Saturday, June 21, 2008

Stock Ideas: Mercator Lines, Rohit Ferro Tech, UTV Software

Religare Research has recommended a buy rating on Mercator Lines with a target price of Rs 160 in its June 16, 2008 research report. "On an expansion spree – fleet size doubled over last two years to 29 vessels with firm plans to ramp up to 33 vessels by December 2010. Also, an oil drilling jack up rig, scheduled for delivery in Q1FY09, has already been contracted for 3 years.Augmented fleet amid favourable day rate conditions to drive revenue and margins. Revenues expected to log 22.3% CAGR over FY08-FY10, with earnings CAGR of 28.6% and ROE of 30%."
"Attractively priced at P/E of 4.9x and P/BV of 1.1x on FY10E. Our valuation of Rs 160 is based on 1.2x current NAV. At our target price, the stock would trade at a P/E of 6.9x and P/BV of 1.6x, which is reasonable given the expanded fleet and strong earnings growth," says Religare's research report.
Religare Research has recommended a buy rating on Rohit Ferro Tech with a target price of Rs 216 in its June 16, 2008 research report. "Riding high on the ferro alloy super cycle, as a severe ferro chrome supply crunch in the world market has escalated prices of this metal to unprecedented levels. Rohit Ferro is thus witnessing a sharp increase in profit per tonne.Timely expansion coupled with increasing feedstock linkages would further bolster growth."
"Acquisition of an operational coal mine in Indonesia (60% economic interest in thermal coal reserve of 20mn tonnes and coking coal reserve of 5 mn tonnes) and arrangements with a chrome ore mine in Iran would provide substantial raw material links. Coal mine would meet input requirements of a 110MW captive power plant coming up by FY10, besides generating revenues from sale of coal in the open market. Business valued at Rs 216 using an average of 5.5x P/E and 5x EV/EBITDA on FY10E, based on industry average multiples," says Religare's research report.

Religare Research has recommended a buy rating on UTV Software Communications with a target price of Rs 1068 in its June 16, 2008 research report."Media industry valued at Rs 513 billion and expected to log an 18% CAGR over the next five years, with films growing at 13%, television at 22% and animation & gaming at 25% (CAGR). UTV is a vast media conglomerate with strong business verticals and ample funding to ride on the opportunities in the sector. Fund infusion of Rs 13bn through recently concluded deals with Disney and the increased promoter group stake would anchor the company’s growth. UTV set to register a CAGR of 86% in revenue and 80% in PAT over FY08-FY10. Film business projected to grow at 47%, television at 40% and gaming at 140% CAGR."
"We have an SOTP-based target price of Rs 1068. At its peak, the stock traded at 23.7x FY10E earnings, while valuations are now at 16.2x – a significant discount to its previous high," says Religare's research report


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