DLF V/s Vishal Retail

Vishal Retail will probably deliver better on listing gains than DLF atleast that could be a reasonable expectation. Retail might be quite excited by this opportunity, said CNBC-TV18’s stocks editor, Udayan Mukherjee.

Vishal Retail is a much more exciting play for the pop offer. It is not as sexy as DLF but we have seen in the past that the biggest issues might take up a lot of headline space but they don’t often generate the biggest returns on listing and it was a fair bet to say that Vishal will probably deliver better on listing gains than DLF atleast that could be a reasonable expectation.

You don’t see too much of Vishal where we stay. They don’t have big glass buildings in downtown city but they are very strong in some of the up country places. They are value retailers, they are not one of your big brand retailers. They have their own brands which they sell pretty successfully and in doing that they have better margin profile than many of the other listed players. So I think 11% operating margin retail player cannot be overlooked specially as it comes at a 13 kind of PE multiple for this year. If our expectations for their FY08 EPS are met then the stock is being offered at 13 times at the higher end of the band.

I don’t think you found anything in this country in the retail space ever in that kind of valuations spectrum. So you can justify much more upside on Vishal. It will almost certainly get done at the higher end of the band and then I think it is much easier to justify a 40-50% upside on listing or shortly after listing on Vishal than it is on DLF. So retail might be quite excited by this opportunity.

Source: moneycontrol.com

IPO Talk: DLF

DLF, a leading real estate company, is open for subscription with an initial public offer, IPO of 175,000,000 equity shares of Rs 2 each through a 100% book building process.
The issue would constitute 10.27% of the fully diluted post-issue capital of the Company.
Keynote Capitals report on DLF IPO:

Recommendation - Subscribe with a medium term view
DLF is the largest real estate development company in India in terms of area of completed residential and commercial developments.
Land bank of 10,255 acres, of which developable area comes to 574mn sqft. The major portion of land bank (51%) is located in the NCR region.
DLF also has interests in developing SEZs, multiplex theaters and hotels and has entered into JVs, which will enter the insurance and capital markets segments. Though these projects are at nascent stages, they have a huge potential over the long term.
The proceeds of the IPO will be used in acquiring new land and funding existing projects. DLF will also prepay part of its long term debt.
We compared DLF with Unitech, its nearest competitor. The IPO is priced at 1.1x price to NPV, which is at a small discount to Unitech (whose land bank is almost equivalent to that of DLF) which trades at 1.2x, though the quality of Unitech's bank is not as good as that of DLF's. The high EV/sqft in case of DLF reflects better quality of the latter's land reserves and its high leverage.
The company has aggressive plans for the development of 44mn sqft area over the next 3 years.
While development of 44mn sqft in 3 years may be a tall order in itself, we believe DLF will continue to have a strong order book in the foreseeable future, given the sheer size of its huge land bank.
On the flip side, the scenario of hardening interest rates is the main concern from the industry point of view. We expect DLF to continue to generate negative cash flows during the next 3 years. Also, around 50% of its projects are to be completed only beyond FY10. The presence of 58 subsidiary companies makes it a complex corporate structure. In our view, the IPO can be subscribed to with a medium term view.
Concerns:
Hardening interest rates
60% of the developable area of 574mn sqft is still agricultural
High concentration on one region (51% of land is located in NCR region)
52.2% of residential, 72% of commercial and 57.3% of retail projects are likely to completed by FY10; therefore significant revenues likely flow in only by FY10 and FY11.
Some of the businesses like SEZs, Cinemas, Hotels and tourism are at nascent stages and will require investments going forward. In our view, a significant part of DLF's cash flows will go into these subsidiaries and joint ventures.
Also investments in long gestation period businesses like insurance may further pressurize cash flows.

Source:moneycontrol.com

IPO Talk: Vishal Retail

Vishal Retail is entering capital market with an initial public offering, IPO of equity shares aggregating Rs 110 crore.

The price band for the 100% book built issue has been fixed between Rs 230 - Rs 270 per equity share of Rs 10 each.

Moneycontrol conducted a poll on market experts to check whether to apply for the public issue or not. Experts said apply.

R S Iyer (KR Choksey) : Apply
Vishal Retail is a good issue. The price band is very reasonable and the company is consumer and investor oriented. People can go for it; they can earn money on listing. It should list above Rs 400.

Manish Bhatt (Prabhudas Lilladher): Apply
Vishal Retail is a good issue. Looking at current P/E of 20x and peers PEx of more than 60-80, the issue looks to be attractive. So investors can apply for the issue.

SP Tulsian (Investment Advisor): Apply
Vishal Retail is a very good issue. The company's fundamentals, past performance and brand are also good. The price band is very reasonable. Investors should subscribe the issue.

The issue opens on June 11, 2007 and closes on June 13.
The proceeds from the IPO will be used to meet the expenses of establishing new retail stores and to meet the expenses of the issue.
The company proposes to invest the proceeds of the issue to establish new retail stores. Of the total 32 stores to be set up this year, the IPO will fund for the establishment of 22 stores. The company will deploy Rs 104.15 crore of the net issue proceeds for setting up the stores in the current year. The setting up of the remaining stores will be funded through internal accruals.
The company will lease the real estate space for the stores and not buy the property.

The company reported total income at Rs 771.15 crore for the year ended March 2007 and net profit at Rs 24.98 crore.

The company currently operates 50 retail stores including two stores operated by franchisees located in 18 states across the country. It sells garments, apparels and FMCG products. It focuses on tier II and tier III cities and follows the value retail strategy.

Enam Financial Consultants Pvt. Ltd is the book running lead manager for the issue and Intime Spectrum registry Ltd. is the registrar to the issue.

Source:moneycontrol.com

Markets Today

It was a disappointing close for the markets as it closed flat despite good global cues. It ended flat after opening strong and trading higher for better part of the day. Profit booking set in at the final hour of trade and the midcap and smallcap index deeper cut. Sensex was off 170 points from day's high and Nifty was off 60 points.Select banking, telecom, auto stocks were among the losers.
Top losers on the indices were Rel Comm, Grasim, SBI, Zee Entertainment, Nalco and Reliance Petro.
However, oil & gas, IT and FMCG stocks were among the gainers. Hero Honda, Hindalco, ITC, GAIL, HPCL closed in green.
The much awaited DLF IPO opened today and its QIB portion was subscribed 1.05 times; overall 0.65 times and most of the bids have come at the higher level of the band of Rs 550.
The BSE Midcap Index ended at 6,129.48 down 27 points or 0.43%.
The BSE Smallcap Index ended at 7,320.01 down 23 points or 0.3%.
The BSE Capital Goods Index was up 0.2% at 10,863.00. Gammon India, Bharat Elec, Punj Lloyd, Alfa Laval, Lakshmi Machine closed higher.
The BSE Health Care Index was up 0.3% at 3,751.64. Divis Labs, GlaxoSmithKline, Sterling Bio, Nicholas Pirama closed higher.
The BSE Auto Index closed closed flat at 4,703.93. Exide Industrie, Hero Honda, Ashok Leyland closed in the green.
The BSE Metal Index closed at 10,258.74 up 0.2%. Shree Precoated, Hindalco, Jindal Saw, SAIL advanced.
The BSE FMCG Index gained 0.6% at 1,790.19. Godrej Consumer, ITC, Nestle, Marico closed higher.
BSE Oil and Gas Index closed higher at 7,413.97 up 0.6%. GAIL, HPCL, BPCL, IOC ended in green.
The BSE IT Index gained 0.6% at 5,015.10. Infosys, Financial Tech, Satyam closed higher.
The BSE Bankex was down 0.2% at 7,427.55.

Source: moneycontrol.com

Intraday Calls for 11th June

Nifty: Support is 4140 and resistance are 4175, 4190.
Sensex: Support is 14000 and Resistance are 14150, 14200.

Market will open with gap up but can see resistance in 2nd half, market should be remain positive today.

Buy Nitin Fire @ Rs. 415-420/- Target Rs. 430-445/- SL Rs. 408/-
Buy Crompton Greave @ Rs. 243/- Target Rs. 250-255- SL Rs. 238/-
Buy Unitech @ Rs. 505-510/- Target Rs. 525-535/- SL Rs. 500/-
Buy Tata Steel above Rs. 590/- Target Rs. 600-610/- SL Rs. 582/-
Buy IDBI @ Rs. 101/- Target Rs. 105-107/- SL Rs. 99/-
Buy GTL @ Rs. 220/- Target Rs. 225-230/- SL Rs. 216/-

Others are: RNRL (34), Moser Baer (454), Mphasis BFL (325), Indiabulls (500), Indiainfoline (624), Paramount Communication (35.5).

Good Luck.