2007 | Dalal Street

Banking Stocks under Pressure.

May 25, 20071 min read

Banking stocks were under selling pressure on rumors of the Reserve Bank of India (RBI), which has already raised the cash reserve ratio thrice since December 2006, contemplating another hike, though only on incremental deposits this time.

There is a buzz in the market that the decision can come today evening. CRR is the percentage of deposits that banks are required to keep with the RBI.

Shares from the banking and financial space were down. ICICI Bank (down 1.16% to Rs 899.10), HDFC (down 0.99% to Rs 1737.50), and HDFC Bank (down 1.24% to Rs 1075.10) declined.

RBI is particularly concerned about absorbing excess liquidity since it has lowered the inflation target from 5-5.5% to 4-4.5% for 2007-08.

Economy, Markets and Macro Views

BUY Ansal Properties and Infra – Merill Lynch

May 24, 20071 min read

Merill Lynch has initiated coverage on India’s leading Real Estate Giant, Ansal Properties and Infrastructure Ltd [APIL] with a BUY recommendation and a target price of Rs 425, with potential returns of 27%. Recommendation is based on 1) Scope for strong earnings growth. 2) Potential upside of Rs127/sh to from Hi Tech City project at Greater Noida, is not included in current valuation. So effective Valuation will be Rs 425 + Rs 127 = Rs Rs 552.

APIL is expected to report an EPS of Rs 35.8 and Rs 70.7 for FY08 and FY09 respectively. EPSW growth rates are nearly 100%. APIL trades at a forward P/E of mere 9x and 5x. APIL has enough land bank to develop for the next 7 to 8 years. You may download and read the entire research report from here. [PDF]

Breaking Corporate India Earnings News

Smallcap World Fund Inc raises stake in GVK Power

May 23, 20071 min read

Smallcap World Fund Inc(SWF) has acquired an additional 2.94 lakh shares of GVK Power & Infrastructure. The shares were acquired on 18 May 2007 through open market purchase.

Following the acquisition,SWF’s stake in GVK Power has gone upto 5.41% from 4.93%.

Mutual Funds Review

SIP Amount reduced to Rs 100

May 23, 20071 min read

Reliance, ICICI and Lotus Mutual funds have reduced the minimum SIP investment to Rs 100 to enable more Indians to save and invest in the Indian Equities, one of the best asset class in the world. The number of investors investing through SIP route in India is mere 1.2 Million.

So you can now contribute Rs 100 as SIP amount to any of the Reliance / ICICI or Lotus AMC managed funds. I will be really happy if they let us invest Rs 100 on every trading day to take advantage of the volatile markets.

Economy, Markets and Macro Views

Sun TV under a cloud; Raj TV Shines

May 23, 20072 min read

Kalanithi Maran, who is the brother of Dayanidhi Maran, holds a majority 90% stake in the south-based media major. Maran is related to Tamilnadu chief minister and DMK supremo K Karunanidhi.

The Sun TV stock had plunged 7.2% on 14 May 2007 after Maran had resigned from the Union cabinet late evening on Sunday, 13 May 2007, following a directive from the DMK boss. The stock is off from a high of Rs 1,700 to Rs 1,300 currently. Read about the Dark Side of Dayanidhi Maran here.

The stock is currently trading 1:1 cum-bonus and also cum stock-split in the ratio of 2-for-1. As a result, the face value of the scrip will become Rs 5 instead of the present Rs 10.

Sun TV’s integrated growth strategy is to build a dominant presence in south India. It is a leading television broadcaster in all southern states of India. It offers four Tamil language channels Sun TV, Sun News, Sun Music and KTV as also two Malayalam channels Surya TV and Kiran TV, apart from Telugu and Kannada language channels.

The stock of Raj TV is consistently moving up after the fall of Dayanidhi Maran. From Rs 186 on May 14th currently the Raj TV stock is locked in upward circuit at Rs 318. It is rumored that the Karunanidhi Family is now backing Raj TV as DMK channel to counter any challenges from Jaya TV.

Equity Research

Mindtree Consulting will underperform – HSBC

May 23, 20071 min read

Its not just the dolalr that is addign to the wos of Mindtree consulting, but mere profit growth of 30% as a mdicap IT counter. HSBC analyst says it is overvalued and has the possiblity to deliver NEGATIVE returns. HSBC has set a Target Price of Rs 715 on the stock.

HSBC expects FY08e revenues at INR7.8bn (+32% y-o-y) and profits of INR1.2bn (+30% y-o-y). MT should continue to benefit from margin leverage as it gains scale. It had cash of USD64m, was FCF positive with a ROAE of 32% in FY07.

Given its strong performance (+85% since listing), HSBC expects the stock to give muted returns in the near term despite strong EBITDA growth. One-off events such as ESOP (employee share option plan) dilution and higher taxes are likely to impact FY08 earnings growth.

Trades at a 10-50% premium to the top five offshore vendors. Valuation premium to large vendors should correct over the next 12 months, though we expect MindTree to continue trading at a premium to peers. HSBC target price of INR715 is based on a 10% premium to fair
value of 16x FY09e earnings.

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