PSU Shares - Gold Mine or Black Hole ?

Dear Investors,

The recent rally in BSE and NSE has given a big boost to the most neglected sector - Public Sector Undertakings.  

BSE PSU Index comprises of 59 scrips out of which 24  belong to Nationalized Banks.  Rest 35 shares belong to core business / manufacturing activities.  Many stocks in this sector are under owned by both FIIs and Domestic Institutions, HNIs for the simple reason that these are thoroughly mis-managed.

The Sector is out of investment radar of large investors due to uncertainty. There are several reasons for the downturn in PSU stocks include decline in net profit and the government's move to sell shares of some of these companies via offer for sale, at a discount to prevailing market price.  Any further equity dilution means - more supply depressing the market price.  FPOs by the government has become a nightmare for the Retail investors as they are now trading at deep discount to their issue price.  

For the smart investors this gives a golden opportunity to buy into high quality stocks at attractive valuations.  The top ten identified by our Research Team is given below :

1. BHEL
2. BPCL
3. BEML
4. Coal India
5. Engineers India
6. GAIL
7. Hindustan Copper
8. Indian Oil
9. NMDC
10. ONGC

Investors should carefully analyze the price movements of these shares besides the Q4 results for 2014 before taking any investment decisions.

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Smart Investor

Equity Research Division

Ravina Consulting
No.24 Pattamal Plaza
3rd Cross Kamannahalli
BANGALORE 560048

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Prestige Estates - Sell

Dear Smart Investors,

Company Background :
Prestige Estates Projects Limited is a real estate development company. The Company’s business segments include Residential, Commercial, Retail, Hospitality and Services. The Company’s residential developments include Prestige Golfshire, Prestige Neptune’s Courtyard, Prestige Oasis, Prestige Bella Vista, Prestige Westholme, Prestige Royal Woods, Prestige White Meadows, Prestige Tranquility and Prestige Ferns Residency. Its commercial buildings include Prestige Dynasty, Prestige Nebula, Prestige Shantiniketan Commercial Precinct, Prestige Atrium, Prestige Meridian, Prestige Towers and Prestige Pegasus. Its retail buildings include UB City, the Forum, the Forum Vijaya Mal and the Forum Value Mall. Its hospitality building include Angsana Oasis Spa & Resort, Oakwood Premier Prestige Bangalore serviced residences and The 24 Tech Hotel. Under the labels of Morph Design Co and Prestige Interiors, the Company offers customized interior design solutions and fit out services.

Q3 Results & forecast :
The debit pile of this company is huge and Management is well aware of this.  Efforts to bring down the debt by QIP preferential offers are in the offing.  25% vs. our estimate of 26.5% (down 506bps YoY) led to EBITDA of Rs 1.2bn and PAT of Rs 0.8bn, ~10% below estimates.  The  lower  margins  were  attributable  to majority  of  revenues  being  recognized  from   mid- income projects such as Tranquility (Rs 1.5bn) and Bella Vista (Rs 1.1bn) during the quarter. Other expenses increased 68% QoQ to Rs 251mn  on  account of re- classification of agent commissions  underoverheads vs. project-level expenses (material expenses).

Technical view : 
Although PEPL continues to have a strong launch pipeline, PEPL continues  to invest in augmenting its land bank through a mix of JDAs and outright acquisitions and is incurring annual capex of Rs 5-6bn on annuity assets. Hence, the key monitorable in our view is the company’s ability to keep debt levels in check in FY14-15E (PEPL’s consolidated net debt increased by Rs 4.0bn in 1HFY14 to Rs 21.9bn). Maintain Sell around Rs.165 stop loss of 170 with TP of Rs 150 /share 


Traders Delight :
The scrip provides enough trading opportunities for the risky traders.  Any fall below Rs.140 should be considered as an opportunity to buy and hold the stock for a target price of Rs.170 

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Smart Investor
Ravina Consulting
No.24 Pattamal Plaza
3rd Cross Kamannahalli
BANGALORE 560048

For Stock Advise + Ideas
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Purvankara Projects - Avoid

Company Background :

Puravankara Projects Limited is an India-based company. The Company is engaged in the development and construction of residential and commercial properties. The Company operates primarily in India. The Company has projects across Bangaluru, Chennai, Coimbatore, Kochi, Hyderabad, Kolkata, Mysore, Mumbai and Colombo. Its completed projects includes purva fountainsquare, purva jade, purva vantage, purva grande, purva Riviera, purva panorama, purva carnation, purva pavilion, purva fairmont, purva heights, purva iris, purva graces, purva park, purva paradise, castlemaine, purva nest, whitefield bougainvilla and uran park-Mumbai. As of March 31, 2012, the Company had 19 subsidiaries.

Performance 

A comparative chart with its peers in Bangalore segment reveals interesting facts.  It has fallen way ahead of others in the recent slide sinking to a new 52 week low.  A consolidation in Rs.45-50 is expected sooner than later.  While Sobha, Prestige and Brigade scrips have fallen around 18% Purvankara had steepest fall of 47% clearly indicate the weakness in the fundamentals of the share.

https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1393978485814&chddm=90992&chls=IntervalBasedLine&cmpto=NSE:PRESTIGE;NSE:BRIGADE;NSE:SOBHA&cmptdms=0;0;0&q=NSE:PURVA&ntsp=0&ei=kGwWU7CiGYTQkgXdnwE

52 Week Low :

Will you buy this stock ? No The investors are exiting the stock since the expectation is that there will be fall in total sales and revenue in next 2 quarters.  The Realty scene in major cities in India is down since there is contraction in the income levels of the users and tepid increase in the annual salaries of the workforce.

Provident Housing :

The company forayed into low cost housing projects with a 100% subsidiary which is yet to turn green.  The large size of units that remain unsold is a cause for worry.

Buying Opportunity :

During last year the company raised money through QIP at Rs.80 levels to raise INR 1.84 Billion hence the book value continues to remain high.  The debt levels are also manageable.  The scrip becomes a compelling buy only after we review the performance in Q4 quarterly results and management perception of the realty scenario in major markets they have projects.  

Smart Investor

Equity Research Division

Ravina Consulting
No.24 Pattamal Plaza
3rd Cross Kamannahalli
BANGALORE 560048

For Stock Advise + Ideas
mail to intellinvestor@gmail.com
Talk / SMS 08105737966

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Telecom Sector - Avoid

With the conclusion of Spectrum auction, the GOI has garnered good funds, at the cost of the Telcos and its end users !!

The trend for the last month or so in the telecom sector scrips in the BSE and NSE - down.  It is unlikely to reverse this trend and as we see lower tops and lower bottoms, we expect the slide to continue for the upcoming year. 

Idea Cellular had a recent low of Rs.127 and is likely to halt around Rs.100, failing which it can go all the way upto Rs.75-80 levels which is a compelling buy for long term portfolio investors.

RCom appears to be weakest in the Telco pack its fall is more pronounced when compared to other 2 biggies Idea and Bharti.  Avoid the scrip as it is likely to breach recent low of 110.  The fall could be steep and in our estimates it could hit Rs.75 sooner or later.

Bharti - better placed than the other 2 companies.  Acquisition of Loop Telecom would entail an outflow of Rs.700 crores which will put more pressure on cash flows and could bump up the interest costs for borrowings to fund spectrum fee as well as taking over of loop.  Staring near the 52W low this stock is poised to slide sharply in the coming months.

Smart Investor

Equity Research Division

Ravina Consulting
No.24 Pattamal Plaza
3rd Cross Kamannahalli
BANGALORE 560048

For Stock Advise + Ideas
mail to intellinvestor@gmail.com
Talk / SMS 08105737966

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Technical Calls - JP Associates

JP Associates Limited - Sell

The stock has been trading below its long term 200 day WEMA (73) since fourth week of January 2013. Moreover, the stock is trading within bearish price channel on the monthly chart. This indicating long term trend on JPASSOCIATES is likely to remain weak. On weekly chart, the stock has given a breakdown from the upward price channel indicates selling pressure cannot be ruled out and we might see a decline till 42/39 levels on downside. We expect selling pressure in the coming trading sessions with immediate support placed at 42. If the stock is able to give a sustained close below this level then we would see the stock testing 34.50 levels in the short term to medium term scenario. The stock is expected to find resistance at 50.30/52.70 levels.

Strategy: 

Sell JP Associate below 46.50 (Spot) with a stop loss of 50.30, for a potential target of 39/34.


Options Strategy

Traders could consider a short strangle on JP Associates. Short strangle is a strategy involving simultaneous selling of call and put options.  This strategy is best suited when one expects the underlying stock to move in a narrow range.

Traders could consider selling ₹35-put option and ₹45-call option. They closed with a premium of ₹1.15 and ₹0.75 respectively.

This will entail an initial income of ₹15,200 , as the market lot is 8,000 a contract. The maximum profit in this strategy will be the initial income. This strategy is for traders who can bear the risk, as loss will be unlimited.

For maximum profit, JP Associates has to settle between the strike price at the time of expiry.  However, if the stock breaks free in any one of the directions, that is either up or down, then this strategy will result in a huge loss. Any close above ₹47 or below ₹37 will impact the position.

It is better to hold on to the strategy till the expiry, as traders could capture the full potential of time value. We advise traders to exit from this strategy, if the loss touches ₹3,500.

Ingenious Investor
Equity Research Division

Ravina Consulting
No.24 Pattamal Plaza
3rd Cross Kamannahalli
BANGALORE 560048

For Stock Advise + Ideas
sowmya@ravinaconsulting.com
Talk / SMS 08105737966

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Mid Cap - Buy Recommendations

If you are looking for buying into Mid Caps which has potential to grow about 50% in the next 9 to 12 Months consider investing in the following scrips.

A further dip of about 10% is expected in these stocks.  Buy only on declines and wait for the prices to climb slowly and steadily.

Stop Loss

Make sure that when you are buying keep a strict stop below 10% of your purchase price as a sound investment strategy.  Do not average in a falling market as the shares are likely to slide further.

Smart Investor
Equity Research Division


For Stock Advise + Ideas
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Talk / SMS 08105737966

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Buy Sugar Stocks for Sweet Gains !! Wait for dips, buy and Hold !!

The government recently announced its decision to partially decontrol the sugar sector. This announcement brought cheer to the sugar industry. In fact, the Sugar Index outperformed the CNX Nifty 50 index by more than 10% in the first week of April, the week the news became public.

The Sugar Index, comprising frontline sugar stocks, gained close to 9% during 11 trading sessions ending 12th Apr '13. During this time period, the broader market remained in the red. The CNX Nifty 50 Index fell by approximately 2% in the corresponding time period. In view of the structural change in the industry, investors from this sector need to keep a close eye on the upcoming developments and could consider going long in selective sugar company stocks.

After years of reluctant hope and months of speculation, the Indian government's Cabinet Committee on Economic Affairs finally approved the partial decontrol of the sugar industry. The proposal seeks to abolish the levy-sugar mechanism, under which private millers have to sell a specified quantity of the sweetener to the government at concessional rates.

As per the new policy, the quarterly release mechanism of sugar has been dropped, which allows sugar mills to sell sugar into the domestic market or to export at will. The move is expected to free up cash flows for mills and allow them to better meet their cane payments to farmers, thus removing one of the major barriers to good farmer-miller relationships, which may in the end lead to less of a swing in cane plantings and more steady sugar production.

Obviously, the dropping of the levy obligation will boost profit margins of sugar companies significantly. Industry pundits estimate total savings to be in the range of `3,000 crore. The Indian Sugar Mills Association says that the two decisions combined could lead to an additional growth of 20% to 25% for the industry. Sugar production in the country is estimated to touch 24.6 million tonnes in 2012-13 marketing season ending 30th September with the cumulative turnover of `80,000 crore.

Currently, major players in the sugar industry are all domestic firms such as Bajaj Hindhusthan , Shree Renuka Sugars  , Dhampur Sugar  , Balrampur Chini  , EID Parry  and Mawana Sugars  , among others. After the decontrol policy of the government, the sector is likely to see more merger and acquisition activities.

Overseas players like Olam International, Cargill and Noble Group are looking at occupying a bigger pie of the Indian sugar industry. Foreign firms have been calling top industry people as they are lured by the size of the `80,000 crore market, which is expected to double up in five years. Trade sources say potential investors are eyeing opportunities in detail and have a preference for business in top producer Maharashtra although they are suspicious of politically meddlesome UP. As a result of all these positive developments, sugar stocks have surged upwards, beating negative trends of the overall market in the month of April.

Bajaj Hindusthan, Shree Renuka Sugars and Balrampur Chini Mills shares surged by 7.30%, 7.07% and 4.02%, respectively on the day the news was made public. Part of the overall impact had already been factored in before the news. Some momentum gained in stock prices after the news. Though the positive news will boost investor sentiments in the sugar industry, there are some concerns that need to be looked at carefully.

The relaxation in levy regulation is applicable only for two years and it is not clear what will happen from the third year onwards. Secondly, the control of sugarcane pricing still rests in the hands of select states. Depending on the political as well as investment-friendly situation of the individual states, companies' benefits would vary. Hence, investors need to carefully look at the plant location of individual sugar companies and its existing relationship with the government, among others. This means that the full benefit of a free market is yet to be realized for sugar investors.

For risk takers our recommendation - Buy Bajaj Hindustan below Rs.10 Shree Renuka below Rs.15 holding period 12-18 months

For long term our recommendation - Buy Dhampur Sugars below Rs.30 and Balrampur Chini below 36 holding period 18 - 24 months

Smart Investor
Equity Research Division

Ravina Consulting
No.24 Pattamal Plaza
3rd Cross, Kammanahallli
BANGALORE 560084

For Stock Advise + Ideas
sowmya@ravinaconsulting.com
Talk / SMS 08105737966

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Buy PVR Limited

We recommend a buy in the mass media scrip PVR from a short-term horizon. It is apparent from the charts of the stock that since its March 2011 low of Rs 94, it has been on a long-term uptrend. Following a corrective decline from early December 2012 peak of Rs 341, the stock found support at Rs 250 in late January and early February this year. The stock resumed its long-term uptrend taking twin support at Rs 250. Both medium- and short-term trends are up for the stock.

Reinforcing the uptrend, the stock advanced 2 per cent accompanied by above average volumes recently. It is trading well above its 21- and 50-day moving averages. The daily as well as weekly relative strength indices are featuring in the bullish zone. Moreover, both daily and weekly price rate of change indicators are hovering in the positive terrain implying buying interest.

Our short-term outlook on the stock is bullish. We expect its uptrend to continue and reach our price target of Rs 400 or Rs 421 in next 2 months. Traders with a short-term horizon can consider buying the stock with stop-loss at Rs 335 level.

Smart Investor
Equity Research Division

Ravina Consulting
No.24 Pattamal Plaza
3rd Cross, Kammanahallli
BANGALORE 560084

For Stock Advise + Ideas
sowmya@ravinaconsulting.com
Talk / SMS 08105737966

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