Opening Bell : Markets to consolidate

Asian markets throw mixed trends

Sensex closed at 12381 yesterday, a gain of just 14 points over previous day. F& O expiry went smoothly with around 70% rollover indicating that the markets are more bullish than bearish on the neart term outlook. Asian markets have shown a mixed trend today with Japan, Taiwan and Hongkong moving ahead while Singapore and Korea were lagging behind their previous close.

Indian stock markets are expected to consolidate their earlier gains. Action may be seen in recently listed IPO like action construction and Atlanta limited.

Stocks in News
Wipro buys Sweden’s Hydrauto for $31m
Wipro Infrastructure Engineering (WIN) -part of Wipro, announced that the company is acquiring Sweden-based Hydrauto Group AB for $31m (Rs 142.6 crore) in an all-cash deal. The acquisition is expected to be completed by Q3 of FY ’06-07, subject to customary closing conditions and regulatory approvals. The FY06 revenue of Wipro Infra Engineering has been USD 57 million while Hydrauto had revenues of USD 112 million in 2005. The deal is expected to bring some action back to the Wipro counter.

M&M bags German forging firm Jeco
M&M, through its component arm Mahindra Systems and Automotive Technologies, now renamed Systech, acquired a 67.9% stake in German forging company Jeco Holdings, one of Germany’s top five forgings companies, for an undisclosed amount. The enterprise value of the firm has been estimated at about e140m (Rs 830 crore), making it the largest outbound deal.
Jeco manufactures forgings for gear boxes, engine and axle parts, hubs, gears and piston heads and its activities are concentrated on the truck, bus and trailer market. Its main customers include DaimlerChrysler Group, ZF Group, MAN Nutzfahrzeuge, Volvo, Linde, Renault, Agco, Kessler and Kolbenschmidt. The news would add spice to the M& M counter.

Rajesh Exports to start retail stores in Oct
Jewellery exporter Rajesh Exports Ltd said on Wednesday it would start its retail stores, Laabh Jewellers. LAABH will be starting its roll out of stores in the first week of October and will be present in most major cities of the country, shortly there after. For the first time in the country, an exclusive range of 3000 pieces of the most practical and designer range of jewellery has been created. This exclusive and practical range of 3000 jewellery pieces would be launched at the LAABH stores across the country. This range of international class with local flavor designs has been created by the R&D wing of Rajesh Exports.

With the launch of LAABH, Rajesh Exports will emerge as the only company in the world which would be a onestop mines to consumer destination for gold jewellery.

Earlier, the company has bagged a prestigious export order for Rs.195 Crores from Lazorde Jewellery, Kuwait for the supply of a new range of festival collection of plain gold jewellery.

Godrej Appliances may ink deal with Japanese major
ET has reported that the company is believed to have recently held talks with Japanese majors Hitachi and Matsushita for technology tie-ups or possible joint-ventures. The company has also appointed management consultant BCG to chalk out its future business strategies.

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IPO Update : Minar International

High on Risk, low on returns

Minar international has entered the capital markets with a public offer of 69 Lac shares at a price band of Rs. 108-115. Investment Guru recommends investors to stay away from this IPO since there are much better players available at these valuations in the secondary market.

Let’s dig into the company :
Minar started its operations in the year 1981, with the main object of trading and export of home textiles/Made ups in the international market.

Minar has been the largest merchant exporter in made-ups for five years of the quota period. The company has been exporting made-ups to the US markets.

The company is proposing to set up a fabric processing plant in Erode, Tamil Nadu. This plant is likely to commence operations by April 2007. The IPO proceeds would be used for the above.

CRISIL has assigned an “IPO Grade 2” to the IPO of the company.. This grade indicates that the fundamentals of the issue are below average relative to other listed equity securities in India.

The company has mentioned Strong Management Team, Infrastructure Set-up, Commitment to Quality, Strong Customer Base & Delivery Capabilities as its strength.

The financial performance looks good considering that the Topline has grown three fold from Rs. 114 crores to Rs. 336 crores. Net profit after tax has also reflected similar pattern and has grown from 5 Crore to 14 Crore.

In its justification for issue price, the company has mentioned Zero Rejection Rate, Capability to Manage Multiple and Large Orders & Strong Customer Relationships as the quality parameters.
The weighted average EPS comes to Rs. 17 (pre-issue). However, Post issue on a equity capital base of Rs. 24 Crore, the Post issue EPS works out to be Rs. 6. This translates into a P/E of 17-19.

The Pre-issue Net Asset Value per share comes to Rs. 38

The company had Negative cash flows from operating activities in FY06 to the tune of Rs. 24 Crore.

The company has mentioned Bombay dyeing and Alps industries as peers and these company are currently quoting at PE of 40 and 7 each. However, one should note that Bombay dyeing is enjoying high PE based on the realty play which is not the case with Minar.

Well established market players like welspun is quoting at PE of 17 while Alok industries is quoting at PE of 10. This makes Minar’s offer price highly demanding.

Issue Opens : 25-Sep-2006
Issue Closes : 29-Sep-2006
Registrar : Intime Spectrum Registry Limited
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FeedBlitz provides updates on this blog directly to your email

Though I had initially thought of floating a newletter around a year back, the time constraints didn’t allowed me to do so. I remember a huge list of the visitors (around 400+) enrolling for the newsletter. The constraints remain even today, but I just got struck to a website named “Fed Blitz” which delivers feeds of your webpage to the subscribers. The idea looked good to me and I have put a box on the right hand bar where you can provide your email ID’s to get the updates on this website directly into your mailbox and that too absolutely free !

What you need to do is to write your email ID in the box on right hand side bar and then click “subscribe me”. This will take you to the Feedblitz website page where you have to do a word verification . Once you finish this, they will send an email to your mailbox to verify the email address. After getting the email , you need to click the link you received in the email and that’s it. You will be enrolled and will receive an email of the latest articles whenever this blog gets Updated.

You can unsubscribe to the service anytime by clicking the link mentioned in the email.

So for all those , who want the updates on this blog by email, this would be a good solution. Read More!

New feature : Stock in news

ACE to debut today on NSE & BSE
Action construction equipment is listing today on NSE & BSE. The shares were alloted at a price of Rs. 130 per share. The issue price is at a P/E multiple of 14. The competitors are quoting at a P/E multiple of 19-24. Investment guru expexts the listing to be in range of 180-200. Any price above 200 shoould be must sell scenario. Investors are advised to book profits on listing.

US-based CDMA patent-holder Qualcomm has entered into an agreement with Himachal Futuristic Communications Ltd (HFCL) for developing, manufacturing and selling 3G-enabled CDMA mobile handsets in the country. HFCL is expected to begin manufacturing from April 2007 at its facilities in Solan (Himachal Pradesh) and Chennai. Agency reports quoted HFCL chairman Mahendra Nahata as saying that 4 million devices (a combination of mobile handsets and fixed wireless devices) will be produced in the first year of the agreement

UTI Bank
The bank has firmed up its plan to enter into life insurance biz. UTI Bank had invited most of the private insurance companies to make presentation for a possible partnership. LIC has stated in an communicaton to the Bank board that it should be first considered as a partner.

Pantaloon Retail
The stock is in news on talks of a stock split. Patloon has also been reorganising itself as the leader in retail segment and is posing itself as a nearest competitor to the proposed Reliance retail. The stock is also a good bet in retail spcae considering its growth strategy. Read More!

Market Watch: Where is sensex headed now ?

Q2 Results & FII flow holds key, Caution prevails

Last week the sensex continued its upward journey to close 105 points up at 12237. Now we are just 435 odd points away from the lige time high of sensex. The heart beats have started rising and a wind of confusion is blowing in the dalal street with regards to the direction of sensex. So the million dollar question is " Whether the sensex would start falling now since it has nearly reached its previous peak "?

I know this question is not a new to the investor's mind. This question was buzzing all through the sensex journey from 10000 levels till the final landing at 12670. So what's new about this question ? The new things friends is that last time the question was being asked with curiosity and a mix of enthusiasm as every tom dick and harry was floating with profits on the table. Now the tone has changed.

I hope you guys would agree with me that this time the question remains same but the tone is that of fear and pessimism. People are awaiting a big fall to happen. why ? ..ummm..may be because the sensex had a great fall around these levels last time in May and they fear the repetition of the same...ummmm..may be because the wounds of the may blast are still green...may be they don't want to take a chance this time..may be the so called prophets of stock markets, whose mouths were tight lipped during the May fall cos they were jumping with recommendations just ahead of the fall and then came the wind which blew away so strongly that it shook the confidence of even the experts, are giving cautious guidance because of the same reasons...the list is endless! Let's leave the past behind (but not ignoring it) and sneak though the telescope of Investment Guru to understand what lies ahead..

The Technical aspects

Sensex is trading well ahead of its 100 and 200 days moving average and as currently there are no signs of a strong trend reversal. However as the sensex moves ahead of the 100 DMA without smaller bouts of corrections, the probability of a sharp fall increases. In summary we still have some way to go up before coming down. Smaller corrections should be a welcome move.

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The next triggers
FII's continue to be on the drivers seat and yes they have been driving it all through the month of July,2006. Let's take a look at the FII activity for past few months.

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Wow! Have you noticed that FII's have sold Rs. 7354 in equities in the month of May and have been continuous net buyers since then and they have already bought much more than what they sold in May-06. FII's have bought net equities to the tune of Rs. 10500 crore since June,2006. Mutual funds are still not a force to reckon and sitting on sidelines. They actually sold in June -06. Poor fellows ! Since they burnt their fingers in May-06 mutual funds have been cautious buyers in equities and have been sellers on every rise. They are still sitting on a good amount of cash. So what are they waiting for ? God knows !

Q2 results season is set to roll and generally is a better quarter for companies. So will the Q2 results play a big role in sustaining this market rally or will they be the leaders in pinning this baloon ? If Q2 results are not as per markets expectations, that would surely be a good excuse for markets to drag down, but the probability of this happening is less given the strong growth momentum in Q1 which is expected to continue. Q2 is more important in terms that it will bring more visibility to the yearly guidance of companies.

Large Caps Vs. Mid caps
There is a section in the analyst which believes that large caps have become overvalued and its time to shun them and hunt for good quality midcaps. Investment Guru however believes that though the large caps were the ones to bail out the markets, they would continue to be investors favorites. Midcap stalwarts have been a steady performers in last few months and they should also be picked equally carefully as they are first to bear burnt of any downfall.

To summarise
A prudent investor would play this market carefully realizing that the markets are heading towards their earlier peaks. He would keep booking profits at regular intervals and would stay away from penny and worthless stocks. Again long term investors would not worry for short term movements and keep their faith intact. Remember, there are two factors that differentiate between a rational and irrational investor, Fear and greed, A prudent investor would neither buy for greed nor sell for fear. A prudent investor turns out to be winner and smiles his way to the bank. So be a prudent investor and take your call on the markets. We would countinue this wonderful journey together !
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IPO trio to debut on bourses

Atlanta, Deep Ind. & KEW Ind. to list on monday
Monday is going to be a day full of action for IPO investors as 3 IPO's are getting listed on the same day. Atlanta will list on BSE as well as NSE while Deep and KEW will get listed on BSE.

Atlanta IPO was priced at Rs. 150 per share. The competitors are currently currently qouting in a PE range of 15 -21. The issue was subscribed 10 times. The stock is expected to list in the range of 190-200.

Deep Industries was priced at Rs. 36 per share. The IPO price do not provide scope for appreciation . However, it may spring some surprise given the market sentiments.

KEW Ind was priced at Rs. 30 The IPO was offered at a PE of 12. The stock may list in the range of 36-38 before settling at lower levels.

So if you have got allotment in any of the above IPO's gear yourself up for the listing day !

Coming soon.... Investing in Gold!
Sunday Special : Market Watch : Where is sensex headed now ? Read More!

Why invest in Hindalco ?

Partly paid shares of Hindalco offer better proposition

Though Metal stocks have been laggards in the recent run up on bourses, they have provided regular trading opportunities for the trades. One such stock is Hindalco.

However, what what we are going to talk today is about an alternate to trade in Hindalco. In addition to Hindalco's fully paid up shares, the partly paid up shares of Hindalco are also traded on BSE. Currently Hindlaco is trading at around Rs. 170 while the partly paid hindalco shares are trading at Rs. 89.

However, the partly paid shares of Hindaco simulates the movement in price of fully paid Hindalco shares so as to maintain the price differential. This offers a double advantage to holders of partly paid shares. One, they are able to trade in hindalco at nearly 52% of the price of fully paid sahes and hence are able to take more exposure. The other bigger advantage is that in order to maintain the price differential the partly paid shares move at a higher percentage than the fully paid up share, thus providing more room for traders.

Even from Investing point of view, one can hold the partly paid up shares instead of fully paid up shares and can nearly double his earnings from the stock in terms of percentage gains !!

Note of Caution : ( The above write up does not recommends Hindalco as as Investment opportunity. It just explains the benefits of holding partly paid shares of Hindalco instead of fully paid up shares) Read More!

The Opening Bell : Markets to consolidate gains

Indian stock markets saw a spurt in later half's trade yesterday with sensex surging 140pts to end at 12109. Nifty also inched up 45 points. FII's continued their buying spree and have already shopped for Rs. 3700 crore in the month of September.

As far as triggers are concerned, news flow have been positive. US fed has decided to leave the interest rate unchanged which is in line with market expectations. Asian markets are ruling firm and are expected to remain buoyant throughout the day.

Back to India, the markets are expected to consolidate on yesterday's gain and move in a narrow range today. Action will be more stock specific. However, investment Guru advice investor to adopt a cautious approach as sensex climbs higher levels. Invest only in fundamentally good stocks and do not get carried away with rumors. In other words, one should avoid to repeat the mistakes of May2006. One good strategy in at these levels would be to keep booking profits at regular intervals before participating in next round of rally. This would ensure that your profits do not get eroded by a sudden fall at higher levels.

Coming to stock specific actions, Skumars Nationwide is expected to hog limelight. The stock is set to see action in the coming weeks with positive newsflow. The company is in advanced stage of bidding for one of the largest American home furnishing manufacturing and distribution company, America Pacific. If S Kumars manages to strike this deal, it will add Rs 400-500 crore to its home furnishing business which has just been launched under the brand named Carmichael House. The acquisition will also help integrate S Kumars business at various levels, First, it will give the company access to various retail stores in the US; second, it will help underwrite back-end facility and third, source better for the Indian market.
The company is also in talks to acquire few foreign brands which wouldincreasee company;s brand inventory. So watch out for the action !

Read More!

Investment Guru featured on Economic Times

Dear Friends,

Economic Times has carried an article today on Financial blogs under heading "Blogs coin new money talk ". The article was authored by Amanpreet Singh and Bhanu Pande.
The article talks about rising popularity of the financial blog and their target audience. The article also dwelves into the fine print of financial blogging and bewares viwers of malpractices by some blogs.

The article has featured Investment Guru Blog as the Popular Indian Financial Blog.
Thanks to ET for recognising the power of Investment Guru Blog !

Read the article on web edition of The Economic Times Read More!

Voltamp Transformer Lists tomorrow (20th Sep.)

Book Profits on Listing

The IPO got oversubcribed 17 times and the shares were offered at the rate of Rs. 345 per share. The issue price comes at a PE of 15. The competitors are currently quoting ata PE range of 17-20. With the sharp fall seen in the later half of today's session, a lot depends on how the markets open tomorrow. Investment Guru is of the view that the stock should list and stabilize in the range of Rs. 375-400. It is advised that investor should be better off booking profits on listing as they would get better rates to enter again at a later stage. Read More!

IPO Update : Action Construction Equipment Ltd.

Nothing can beat an ACE !!

Action construction Equipment (ACE) Ltd. has entered the capital markets with a public offer of 46 Lac equity share of Rs. 10 each at a price band of Rs.110-130. Investment Guru rates the IPO as “above average” and recommends investors to subscribe to the IPO. The stock is expected to generate listing gain in the range of 30-40% provided the market sentiments remain positive by the time of listing of the issue. If one has to choose between ACE and Atlanta IPO, ACE IPO offers more value.

Let’s have a look at the issue highlights :

ACE is an established manufacturer of Hydraulic Mobile Cranes, Mobile Tower Cranes and Construction Equipment in the country existing since more than a decade and enjoys a consolidated presence in all major Infrastructure, Construction, Heavy Engineering and Industrial Projects throughout the country

The Company clientele includes most of the leading Private and Government Sector Companies in India such as Reliance, ABG, L&T (ECC), BSES, BHEL, Punj Lloyd, Gujarat Ambuja, Coal India, BSNL, Indian Railways, NTPC,IOCL, ACC, Ministry of Defence & HPCL.
Products of the Company are also being exported to U.A.E., Qatar, Sultanate of Oman, Kuwait, South Africa, Kenya,Nigeria, Mauritius, Sri Lanka, Nepal, Bhutan, Bangladesh, Singapore and Portugal.

The proceeds of the issue will be used to set up a new plant for manufacturing loaders, higher capacity tower cranes and construction equipment along with expansion and modernization of the existing capacities and facilities. The plan also covers setting up of a joint venture with Tigieffe SRL of Italy and setting up a corporate office and R&D center.

The company has a good financial track record. The topline has swelled from Rs. 10 crore in year 2002 to Rs. 160 crore in year 2006. Net profits have also increased on a consistent basis. The company bottomline in year ended March,2006 has seen a jump of 88% over previous year.

As per company’s prospectus, the weighted average EPS comes to Rs. 9. This means that the offer price comes at a P/E of 12 at lower band and 14 at the upper band. The competitors are quoting at a P/E of 19-24.

The weighted average return of net worth is 34% whick looks good. Competitors generate retrun of 15% - 21%

Issue Opens : 01-Sep-2006
Issue Closes “ 07-Sep-2006
Registrar : Karvy computershare

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IPO Update : Atlanta Limited

Riding on Infrastructure wave

Atlanta Limited has entered the capital market with the offer of 43 Lac equity shares of Rs. 10 Each at a price band of Rs. 130-150. Investment Guru rates this IPO as “Average”. The recommendation would be to subscribe with objective of garnering listing gains. Investor should not compare this issue with Tech Mahindra in terms of listing gains. The listing gains on this issue basically arise from a relatively smaller equity on the offer and the markets sentiments at the time of listing may affect the outcome.

Let’s have a look at the company in detail:
Atlanta Limited started its business in the year 1977 as Atlanta Construction Co. (I) Ltd. as BMC Contractors. Presently the Company's core competence lies in Highways, Runways, Mining, Realty and Infrastructure Concessions.

The net proceeds of the issue shall be used for investing in Balaji Tollways, a SPV set up for the execution of the Nagpur-Kondhali four-lane BOT project., purchase of Plant & Machinery, Repayment of high cost debt and investment in real estate projects.

The company has successfully executed the Udaipur Bypass Road Project II . It is currently working on two projects on BOT basis: the Mumbra Bypass Project and the Nagpur-Kondhali section.

Company is carrying out the work of extraction of coal for Mahanadi Coalfields Limited (“MCL”), a subsidiary of Coal India Limited at various locations. MCL has awarded contracts for extracting 12.78 million cubic meters of coal over a period of 3 years, of which, the Company has extracted 6.37 million cubic meters as of June 30, 2006 and the balance quantity has to be extracted by October 31, 2007. This the only work company has in mining business.

The real estate business of Atlanta consists of both residential and commercial complexes. The company has executed projects such as Amba Shanti Chambers, Atlanta Arcade and Atlanta Towers in Mumbai. The company plans to develop 31000 sq. mt. of land on NH-4 in Thane as a residential complex.

Net profit after tax for year ending March 2006 at Rs. 15 crore has increased three folds over the year 2005. The topline has risen by 30% during this period.

The equity shares are prices at Rs. 130-150. Given the weighted average EPS of 11 (over last three years) the issue comes at a P/E of 12 at lower band and 14 at higher band. Shares of its competitors are quoting at a P/E band of 15-21.

The Retrun on Net Worth comes to 19% on a weighted average of last three years. Competitors are generating a return of 15-30% .

Book Value of the company is Rs. 44.40. Hence the issue is priced at 3.37 times the book value at the higher price band.

Issue Opens : 01-Sep-2006
Issue Closes : 07-Sep-2006
Registrar : Karvy Computershare

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