No.1 job site, enjoying over 50% share of page views across the top three job sites.

The outlook for the company looks very positive. The job market is again gaining momentum, even the matrimonial search has gained pace with increasing awareness and internet penetration. Property related deals are again happening at a faster pace, thus culminating in better prospects for 99acres.com. The company maintains a healthy cash position. As of 31 March 2009,the cash and bank balances with the company were Rs. 3,22.9 crore deployed conservatively mostly in bank fixed deposits.

So, the prospects are bright w.r.t both organic and inorganic growth. However, I would consider it as a better investment option, at slightly lower valuations of P/E of 20-22, which is mostly the case with other high end IT companies.

Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.

To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com

Instant Profit Stock Reco : Vision Corporation Ltd. (BSE Code : 531668)

Buy Vision Corporation Ltd. (BSE Code : 531668) around Rs 8.00 - 8.50; SL @7.50; First TGT Rs 10

As on Sept 8th : CMP = 8.38 & Volume = 90-100K Shares

This Instant Profit recommendation is based purely on technicals, as the counter has witnessed a breakout against a general market trend. This recommendation is meant for high risk profile individuals as Risk/Reward ratio is equally balanced.

- Team MPS

GTL Infrastructure - A long term bet

GTL Infrastructure, established in 2004 and part of Global group, is the pioneer in Shared Telecom Infrastructure in India. GTL Infrastructure offers ready to use passive infrastructure to wireless telecom operators.

The company is in the midst of rolling out a Pan India network of 23,700 towers by 2010/11, and is offering the infrastructure to the leading service providers in India.

This company is in the business of passive telecom infrastructure sharing, setting up of which involves large amount of capital. It's a highly capital intensive business initially, but can definitely reap huge benefits in the long run.

Not all telecom operators can afford to set up their own towers, and therefore they resort to sharing, which provides ample of opportunities to companies like GTL infrastructure. Companies like Bharti and Rcom have their own tower companies, but the new entrants like swan, telenor, or even the relatively older folks like Aircel, Idea, BSNL, are dependent on the infrastructure set up by GTL or Bharti, Rcom.

At present, GTL can't be valued on the traditional lines of P/E. The company is generating cash from operations, which does not reflect in earnings on account of huge depreciation charge. At present the equity base is Rs 946 Cr, but will swell up to around 1200 Cr, if all the warrants and FCCBs are converted.

The present earnings and the net profit are not the true reflection of the earnings potential of the company. However, looking at the rate of depreciations, and the interest charge, one cannot expect the company to post good results (on the basis of numbers) till say 2011. But, the fact is that its telecom infrastructure will always be in demand, especially with the new entrants, and also on account of 3G services.

Thus, if one is ready to hold it for 4 years or so from now, then it can really prove to be a good investment. However, in the medium and shorter term, dont expect much out of this company.

Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.

To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com

A Tribute to the saint of Non-violence

Gandhi and the universality of God

October 2nd 2009 is the 140th birthday of Mahatma Gandhi who is one of the greatest personalities of recent times and he can be considered the saint of non-violence who did what he preached and preached only what he did.

Religious conflicts are the most common cause of violence in the world today. Not a day passes without the news of some tragic episode causing deaths of innocent people somewhere in the world. We say that we are all the children of one God and that that all religions lead to that same God but why are we fighting and killing each in His name.

Mahatma Gandhi had a very simple but useful lesson for us all in inter-faith relations. A militant Hindu, who admitted killing a Muslim child in revenge for the murder of his own son by Hindu militants, came to Gandhi, who was almost dying from prolonged fasting. He laid down his weapons and urged Gandhi to break his fast, saying he did want to carry the sin of his death. The Mahatma listened intently and told the man of a way out of his past sins against fellow Muslims.

You go back, find a Muslim child whose parents were killed by Hindus and bring it up strictly as a Muslim not a Hindu.

These words of Gandhi are so powerful and remain relevant till today and will remain so for ages to come.Unless we accept and respect each other s faith we can never have genuine and lasting peace. Although Gandhi was a devout Hindu he also had great respect for all other religions. When asked whether he was a Hindu,he replied said Yes,I am a Hindu but I am also a Muslim, Christian and a Jew .

Gandhi believed in the universality of God, The Allah of Islam is the same as the God of Christians and the Ishwar of Hindus.

He was quoted as saying all religions were true but all had some error in them, and whilst I hold by my own, I should hold others as dear as Hinduism. our inner-most prayer should be for a Hindu to be a better Hindu, a Muslim a better Muslim, a Christian a better Christian." (Young India: January 19, 1928).

This concept of the equality of religions and the universality of God is something, which is badly needed in today s world where violence in His name is so rampant. We justify killing others as acts to defend our own God. I wonder who needs whose protection, God needs man s or man needs His. Don t we realize that we are despising the same God who may be worshiped by others in different forms?

We are so intent in fighting one another to claim superiority over our adversaries, man against man, race against race, religion against religion and nation against nation. We resort to all the resources at our disposal; powerful arms, violence and war, to achieve victory over our enemies. We justify the use of violence to protect our perceived rights, race and religion but where do all these stand in the eyes of God?

Just after sixty one years after his passing we are finding it difficult to believe how Gandhi, a small, timid and frail looking man, could have brought down the mighty British Empire. This was clearly described by Albert Einstein, 'Generations to come will scarcely believe that such a one as this ever in flesh and blood walked upon this earth .

Mahatma Gandhi may have left this world but his memories remain very much with us, alive and relevant. He did not possess power, position or wealth. His simplicity, integrity and a heart for fellow men had touched many of all races and religions and he should and will remain a conscience in the hearts of men for generations to come.

Source : web