2007 | Dalal Street

Centurion Bank of Punjab merger of Lord Krishna Bank

August 28, 20071 min read

Centurion Bank of Punjab announced that it has received the Reserve Bank of India’s approval for the merger of Lord Krishna Bank with it. The merger is effective from 29 August 2007 and Centurion will issue seven shares in itself for every five held in Lord Krishna, the bank said.

Net profit of Centurion Bank of Punjab rose 14.90% to Rs 33.01 crore on 75.84% rise in total operating income to Rs 445.60 crore in Q1 June 2007 over Q1 June 2006.

Centurion Bank of Punjab’s principal activities are to provide banking and other financial services to corporate and private customers. It provides personal banking, cash management, retail loans and other financial services.

Economy, Markets and Macro Views

Buy Man Industries – ICICI Direct

August 28, 20072 min read

ICICI Direct Research has put a BUY recommendation on Man Industries with a price target of Rs 306 within a time frame of 3-6 months.

Man Industries (India) Ltd, the flagship company of the Man Group, UK, manufactures steel line pipes for high and medium pressure applications such as oil and gas, petrochemical and water transportation, anti-corrosion coating systems and aluminum extrusion products.

Demand for SAW pipes is likely to remain firm in next five years due to burgeoning crude prices and depleting oil reserves. Global demand is expected to be in the range of 67 million tonnes with around 66% flowing in from Middle East, Asia & US, the key markets for the Indian players. While demand in Europe and Russia would be met by internal supplies, demand in Middle East and US is likely to be met through imports. This high demand, coupled with supply constraints, would keep prices firm at for least two years through CY08 and 09, escalating to mid 2010, where after it may start softening.

Man Industries is in capex mode and post expansion, its capacity of 1 million tonnes would be more than 2x the existing capacity, equally distributed between LSAW and HSAW pipes. This would reduce the risk and increase the size of addressable market. With a robust order book position of Rs 2,400 crore, the top line is expected to grow at a CAGR of 51% over FY07-09E and net profit by 67%. Capacity utilization should be at about at 40% in FY09E.

Man Industries is set to capitalize on the rising global demand for pipelines. At the current price of Rs 255, the stock is trading at 4.42x the FY09E EPS.

Breaking Corporate India Earnings News

Punjab Chemicals + KLG Systel Acquisition

August 27, 20071 min read

Punjab Chemicals & Crop Protection’s wholly owned SD Agchem (Europe) NV entered into a share purchase agreement with Pevobel N.V. and Gevobel N.V. to acquire 100% equity shares in Pegevo Bcheer BV (Pegevo), a company incorporated under the laws of The Netherlands. The transaction is based on an enterprise value of about euro 39.5 million for Pegevo. The company made this announcement before market hours on Monday, 27 August 2007.

Pegevo undertakes substance formulation for crop protection. Its product range includes herbicides, insecticides and fungicides. Pegevo’s products are registered in The Netherlands, Belgium, UK, France, Germany, Ireland, Denmark, Italy, Slovakia, Czech Republic, Belarus and Switzerland.

KLG Systel announced that the company has acquired a 51% stake in Atlantis Lab, a dedicated engineering solutions company. With this acquisition, Atlantis has now become a subsidiary of KLG Systel.

Incorporated in 2001, Chennai based Atlantis Lab is one of the fastest growing engineering services companies providing mechanical design solutions to worldwide manufacturers such as General Electric, Whirlpool, Atlas Copco, Tata Motors, John Deere, Schneider Electric and Cummins, to name a few.

Equity Research

Cairn + Zee Entertainment to Underperform – Kotak Securities

August 27, 20072 min read

Indian government has approved Cairn Energy India’s plan to construct a crude oil pipeline to evacuate crude oil from its Rajasthan block RJ-ON-90/1. The cost of the pipeline (US$500 mn net to Cairn) is treated as part of the upstream capex and Cairn will recover both capex and opex related to the pipeline as part of the overall production sharing contract for the block.

Cairn Energy factors in US$780 mn of additional value (20% of base valuation of Cairn’s 70% stake in the block for potential upward revision to reserves). Cairn will likely provide updates on its crude reserves/production profile by end-2007 in terms of (1) outcome of further EOR studies including ASP simulation and pilot project for Mangala and (2) conversion of current contingent resources to reserves including ‘tight’ oil in Mangala Barmer Hill, Vijaya/Vandana/NR.

At US$60/bbl crude price in perpetuity from 2013E, our DCF-based 12-month fair valuation for Cairn stock would come to Rs154. At US$70/bbl in perpetuity, the same would increase to Rs166. Kotak Maintains an Underperform rating on Cairn Energy with a target price of Rs 140 based on DCF Model.

Zee Entertainment Enterprise Limited [ZEEL] has reportedly increased its prime-time ad rates for its flagship Zee TV channel by 15-20% and non-prime time rates by 40% following the 15%-25% increase in March 2007. The increase in ad rates for Zee TV will likely help ZEEL achieve our projected 24% growth in ad revenues for FY2008E and partially support ZEEL’s current rich valuations.

A 37% increase in ad revenues for FY2008E for Zee TV on the back of a 45% increase in ad revenues in FY2007E. The key to sustenance of ZEEL’s multiples would be (1) continued high ratings for Zee TV particularly after start of new competing channels and (2) continued improvement in domestic pay-TV subscription revenues.

ZEEL stock trades at 32.5X FY2008E EPS of Rs8.7 and 24.5X FY2009E EPS of Rs11.5. Kotak maintains an underperform rating on the stock with a price target of Rs 230.

Update on ZEEL from Merill Lynch [ML]:
ML reiterates a BUY with Price Objective of Rs 400 is at 30x 1-yr forward PER – 7% discount to current multiples & in-line with Indian media average.

Breaking Corporate India Earnings News

NorthGate Technologies form Social Media India

August 27, 20071 min read

Northgate Technologies has announced that Social Media India, India based subsidiary company has been formed.

Social Media India is focused to tap the online advertising and other internet transaction services industry in India.
Vishnu Vardhan Induri, head of Bharatstudent.com has been appointed as Managing Director of Social Media India.

BharatStudent.com a social networking site for Indian students has been severely criticized by bloggers for spamming and hosting Adult content. Our analysts are of the opinion that Social Media India is a SHELL company because of it being bogged into controversy and the management of BharatStudent.com deciding to remain silent on the issue.

Breaking Corporate India Earnings News

Canara Bank acquires 51% in Can Fin Homes

August 27, 20071 min read

The board of Canara Bank has permitted the Bank to acquire differential shares so as to hold 51% stake in Can Fin Homes in order to convert the sponsored entity into a subsidiary, through the process of open-offer.

Ind Bank Merchant Banking Services, Chennai are the merchant banker to the open-offer scheme.

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