SP Tulsian of sptulsian.com, sharing his view on various stocks, said
He was bullish on KNR Construction and Punjab Communications. He added that Manaksia also was a good bet for a time-frame of 12 months.
The 11th Plan is expiring on 31st March 2012 and I don’t think that we have seen the sizable progress. If you see plans announced by Reliance Power, GMR Energy, Jindal Steel and Power, Adani; I don’t think the execution of all can go on stream. You will see phases of that. Take the case of ROSA 1 with a project of 300 megawatts (mw) , we heard day before that they have gone for the second financial closure of ROSA 2 which will be just 31st March 2012. Though I am not trying to defy the figures or the targets given by the Power Minister, but ultimately that’s most authentic. If you just want to take a realistic call, even if we achieve 50,000 mw, in my way it could be anywhere between around 42,000-45,000 which will be operational by 31st March 2012. Otherwise it looks as a very ambitious target to go on operations in the 11th Plan period.
About Punjab Communications :
They are into transmission, networking, radio, security surveillance products. If you look at the past, they have not been able to make those products successfully and how they have shifted the focus from manufacturing of product servicing and joint venture for which I think they seem to be on track. But if you see the financials of the company, the present market cap of the company is at about Rs 30 crore with equity at Rs 12 crore and market price at about Rs 24, but the company has Rs 90 crore as cash in their books of which 80 crore plus is into the banks fixed deposit on which they receive an interest of about Rs 8 crore every year. Presently, they have declared their Q1 results for June 2009 in which they have posted an earning per share (EPS) of Re 1.70, but the entire profit has come largely from the interest on fixed deposit and the operational performance has not posted any profits though they have shown a turnover of close to Rs 65 crore by this quarter. They have about 2 lakh square feet of area of assembly line plus they have about 350 employees, out of which 150 are the engineers. They will move profitably because there has been shortage of this servicing organization or the company and if they move their focus from production of products to servicing of the product, I think give them a good income even if it is that say they are able to clock up a bottom-line of close to Rs 3-4 crore from that operation and plus Rs 8 crore from the interest as I said from the bank fixed deposit. They should be able to post an EPS of Rs 6-7 and as I said already Rs 75 per share of cash is lying in the books while the share is ruling at Rs 25. So, there is no justification for these kind of prices for the share to continue and this is going to get reflected in the share prices in the time to come.
About KNR Constructions :
A: This company is again into roads, construction and irrigations. Mainly in these two areas and they have a strong presence in Andhra Pradesh with a topline of close to Rs 700 crore and they have posted an EPS of Rs 15 for March 2009 and the price right now is Rs 70. It is way below the book value and they came with a public issue last year at Rs 160 and the share is ruling way below that and they have interest in two build-operate-transfer (BOT) road projects in which they have a 40% interest in each along with Patel Engineering which has 60% stake and those two BOT projects will go on stream one in the next three months and another one in next 8-9 moths or in the next ten months. The contract for the construction is given to them. The total orderbook with them is close to Rs 1,500 crore and what I have learnt is that recently they have been L1 for a Rs 500 crore Coal India order, plus they will be getting another order of Rs 250 crore. A letter of intent will get issued to them maybe in a week or so which will take them to a total orderbook of close to Rs 2,000 crore which can easily take care of their next two year execution capabilities and if you see their net profit margin it is close to 6.75% while the profit before tax (PBT) is close to 10% which is slightly above the industry norms because industry norms ease about 5-6% on the net profit or the profit after tax (PAT) margins while PBT margins is close to 8-9% while they have a slightly higher margin. And now we see with the new state government coming into the power in Andhra Pradesh, their thrust will be more on the road and irrigation projects in which this company has the specialty though the presence of the company is to the expense of 80-82% in the road construction while about 15% in the irrigation but those two areas will give good orderbook to the company in the time to come and they will be able to consistently perform. In fact you have seen the run up having taken place in many of these companies. They have been languishing at a price to earnings (PE) multiple of close to 3 or 4 and even if you see this share is also available on a historic PE of less than 5 so you have a good scope of appreciation. The present market cap of Rs 200 crore does not justify the present topline of Rs 300 crore. So, you have safety from all the angles with very minimal downside risks but a good upside potential.
About Manaksia:
This is a very interesting play. This company is into cold and aluminum rolling, and they are making packaging products. They have about 15 manufacturing plants in India and their equity is quite low. Its at about Rs 14 crore with a face value of Rs 2 and for FY09 they had an EPS of about Rs 15 with a book value of Rs 88, while their cash EPS is quite high which is about Rs 23 and if you see the performance of the company, their market cap is just Rs 300 crore and right now it is ruling at Rs 44. They came out with a public issue at about Rs 160 per share and they have 15 plants in India, three abroad with a dividend which they have paid of 110%. I don’t think you can expect anything better than that with a price to book at 0.5 with a good dividend payout and good growth. Their equity turnover ratio is over Rs 110-120 times because their turnover is close to Rs 1,500 crore on an equity of about Rs 14 crore. So, at Rs 44 this qualifies as very good investment if somebody can have a view of 12 months or so.
He was bullish on KNR Construction and Punjab Communications. He added that Manaksia also was a good bet for a time-frame of 12 months.
The 11th Plan is expiring on 31st March 2012 and I don’t think that we have seen the sizable progress. If you see plans announced by Reliance Power, GMR Energy, Jindal Steel and Power, Adani; I don’t think the execution of all can go on stream. You will see phases of that. Take the case of ROSA 1 with a project of 300 megawatts (mw) , we heard day before that they have gone for the second financial closure of ROSA 2 which will be just 31st March 2012. Though I am not trying to defy the figures or the targets given by the Power Minister, but ultimately that’s most authentic. If you just want to take a realistic call, even if we achieve 50,000 mw, in my way it could be anywhere between around 42,000-45,000 which will be operational by 31st March 2012. Otherwise it looks as a very ambitious target to go on operations in the 11th Plan period.
About Punjab Communications :
They are into transmission, networking, radio, security surveillance products. If you look at the past, they have not been able to make those products successfully and how they have shifted the focus from manufacturing of product servicing and joint venture for which I think they seem to be on track. But if you see the financials of the company, the present market cap of the company is at about Rs 30 crore with equity at Rs 12 crore and market price at about Rs 24, but the company has Rs 90 crore as cash in their books of which 80 crore plus is into the banks fixed deposit on which they receive an interest of about Rs 8 crore every year. Presently, they have declared their Q1 results for June 2009 in which they have posted an earning per share (EPS) of Re 1.70, but the entire profit has come largely from the interest on fixed deposit and the operational performance has not posted any profits though they have shown a turnover of close to Rs 65 crore by this quarter. They have about 2 lakh square feet of area of assembly line plus they have about 350 employees, out of which 150 are the engineers. They will move profitably because there has been shortage of this servicing organization or the company and if they move their focus from production of products to servicing of the product, I think give them a good income even if it is that say they are able to clock up a bottom-line of close to Rs 3-4 crore from that operation and plus Rs 8 crore from the interest as I said from the bank fixed deposit. They should be able to post an EPS of Rs 6-7 and as I said already Rs 75 per share of cash is lying in the books while the share is ruling at Rs 25. So, there is no justification for these kind of prices for the share to continue and this is going to get reflected in the share prices in the time to come.
About KNR Constructions :
A: This company is again into roads, construction and irrigations. Mainly in these two areas and they have a strong presence in Andhra Pradesh with a topline of close to Rs 700 crore and they have posted an EPS of Rs 15 for March 2009 and the price right now is Rs 70. It is way below the book value and they came with a public issue last year at Rs 160 and the share is ruling way below that and they have interest in two build-operate-transfer (BOT) road projects in which they have a 40% interest in each along with Patel Engineering which has 60% stake and those two BOT projects will go on stream one in the next three months and another one in next 8-9 moths or in the next ten months. The contract for the construction is given to them. The total orderbook with them is close to Rs 1,500 crore and what I have learnt is that recently they have been L1 for a Rs 500 crore Coal India order, plus they will be getting another order of Rs 250 crore. A letter of intent will get issued to them maybe in a week or so which will take them to a total orderbook of close to Rs 2,000 crore which can easily take care of their next two year execution capabilities and if you see their net profit margin it is close to 6.75% while the profit before tax (PBT) is close to 10% which is slightly above the industry norms because industry norms ease about 5-6% on the net profit or the profit after tax (PAT) margins while PBT margins is close to 8-9% while they have a slightly higher margin. And now we see with the new state government coming into the power in Andhra Pradesh, their thrust will be more on the road and irrigation projects in which this company has the specialty though the presence of the company is to the expense of 80-82% in the road construction while about 15% in the irrigation but those two areas will give good orderbook to the company in the time to come and they will be able to consistently perform. In fact you have seen the run up having taken place in many of these companies. They have been languishing at a price to earnings (PE) multiple of close to 3 or 4 and even if you see this share is also available on a historic PE of less than 5 so you have a good scope of appreciation. The present market cap of Rs 200 crore does not justify the present topline of Rs 300 crore. So, you have safety from all the angles with very minimal downside risks but a good upside potential.
About Manaksia:
This is a very interesting play. This company is into cold and aluminum rolling, and they are making packaging products. They have about 15 manufacturing plants in India and their equity is quite low. Its at about Rs 14 crore with a face value of Rs 2 and for FY09 they had an EPS of about Rs 15 with a book value of Rs 88, while their cash EPS is quite high which is about Rs 23 and if you see the performance of the company, their market cap is just Rs 300 crore and right now it is ruling at Rs 44. They came out with a public issue at about Rs 160 per share and they have 15 plants in India, three abroad with a dividend which they have paid of 110%. I don’t think you can expect anything better than that with a price to book at 0.5 with a good dividend payout and good growth. Their equity turnover ratio is over Rs 110-120 times because their turnover is close to Rs 1,500 crore on an equity of about Rs 14 crore. So, at Rs 44 this qualifies as very good investment if somebody can have a view of 12 months or so.
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