Stock Idea: Subex Ltd.

Company overview—
Subex systems a banglore based software company was incorporated as a private limited company on Dec’94. Company commenced operations after the takeover of a partnership firm engaged in the manufacturing of telecom equipment and accessories. Company has significant portion of the revenues from telecom testing and measurement equipments and cellular infrastructure solutions. During 1999 company made a foray into telecom software services and products major growth driver, which was a major growth driver for the company.
Company provides both offshore and onsite consultancy services and also has a software product Ranger for the cellular market. Software services of the company are mainly for the high margin export markets. With increasing competition, product differentiation and subsequently pricing will become a key differentiator for these telecom companies. It is at that juncture that they would start feeling the pinch in bottom lines and would try and get every piece of revenue owed to them but is losing. This augurs well for a telecom software product company like Subex. Except Reliance, VSNL and BSNL every telecom company in India is Subex's customer. Company has a strong presence in the Asian, African, Eastern European and Middle Eastern markets.
Products & services—
Subex Systems is global telecom software products company that offering comprehensive and flexible solutions. Subex has a global presence across North America, Europe and Asia. Subex’s Ranger™ has the largest installed base worldwide for Fraud Management Systems. Subex has over 70 leading telecom companies in its customers list and they span across 42 countries in the Americas, EMEA and Asia Pacific. Company is an ISO 9001 certified company. Company has significant portion of the revenues from telecom testing and measurement equipments and cellular infrastructure solutions. Company’s differentiating factors are its customer support and product features.
Company’s business can be mainly divided into 3 categories i.e. Test & Measurement Equipment, Cellular Infrastructure Solutions and Telecom Software.
Test & Measurement Equipment:
Division provides solutions and systems for test and measurement application for major telecom and data communication technologies like Fibre Optic, Frame relay ATM, ISDN, GSM, XDSL and SDH/ PDH. Equipments are mainly used to measure performance so that they can be compared with specifications. Company’s customers in this division include Department of Telecommunications, Basic telecom Operators, PSUs, Railways, Defense, cable manufacturers etc.
Cellular Infrastructure Solutions:
Division’s services are basically used to strengthen the signals for cellular phones both indoors and outdoors. The division also offers fraud control devices for cellular operators. Thus the clients are mainly cellular operators.
Telecom Software:
Division provides telecom applications in operation support systems, revenue assurance etc. Company has a huge growth potential worldwide given the rising demand for telecom software globally. Except that, company also works as a distributor to various foreign telecom equipment manufacturers for which it receives commission.
Valuation—
The company has developed significant skill and knowledge base in the telecom segment, which will help in acquire a sizeable share of the telecom sector. The company’s telecom software services and products division will be the major growth driver in the coming years. Company has business alliances with well-known international telecom companies, which it plans to capitalize on its software services. Some of the partners include Oracle Corporation, Ericsson Cables, EXFOE-O Engineering Inc, Allgon Systems etc.
At current market price, Stock is trading at very attractive valuation of 5.42 P/E multiple of its estimated earnings of FY2010. We recommend investors to “Buy” Subex Limited” at every dips with long-term investment horizon.

Source: Internet (Valuenotes by Abhishek Jain)

Sugar Sector

We have seen sugar stocks correcting in last 7–8 days, which has made even the investors, who have kept view till March 10, get disturbed. Traders are also disturbed, which is expected of them. Infact, sugar stocks have been rising continuously for last 2 months and that has raised the expectations of the investors and traders, expecting the same trend to continue. Expecting this, even the behaviour of sugar stocks were linked with Sensex and Nifty, and questions were raised in last 7 days that why they are not moving up, inspite of benchmark indices going up? When it was converse, nobody really asked this question.

To cut the long story short, bullish tone of sugar sector will continue to remain on domestic as well as global front. Season 08-09 will be ending on 30th September, 09, in which, the estimated domestic sugar production is expected to be 146 lakh MT. We had an opening stock of about 80 lakh MT on 01-10-08 and had an import of about 30 lakh MT in this season. This has made available, an aggregate quantity of 256 lakh, in the country against our estimated consumption of 230 lakh MT, thus leaving an expected closing stock of 26 lakh MT, on 30-09-09.

In season 09-10, India’s domestic production is not likely to exceed more than 140 lakh MT, lower than what we had in season 08-09. The reason for lower sugar production, in this year, could be diversion of sugarcane for Gur and Khandasari, as also about 10% of the crop going for seeding, as more planting of sugarcane will be done by the farmers, due to better realizations expected for sugarcane. Though poor monsoon will also have marginal impact on lower production of sugarcane in coming season, but won’t be seen to have much impact in Karnataka, Tamil Nadu, U.P. and Maharashtra. It may affect, to some extent, in Andhra Pradesh.

So, Season, 09-10, with opening stock of 26 lakh MT and expected production of 140 lakh MT is estimated to have a deficit of 70 lakh MT, expecting the consumption to be at 236 lakh MT. Obviously, closing stock requirement of atleast 20 lakh MT has not been considered in this deficit. This shortfall can only be made good by import of raw- sugar.

To meet this shortfall, some of the mills have contracted to import raw-sugar, which will be seen arriving mainly in the coming season, as it is not likely to be more than 30 lakh MT in this season. Renuka has contracted to import 150 lakh bags, at an average rate of Rs. 19 per kg., Sakthi about 90 lakh bags at Rs. 20 per kg., Bajaj Hindustan 70 lakh bags at Rs. 23 per kg., Balrampur Chini about 8.50 lakh bags at Rs. 21 per kg, Dhampur Sugar about 21.50 lakh bags at Rs. 23 per kg, Dharani Sugar about 20 lakh bags at Rs. 22 per kg, Simbhaoli Sugar about 13.50 lakh bags at Rs. 22 per kg, Triveni Engg. about 10 lakh bags at Rs. 22 per kg and EID Parry about 20 lakh bags at Rs. 22 per kg, for its standalone refinery, in 50:50 JV with Cargill. The cost of refining is Rs. 3 per kg, with 5% processing loss, would add about Rs. 4.50 to Rs. 5 per kg, to the cost of white sugar of all these companies.

Earlier, these raw sugar, post refining could have been sold in the market within 3 months, which has now been reduced to 1 month by the government, to keep the check on the rising price of sugar. Due to this, for September 09, Renuka and Sakthi has been given a release quota for levy, of 8 lakh bags each. Dharani has been given of 1.70 lakh bags. This is over and above the normal release of levy and non-levy manufactured sugar. Also, this non-levy monthly quotas have also been made mandatory to be released in equal parts, in first and second half of the month. Due to this, sugar prices have corrected from Rs. 33 per kg, ex-mill, in U.P. to about Rs. 30 per kg, now.

Due to this, the Indian sugar companies have also stopped contract to import raw sugar from global markets due to which, raw sugar prices fell from 24 cents per pound to 20 cents per pound and of white sugar from $ 610 per MT to $ 510 per MT. However, now it has been moved back to 22 cents per pound for raw and $ 540 for white. Even 3 months white futures is ruling at $ 574, while for raw, it is ruling at 22.75 cents per pound.

As stated above, due to release of higher quantity of imported sugar, for September, these companies will have a profit of atleast Rs. 10 per kg and hence Renuka and Sakthi is likely to have a pre-tax profit of atleast Rs. 80 crores each, for this month, in addition to gain to be made on normal sale of inventory held by them. So, September 09 quarter, will show huge improvements in the bottomline of all these sugar companies.

Though this move of the government is not seen pragmatic by the mills, as the similar move was taken by the government in April 09, whereby all the buffer held by the government, were released, to keep an artificial check on the sugar price, ahead of elections. Effect of this was seen later, with sharp rise in sugar prices. So same thing may get repeated in March 10, once the crushing stops in U.P., Maharashtra, Karnataka and A.P.

There is not going to be much comfort on the domestic front, even for season 10-11, as estimated production of sugar is not likely to be more than 240 lakh MT, which will take care of our domestic consumption only. So India will continue to be an importer for the next 2 years.

Even on the global front, for 2009-10, production is likely to be 152 million MT against estimated consumption of 157 million MT, thus depleting the closing stock to an all time low of 20 million MT, which is equivalent to 45-50 days only.

The government is also not likely to hurt the mills in coming period to ensure adequate availability of sugar in the market. In view of increase in MSP of wheat and rice, it has become unviable for the farmers to move to sugarcane, unless Rs. 180 per quintal is paid to them, against Rs. 160 per quintal having paid by the mills in U.P. in this season, inspite of SAP having been fixed at Rs. 140 per quintal. So low sugarcane price will keep the deficit continuing, which government would not be interested to see and happen.

Hence, all this correction in the sugar stock prices are temporary in nature and looks to have reached its near term bottom. Those who have 6 months view, can look to buy Renuka, Sakthi, EID Parry, Ugar, Dharani and Balrampur Chini, without taking day to day calls.

Source: www.premiuminvestments.in (By S. P. Tulsian)

Intraday Trading Calls for 11th September

Indian Stock Market may open positive and remains good positive for the day today.

Today's Intraday Stock Tips / Trading Calls (Keep strict Stop Loss for Each Trade):

SCRIP NAME	TRIGGER	PRICE	TARGET 1	TARGET 2
CAIRN INDIA	Buy Above	263.80	268.45	274.00
	Sell Below	261.05	257.35	252.00
PSL LTD.	Buy Above	166.75	172.35	178.00
	Sell Below	164.35	160.20	155.00
UNITED PHOSPH	Buy Above	171.65	177.40	182.00
	Sell Below	169.35	165.20	160.00
ROLTA INDIA	Buy Above	173.25	178.40	184.00
	Sell Below	170.10	165.65	160.00
FIRST LEASING	Buy Above	54.65	57.35	60.00
	Sell Below	53.25	51.10	48.00
HCC	Buy Above	112.75	117.25	122.00
	Sell Below	110.45	106.55	102.00
NAGARJUN CONSTRUCT	Buy Above	143.20	148.10	152.00
	Sell Below	140.35	136.20	132.00

GOOD LUCK