Tuesday, December 28, 2010

Scam Tainted Buy on Declines

Investors are flocking back to make a quick buck by hunting for bargains among stocks that were pummeled by investors in wake of the bribe-for-loans scam.

Out of the 21 companies allegedly involved in the scam, BGR Energy Systems has recouped all its losses and surged 40% to Rs 740 after touching recent lows of Rs 528. The stock is thus no more a bargain buy. BGR Energy Systems is a Chennai-based capital goods manufacturer and was among the first to deny allegations of involvement in the scam. Core Projects has also bounced back 70% to Rs 256 from recent low of Rs 155 after it denied any role in the scam.

JP Associates and Suzlon have also regained their lost value. Suzlon has surged to Rs 47 after touching a low of Rs 43. The maker of wind turbine generators has clarified that Money Matters was a financial advisor for raising loans in 2009 and the transaction was under the regulatory compliance. And JP Associates has scaled back to double digits (Rs 110) after plummeting to Rs 99.

Name19th NovRecent Low% Chg30th NovAB
BGR Energy Sys719.20528.20-26.6739.6940.02.8
Core Projects276.00150.00-45.7255.6570.4-7.4
Suzlon Energy51.7543.00-16.947.6010.7-8.0
Jaiprakash Associates120.5099.00-17.8110.0011.1-8.7
Adani Enterprises736.05565.15-23.2667.7018.1-9.3
Indiabulls Real Estate173.50118.15-31.9153.6530.0-11.4
Jaypee Infratech80.1562.00-22.670.3513.5-12.2
Central Bank216.60183.05-15.5189.353.4-12.6
Orbit Corporation98.6057.00-42.282.3044.4-16.5
LIC Housing Fin1294.05901.50-30.3998.8510.8-22.8
India Infoline107.7572.55-32.782.9514.3-23.016
D B Realty359.60190.60-47.0207.909.1-42.186
Money Matters Financial686.10344.30-49.8309.90-10.0-54.832
A = % Chg from recent Low; B = % Chg from 19th Low; Source: BS Research Bureau

Despite the rally, the realty players remain on tenterhooks amid the uncertainties surrounding pricing concerns and future funding. Indiabulls Real Estate, HDIL and DB Realty continue to be available at 11-40% discount when compared to the pre-crisis price levels.

HCC, which was up 9% at Rs 43.45 on Tuesday; is still an attractive buy compared to pre-scam level of Rs 56. Analysts sound cautious though. "Need to wait and watch the extent of damage on the performance of the stock. Lavasa was planning to come out with an IPO which is a 100% subsidiary of HCC which would have unlocked value; additionally environment ministry has also issued a notice." Gaurang Shah, Vice President of Geojit BNP Paribas said

LIC Housing Finance, which was up 5% on November 30, is still down 23% since the bribery news. Kotak Securities on Monday raised LIC Housing Finance to "add" from "reduce," saying it believes the recent price correction factors in business moderation. Gaurang Shah said, “LIC Housing Finance is financially sound and well managed entity; it has a proven track record. Numbers in the last two quarters speaks for the company’s fundamentals. It is a very decent investment from the long term point of view."

The other names in the financial space, such as Central Bank, India Infoline and Money Matters, have still not pared their losses.

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