Stock Idea:Vivimed Labs Ltd.

Vivimed Labs Ltd (Rs 92)
(BSE Code- 532660 NSE Code- VIVIMEDLAB)
(P/E- 3.3, Promoter's stake- 58.44%, Mkt Cap- Rs86 cr)
Vivimed Labs Ltd (VLL) is a leading manufacturer and exporter of an API, viz. Triclosan. Apart from Triclosan, it also manufactures other Specialty Active Ingredients such as Avis, Chlorophenesin, NDGA and CaGP. Vivimed caters to both domestic as well as Export markets and its major customers are Hindustan Unilever Ltd., Anchor Healthcare, Marico Industries, Unilever, Harmet International Inc., USA, Benckiser (North America) etc. Vivimed has a strong product portfolio catering to need of various segments like: Oral care (Triclosan - anti microbial agent, Calcium Glycerophosphate - dental enamel protection), Skin care (clinbazole - anti fungal agent, Vicrol - hair dye coupler) and Hair care (Avis- UV protection cream). VLL manufactures ingredients mainly for the Cosmetic industry which has been growing at an accelerated pace for the last few years. Due to this, the company is experiencing continuous increase in demand for its products
VLL is based out of Karnataka with its manufacturing plants in Bidar (Karnataka), Medak and Bonthapally (AP). The Research and Development (R&D) which is the key success factor for this company was set up to support its manufacturing. Vivimed has a state of art laboratory in Hyderabad with about 35 highly qualified professionals with experience in diverse fields of organic synthesis, analytical knowledge, microbiology & formulations, who conduct and supervise research. Triclosan (Viv-20) is the bread earner for Vivimed. It is the most widely used antibacterial, which goes into Oral care, personal hygiene and cosmetics. In July 2005, Vivimed came out with a public issue at Rs 70 per share for the expansion of Triclosan capacity. Globally Ciba Speciality Chemicals, Switzerland is a largest player in Triclosan with 75% market share while Vivimed has 12% market share. Another speciality product manufactured by VLL is Avis, which improves UV absorbing ability of Sunscreen and make them more effective. L' Oreal is a main client for Avis. It has also approved Vivimed as Global Supplier to L'Oreal- France.
For the year ended March 2009, the company had posted net sales of Rs 280 cr.. and net profit of Rs 22 cr. on consolidated basis. On a equity capital of 9.4 cr.(Promoters'stake-58.44%), the EPS stood at Rs 23.4 and the dividend declared is 15%. For the Q1 ended June 2009, VLL has posted a 65% rise in net profit to Rs 6.96 cr. on a 50% rise in net sales to Rs 78.96 cr. on consolidated basis. During the first quarter, FCCB's of USD 12.5 million were bought back and cancelled. Of the total issue, bonds worth USD 12.5 mn were bought back and Bondholders opted for conversion of balance Bonds worth USD 2.5 mn into equity shares. The Company in its Board Meeting held on August 31, 2009 considered allotment of equity shares to the Bondholder and has issued 5,63,918 equity shares of the Company, converted at Rs 185 per equity share.
Vivimed Labs is a niche player focused on manufacturing of ingredients for various segments of cosmetic products. It has show a steady growth in its revenues and earnings over the past four years and also established itself as a supplier to some globally leading cosmetic companies like L'Oreal, Revlon etc. Vivimed has a sustainable business model, which is scaleable .The demand for products are buoyant with little pressure on the pricing. In February 2008, Vivimed announced acquisition of James Robinson, a subsidiary of UK-based global chemicals major Yule Catto & Co. for about $30 million. The company has a leadership position in the Hair Dyes and Intermediate segments. The Personal Care products of James Robinson complement Vivimed's strong portfolio of active ingredients for this sector and this acquisition will be EPS accretive.
Going forward, VLL has decided to introduce new products at regular intervals. It has short-listed six active ingredients in the Sunscreen range for development, marketing & sales. It's also exploring the possibilities of offering `custom blends' for large personal care product manufacturing company. Vivimed's vision is to become a major supplier for speciality chemicals. Focus remains on personal care and cosmetics and this is a good proposition. With its R&D and high skill expertise VLL is set for decent growth. In terms of valuations, the scrip is available at 3.9 times x its FY09 earnings(Rs 23.4) and at 3.1 times FY10E earnings(Rs 29-30) and holds good potential for appreciation in the medium term. Investors can start accumulating the stock at current levels and add more on declines for decent returns of 50%-60% over the next 6-8 months.

Source: Internet (Valuenotes by Sanjay Chhabria)

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

Stock Idea: Jagatjit Industries, Taneja Aerospace Aviation

Jagatjit Industries

Jagatjit Industries is a 60 year old liquor company famous for Aristocrat brand Whisky. They also had brands like Maltova, etc. which they sold to SmithKline a couple of years back. This company was dragged in problems between the promoters of the group and a wide order in the month of March by CLB, that problem has not been resolved. CLB ordered the company to buy back the shares of other promoter group and they have already brought back the shares which led to reduction in equity from about Rs 52 to about Rs 44 crore. If you look at the valuations of the company, at the current price the market cap of the company is just about Rs 200 crore, the gross of the company is Rs 540 crore and this being a 60 year old company and the market cap just being 50% of gross the real value of the assets must be much more.
This company has done sales of about Rs 800 crore on the last year, so even if you compare this company with the drop on the basis of sales and brand equity this looks grossly undervalued compared to the peer group.
On Taneja Aerospace Aviation
If we see the price pattern of this stock, this stock has been primarily rangebound between Rs 30–40 for a long period of time. Promoters picked-up about 5% of the stake in the company they increased the stake by about 5% in the month of November at about Rs 28 and the stock has been primarily rangebound mainly because of the negatives which surround the sector and also the company. Last year there were rumours of a Delhi based infrastructure company wanting to take a stake in their air strip project and the valuations being talked about are very high, and at that time the stock touched a high of about Rs 250–270.
The company has a 250-acre land where they have made an airstrip which is largely unutilized and I see that as an opportunity, the reason that we are getting the stock at a market cap of just about Rs 100 crore is primarily because of the reasons which are mentioned. When things look rosy and everything starts looking good. When they are fresh with orders for aircraft and the value unlocking which people are expecting that airstrip will have that happens and you won’t get the stock for Rs 35-40. The reason you are getting the stocks at current valuations is only because of the negatives which are surrounding and the good thing is that the promoters themselves have increased their stake at about Rs 28 in the month of November. At that time there was pessimism all around and the stock has also been range bound for a very long period of time and that’s a reason you are getting this stock for Rs 35, when there were rumours of someone big buying that airstrip business and fancy valuations being talked about at that time the stock was not available for Rs 35 and it was available for Rs 250–270. So this is the one for the patient investors who can just sit on the stock and wait for company to unlock the value for the shareholders.

Source: Moneycontrol.com (By Ashish Chug)

Intraday Trading Calls for 10th 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	271.65	275.45	280.00
	Sell Below	269.15	265.20	261.00
IDFC	Buy Above	145.25	148.75	153.00
	Sell Below	143.10	140.20	136.00
SELAN EXPLO	Buy Above	290.25	297.10	305.00
	Sell Below	286.35	280.35	275.00
OPTO CIRCUIT	Buy Above	208.20	213.60	220.00
	Sell Below	204.35	198.30	192.00
FIRST LEASING	Buy Above	51.25	54.10	57.00
	Sell Below	49.35	47.15	44.00
HCC	Buy Above	112.75	117.25	122.00
	Sell Below	110.45	106.55	102.00
VIJAYA BANK	Buy Above	43.60	45.75	48.00
	Sell Below	42.10	40.30	38.00

Multibagger:

Buy First Leasing Company of India Ltd. (500145) CMP Rs. 50/- Short Term Target Rs. 65/-. Medium Term Target Rs. 90/- Long Term Target Rs. 150/-.

GOOD LUCK

Stock Idea: GMR Infra

GMR Infrastructure Ltd. has been in the news for revealing its mega capital raising plans, resulting in a good value unlocking for the shareholders of the company.

The company operates mainly in 4 verticals, of Airports, Energy, Highways and Urban Infrastructure, with its holding company being GMR Holdings Pvt. Ltd. The company has an immediate plan to take GMR Energy Ltd., public, which is holding company for its power verticals with 100% stake being held by GMR Infra Ltd. This power company has 3 operational power projects for 820 MW, with 8 projects under development of 6,260 MW making total capacity at 7,080 MW. Though it is hinted to raise Rs. 1,500 crores in this company, but no terms, in respect to pricing or stake dilution, has been spelt out.

If we go by the recent IPO of Adani Power, with paid up equity base of Rs. 2,180 crores, resulting in a market capitalization of Rs. 22,000 crores and estimated debt of Rs. 34,500 crores, gives an enterprise value of Rs. 56,500 crores for an effective capacity of 6,600 MW, to be made operational by March 2012.

So broadly, GMR Energy, which has a present paid up equity of Rs. 1,425.08 crores as at 31st March 2009 with the reserves of Rs. 339 crores and total assets of Rs. 2,588 crore and total liabilities of Rs. 824 crores, can very well be compared with Adani Power. However, the company plans to go public after financial closure of its 4 thermal based power projects, to get better valuations in IPO.

It is an accepted fact that all the present power projects, under execution, are financed on a debt equity of 3:1 and this can eventually have a debt of Rs. 20,000 crores on completion of 7,080 MW power project by March 2013. So, expecting an EV of Rs. 56,500 crores, also for this company, market capitalization can be expected to be close to Rs. 36,000 crores. So, even if 10% stake is diluted, which is required, and is minimum, it should be able to garner Rs. 3,600 crores against Rs. 3,000 crores mobilized by Adani Power with 13.50% stake dilution.

However, there is no clarity in respect to ownership of Intergen, in which 50% stake has been acquired by the company or the group, having 8,086 MW operational capacity in 5 countries in 4 continents and further developing 4,686 MW, all being gas based power projects. This stake of 50% in Intergen, looks to have been acquired by an overseas subsidiary of Promoter, of GMR Infra, with 95% stake held and 5% stake held by the company. Also, the company has subscribed to Compulsory Convertible Debentures in GMR Holding (Malta) Ltd. for Rs. 845 crores, which are to be converted into equity at the option of company prior to Feb 2012. It is also stated in the FY 09 Annual Report of the company that the company, through its step down subsidiary GMR Energy Global Ltd has entered into necessary arrangements to acquire 50% stake in Intergen NV and has given a corporate guarantee upto maximum of US $ 1.38 billion to the lenders, on behalf of fellow subsidiary, to enable it to raise debt of financing the acquisition of Intergen.

So, there seems to be great value lying in the energy verticals of the company, and one needs to collate all the financials of this vertical to assess its true enterprise value and means of finance of various projects, under execution.

Company’s Highway vertical has 6 operational road projects of 421 kms. with annuity of 255 km and Toll based for 166 kms. The company is also aggressively bidding for the other road projects which are due to get awarded in the next 12 months.

Its Urban Infrastructure vertical has 3,300 acres in Tamil Nadu, 250 acres Aviation specific SEZ on eastern side of Hyderabad Airport, 250 acre Multiproduct General SEZ on western side of Hyderabad Airport, 250 acres at Delhi Airport and 1,000 acres at Hyderabad Airport.

In Airport vertical, the company is holding 50.10% stake in Delhi Airport, 63% stake in Hyderabad Airport and 40% in Sabiha Gokcen International Airport at Istanbul in Turkey.

The company as at 31-03-09 has a total debt of Rs. 12,024 crores on net worth of Rs. 6,471 crores, resulting in debt equity of 1:85:1. The present market capitalization of the company is at Rs. 25,000 crores, resulting in an EV of Rs. 37,000 crores. The company has cluster of growth oriented infrastructure projects, with each vertical having a valuation of over Rs. 20,000 crores, barring highway verticals.

The company needs to pump in close Rs. 10,000 crores in the company to execute and accelerate these projects, and all the efforts to bring in IPO, of various verticals are in that direction only. However, plans of mobilizing Rs. 7,500 crores by bringing in IPO of holding company of GMR Infrastructure may not be very feasible and convincing, as it will amount to double listing of the same projects and assets. Instead, company can contemplate QIP issue and thus mobilize the desired funds in GMR Infra, which will eventually reduce the stake of the promoters, in GMR Infra.

It is certain that the company has huge asset base with extremely good long term growth potentials which needs to be made operational by infusing need based funds with the most optimum financing patterns and models.

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