Stock Idea: Marathon Nextgen Realty Ltd. (MNRL)

Marathon Nextgen Realty Ltd. (MNRL) (Code: 503101) (Rs.380) was promoted by Mr. Ramniklal Shah in 1969 but reinforced by the technological skills and new-age vision of his successors - Vice Chairman, Chetan Shah, and Managing Director, Mayur Shah.
The Marathon Group acquired the sick Piramal Spinning & Weaving Mills Ltd. (PSWML), manufacturers of cotton fabrics, synthetic fabric and cotton yarn with mills at Lower Parel in Mumbai, Ambarnath, outside Mumbai and Surat in Gujarat. As per the rehabilitation programme sanctioned by the BIFR, PSWML’s three main divisions were demerged into 3 distinctive entities.
The assets & liabilities of PSWML as well as that of Niranjan Mills were transferred to Niranjan Piramal Textile Mills and the Ambarnath processing unit was transferred to Pyarelal Textiles in October 2001. Its third realty unit also co-opted into Ithaca Informatics Pvt Ltd to develop the property at the Lower Parel unit.
Subsequent to the restructuring, shareholders of the erstwhile PSWML were allotted one share in each of the 3 companies for every 3 shares of PSWML held by them. The name of the company was changed to Marathon Nextgen Realty Ltd.
MNRL has developed residential complexes, industrial estates, high-rises, signature homes, retail and corporate spaces catering to different lifestyles through 70 projects in India. Its ongoing projects are spread over 28 lakh sq. ft. in Mumbai.
MNRL’s lean management is supplemented by the prestigious ISO 9001:2000 certification (Quality Management Systems). One of the secrets of its success has been in acquiring the right land that ensures appreciation at an opportune time. This foresight has benefited its customers offering them convenience of location and appreciation in property value in the long run. Its acquisition of PSWML at Lower Parel in Central Mumbai in 1995 is a testimony to this as the area has turned into the fastest growing corporate hub in 2006.
In FY09, MNRL posted 32% lower net profit of Rs.41.8 cr. on 4% higher income of Rs.105 cr. and the EPS was Rs.32.5.
For Q3FY10, net profit rose 64% to Rs.39.4 cr. on 3% lower revenue of Rs.55.2 cr. For the nine months ended 31 December 2009, its net profit jumped 208% Rs.98.8 cr. on 65% higher revenue of Rs.138.3 cr. while the 9 months EPS works out to Rs.78.4.
MNRL’s tiny equity capital of Rs.12.6 cr. is supported by huge reserves of Rs.154.3 cr., which gives the share a book value of Rs.133. The promoters hold 89.2% in its equity capital, foreign holding is 0.6%, PCBs hold of 1.1% leaving 9.1% with the investing public.
Marathon NextGen was a unique product mix of high-end residential towers and two commercial projects that was well-received. Marathon NextGen Era is one of the tallest luxurious towers that offer plush apartments/penthouses with terraces and plunge pools on the 36th floor.
MNRL has entered into three joint ventures, which include the development of 3 corporate IT Parks at Lower Parel, a housing project in Bangalore and development of properties in South Mumbai and the western suburbs of Mumbai. The projects include a SEZ in Navi Mumbai, an integrated township in Badlapur near Mumbai, Commercial and residential properties in Mulund and Parel in Mumbai. These ongoing projects in and around Mumbai are spread over 28 lakh sq. ft.
The prospects of the realty sector have improved according to India's new FDI policy up to 100% investment is allowed under automatic route in townships, housing, built-up infrastructure and construction-development projects. Construction projects would include hotels, resorts, hospitals, educational institutions, housing and commercial premises. The government has also reduced the minimum mandatory area for FDI in real estate sector from 100 acres to 25 acres.
Since, the Indian economy has already recovered, there are positive signs that the realty sector is back on the growth track. Merrill Lynch forecasts that the Indian realty sector will grow from $12 billion in 2005 to $90 billion by 2015.
The rapid population growth, strong demographic impetus with young people, newer job creations, rising incomes, emergence of nuclear families, tax incentives on housing, competitive interest rates, expansion in organised retail sector, shortage of around 20 million dwelling units and the rising FDI levels in the real estate sector provide a conducive environment for investment in the housing/real estate sector for growth in a revenue and profitability.
For FY10, MNRL is likely to post a net profit of Rs.130 cr., which would fetch an EPS of Rs.103. At the current market price of Rs.380, the share is trading at a P/E of just 3.4, which gives a strong buy indication. Applying a conservative P/E of just 6 against the industry average P/E of 32 for the construction sector, will take the MNRL share price to over Rs.600. This would fetch a decent appreciation of over 60% in the medium-to-short-term. The 52-week high/low of the share has been Rs.567/91.

Source: Internet (Moneytimes)

Stock Idea: Yuken India

Long-term investors can consider accumulating Yuken India (Code: 522108) (Rs.154.60) as it is back on track since the last two quarters. Earlier, the rising metal prices had spiralled up its raw material cost that led to a significant reduction in its profit margin. But now things have improved and the company is again recording 11-12% operating margin. Accordingly, its share price has also doubled but deserves still better valuation and has considerable scope for appreciation. It is a reputed manufacturer of power saving hydraulic pumps & valves that are very popular in the heavy engineering industry. As an effective means of automation, it finds extensive use in various key sectors like machine tools, material handling equipment, construction machinery, drill rigs, automobiles, defence, steel, power & cement plants, plastic machinery etc. Besides, it also manufactures complete hydraulic power units as per customer specifications, cylinders, parison controllers, actuators, accumulators and power packs. To cater the rising demand, the company has doubled its hydraulic casting products capacity to 2400 TPA and is further augmenting it to 6000 TPA within the next couple of years. Besides, it has made a tie-up with Hydrocontrols SPA, Italy, to produce and market state-of-the-art mobile control valves especially for agriculture, construction, earth moving and lifting machineries. On the back of the sharp revival in construction and industrial activities, Yuken is expected to fare well in coming quarters. In fact, despite reporting a net loss for Q1FY10, it is estimated to post a net profit of Rs.5 cr. on sales of Rs.105 cr. for FY10. This translates into EPS of Rs.17 on its tiny equity of Rs.3 cr. For FY11, it has the potential to report an EPS of Rs.22-24.

Source: Internet (Moneytimes)

stock idea: Oil Country Tubular Ltd.

Oil Country Tubular Ltd. (Code: 500313) (Rs.108) is a leading global company processing a range of tubular goods needed for oil drilling and exploration. Its wide product range covers drill pipes, heavy weight drill pipes, drill collars, production tubings, casings, tool joints, couplings, pup joints, nipples, subs, and crossovers. Last year, the US government had imposed heavy anti-dumping duty on Chinese imports of certain oil country tubular products, which may have worked in favour of the company. It is also quite active on the export front as nearly 50% of its total revenue comes from exports. For future growth, it plans to set up a joint venture between Golden Dunes International, Oman, & UMW Petropipes (L) Ltd, Malaysia, for putting up a pipe threading facility in Oman. Financially, the company is doing well and has cleared all its term loans and emerged debt-free. However for the December 2009 quarter, it reported a very disappointing performance with a drastic fall in the topline itself and did not give any explanation for such poor sales. Market players are now keenly waiting for its March 2010 quarter numbers. Based on the current situation, it may end FY10 with sales of Rs.325 cr. with PAT of Rs.55 cr. i.e. an EPS of Rs.12 on its equity of Rs.44.30 cr. Aggressive traders can take a call to buy the scrip before the Q4FY10 results are announced.

Source: Internet (Moneytimes)

Stock Idea: UB Engineering Ltd.

UB Engineering Ltd. (Code: 509992) (Rs.137.45), part of the Vijay Mallaya famed UB group, provides integrated design, engineering, procurement, construction and project management services for the infrastructure and energy sectors. It carries out EPC projects for complete power generation plants upto 50 MW and undertakes turnkey business for high voltage & extra high voltage (EHV) sub-stations upto 400 kV class and associated transmission lines right from the conceptual stage to commissioning stage in India and abroad. It even undertakes overhauling and maintenance of plants in varied industries and has a healthy order book of approx Rs.700 cr. Financially, it was not faring well earlier as it was in deep losses with high debt, negative networth and lack of promoter focus. But in the last two years, it made a smart turnaround on the back of its financial/debt restructuring and infusion of additional equity under its new management team and came out with a 5:13 rights issue at Rs.126 per share in December 2007. Today, its net worth is not only positive but it is also almost debt-free with the sharp rise in its profitability. In fact, it has already posted an EPS of Rs.12 for the nine months period ending 31 December 2009. With the government making all time high budgetary allocations for the infrastructure sector, the company’s future prospects look very promising. Hence for FY10, it may clock a turnover of Rs.450 cr. with PAT of Rs.25 cr. and post an EPS of Rs.15 on its equity of Rs.17.10 cr. Technically, the scrip has been consolidating between Rs.120-130 for the last four months. Long-term investors can keep on accumulating at every sharp decline.

Source: Internet (Moneytimes)

Stock Idea: Tantia Constructions Ltd.

Tantia Constructions Ltd. (Code: 532738) Rs.118.50
Established in Kolkata in 1964, Tantia Construction Ltd (TCL) has evolved over the years from a pure railway construction company to a full-fledged infrastructure company executing various diversified projects. Today, it is into construction of roads & highways, railways, tunnels, bridges & flyovers, urban infrastructure, sewerage & drainage, civil & housing construction etc. Lately, the company has also ventured into the lucrative marine infrastructure, power transmission & distribution segment and aviation infrastructure. It is among the few companies that has almost five decades of domain expertise in servicing the Indian Railways. In fact, TCL is among the five Indian companies capable of providing ‘foundation-to-finish’ for mega railway bridges spanning 2-km or more. Importantly, TCL has a very strong presence in the eastern and north-eastern regions, which gives it an edge as very few players are interested in bidding in these regions due to the difficult terrain. Its expertise can be ganged by the fact that it has executed 600 projects which include construction over 250 km of roads in the hilly areas of Mizoram, coastal areas of Kerala, plains of Punjab/Haryana and plateaus of Karnataka. For power projects, it has garnered the capability of in-house manufacturing and erecting transmission towers within a very short time. Notably, TCL has an impeccable track record of completing every single assignment since inception. Although its clientele is skewed towards PSUs, it has diversified customer base including NHAI, State Public Works Departments (PWDs), NTPC etc.
The contribution of the various business segments, domains and verticals are:
􀂄 Roads & Highways (50%): TCL ventured into advanced mechanised road construction in compliance with specifications set by the Ministry of Surface Transport in 1990. Since then, it has established its credentials in the field of construction, widening, conversion, maintenance, strengthening and beautification of roadways, road bridges, highways and flyovers. It is the only Indian company to have fabricated a 100 metre spans steel girders onsite, 4,000 mtrs above sea-level. With over 50% of total sales coming from this segment, it is the largest contributor of revenue.
􀂄 Urban infrastructure (25%): TCL established its credentials in this segment through its Kolkata improvement projects. Its expertise in soil re-engineering, mechanised earthwork, hauling for large-scale land development, sewerage & drainage projects, electrification and lighting systems and construction of college & hospital buildings. Today, the company is well acknowledged by large municipal corporations for its competence in the timely commissioning and completion of urban projects that minimise public inconvenience. TCL is now eyeing urban infrastructure projects in Punjab, Orissa, Delhi and Haryana from their PWDs.
􀂄 Railway infrastructure (20%): TCL is one of the oldest railway contractors in India with the experience of having completed assignments across diverse terrains for the Eastern Railway, North Eastern Railway, South Eastern Railway and North East Frontier Railway. It provides end-to-end solutions right from survey, designing of track embankment, earthwork, track laying, bridges, tunnels, electrification and signalling, maintenance of rail road/infrastructure, constructing railway stations and terminals, railway bridges etc. This division enjoys a pre-qualification for projects up to Rs.450 cr. when
engaged in overseas joint ventures. Some of its joint venture partners comprise reputed international names like Road Builder, Malaysia and TSO, France.
􀂄 Aviation/Marine Infrastructure (4%): TCL diversified into marine infrastructure in 2003 and now possesses proven capabilities in building tunnels, jetties and steel girders along rivers. Subsequently, it ventured into aviation infrastructure in 2005 through the Dibrugarh Airport project.
􀂄 Power Transmission projects (1%): TCL entered the power T&D solutions segment in 2005 and is now executing projects involving beam foundation, lattice structure erection, conductor stringing and cable-laying systems. To enhance its presence, TCL is planning to set up a design department to include plant design engineering.
In recent years, TCL has executed various prestigious and large scale projects in West Bengal, Assam, Bihar, Uttar Pradesh, Tamil Nadu, Kerala and Mizoram, and in neighboring countries like Bangladesh, Nepal and Bhutan. Since over 90% of its revenue comes from government projects, it caters to several government bodies including Indian Railways, Kolkata Metro Railway, NHAI, State PWD, Central PWD, State Electricity Boards, HUDCO, KMC, Airport Authority of India apart from NTPC, Ircon International, SAIL, RITES, IOC etc. It enjoys excellent business relations with them and has good direct contacts within government resulting in repeat orders of similar nature, extension of projects of a higher value and listing among preferred partner. Presently, TCL has a diversified and huge order in hand position of over Rs.1500 cr. to be executed in the next 24-36 months. It bagged over Rs.450 cr. worth of orders in the last twelve months, which gives strong revenue visibility in coming years.
Going forward, TCL is planning to bid for bigger projects in the power transmission segment as it has executed a few power projects and is now qualified to bid for the same. In the near future, it also intends to foray into BOT & BOOT projects to boost margins. It usually takes up complex projects, which are insulated from competition. It is also looking to bag airport projects coming up in non-metro cities. To cash in on the boom in civil construction, it is even contemplating to enter into real estate development. As a long-term strategy, TCL intends to enter in logistics sector by constructing and owning warehouses at strategic location across India. Water treatment, solid waste management and sewage treatment are also being considered to widen its projects profile.
In the recent 2010-11 budget, the government has provided over Rs.1,70,000 cr., which accounts for over 46% of the total plan allocations, for infrastructure development in the country. For road transport, the allocation was raised by over 13% from Rs.17,500 cr. to almost Rs.20,000 cr. It has provided nearly Rs.17,000 cr. to Railways, which is 1000 cr. more than last year. Further, it has doubled the plan allocation for power sector from Rs.2200 cr. in 2009-10 to Rs.5100 cr. in 2010-11. On the other hand, development of rural infrastructure remains a high priority area and so it has decided to allot Rs.66,000 cr. for Rural Development alone. All these developments augur well for infra companies like TCL. With a fat order book of Rs.1500 cr., the company can easily grow at 30-50% CAGR over the next couple of years. In order to fund its projects & working capital, TCL had raised around Rs.30 cr. through the FCCB route in FY08, to be converted into equity shares at Rs.140 each. For FY10, it is expected to clock a turnover of Rs.475 cr. with PAT of Rs.18.50 cr. This translates into EPS of Rs.13.50 on its current equity of Rs.15.60 cr. and EPS of Rs.11 on its fully diluted equity of Rs.18.50 cr. Although its valuations does not look cheap at an EV of Rs.450 cr., still long-term investors can buy at corrections as this infra company is expected to record healthy double digit growth in coming years.

Source: Internet (Moneytimes)