Tuesday, April 18, 2006
18/04/2006 | Company Name: SATYAM | Call Type: Go Long
Stop Loss/ Reversal: 824.0000
Buy/Sell Price Rs.: 843.00
Current Price Rs.: 853.00
Potential P/L%: 1.3600
Investment Argument: Buy the stock with a stop loss of Rs824 on an intra-day for a target of Rs875.
Cluster: Emerging Star
Price target: 244
Current market price: Rs180
3i Infotech acquires Datacons
3i Infotech has announced the acquisition of Datacons, a Bangalore-based software products company, offering niche products for asset management companies. Datacons has a comprehensive range of products for the mutual fund industry that covers accounting (MFund/AM), investor services (MFund/ISS), and dealing and decision support services (MFund/dealing).
Price target: Rs3,504
Current market price: Rs3,230
- For the fourth quarter of FY2006, the consolidated revenue of Infosys Technologies grew by 3.6% quarter on quarter (qoq) and by 32% year on year (yoy) to Rs2,624 crore. The growth was lower than the consensus expectation of a 5-6% growth qoq and marginally higher than the guidance given by the company.
- The company took a severe beating on the profitability front with a 230-basis-point sequential decline in the operating profit margin (OPM) to 31.7% in Q4. The OPM was dented largely by the appreciation of the rupee and the company's conscious decision to bring down its employee utilisation rate.
- The consolidated earnings grew by 3.7% to Rs673 crore, much lower than the consensus estimate of Rs720 crore and our estimate of Rs696 crore. In spite of the steep decline in the margins and the jump in the depreciation charges, the sharp growth in the other income component enabled the earnings growth to keep pace with the growth in the revenue.
- On the full year basis, the revenue and earnings grew by 33.6% and 29.9% respectively. The OPM was also quite stable at 33.5% as compared with a 33.7% growth in the previous fiscal.
- The annual guidance of a 28.7-30.7% (Rs12,254-12,446 crore) growth in the revenue and a 26.4-28.4% (Rs13.9-15.6 per share) growth in the earnings is much ahead of the market expectations. This is one of the most aggressive guidance in the past five years and shows the management's growing confidence in the visibility of the company's growth on the back of a pick-up in the discretionary spending by the clients.
- The management has rewarded the shareholders with a 1:1 bonus issue and a special silver jublee dividend of Rs30 per share (600%). This is in line with the market expectations.
- We maintain the Buy call on the stock with a revised price target of Rs3,504 (23x its FY2008 revised earnings estimate of Rs152.3 per share).
As many as four public offers of equity initial and follow-on by realestate developers are in the pipeline, designed to raise a total of over Rs 8,000 crore.
Along side, at least three construction companies are looking to raise justunder Rs 2,000 crore from the public. This is being interpreted as a sign of the coming of age of the sector and greater transparency seeping in.
Among the real estate companies, Delhi-based DLF alone is looking to raiseRs 5,000 crore. Ansal Properties, a listed company expecting to set up a Rs10,000-crore township in the National Capital Region, has decided to floata follow-on issue of Rs 2,000 crore. Parsvnath Developers has filed a draftred herring prospectus for public issue of up to 3.32 crore equity sharesand hopes to raise Rs 1,000 crore by going public. In step with the trend,DS Kulkarni has planned an issue of Rs 75 crore.
Among construction companies, Akruti Nirman plans to raise Rs 1,000 crore,Ahluwalia Contracts Rs 500 crore and IJM India Infrastructure Rs 400 crore.
Real estate and construction companies are being spurred on to float publicissues in part because of the transparency that is seen to have set in inthe sector since the government allowed 100 per cent foreign directinvestment in construction under the automatic route in March 2005, alongwith overall relaxation of norms. Experts say this has increased investorinterest in such stocks.
"Unitech's shares have shot up from Rs 20 to approximately Rs 3,000 in thelast two years," said Prithvi Haldea, chief executive officer,Primedatabase.
With the construction sector growing at 12.5 per cent a year and having aweightage of 5.9 per cent in the gross domestic product, this is the righttime for construction companies to go public and unlock value.
"Compared with private equity, these companies will prefer raising moneyfrom the stock market. Private equity may translate into interference,while the public market offers more freedom and better valuation," saidGaurav Dalmiya, chairman, Landmark Holding.
| Deccan Aviation has decided not to rope in any private equity investors forthe present and plans to hit the market to raise approximately Rs 500-550crore, sometime in the second week of May.|
The initial public offering (IPO) for 2.45 crore shares is likely to bepriced in a band of Rs 200-250. Two of the merchant bankers associated withthe IPO, ABN Amro Rothschild and JP Morgan, may however, withdraw from it.The issue will now be lead managed by ICICI Securities, Enam and SBI Caps.The reason for this, according to a senior company executive is that JPMorgan and ABN Amro have other commitments in May. However, should the IPObe delayed for any reason and hit the market only in June or July, theseinvestment bankers may once again be part of the team.
While Deccan has been toying with the idea of a preferential allotment toprivate equity investors, even before the IPO, it was apparently taking toomuch time. The company needs to bring out the public issue before May 20;otherwise it will have to file a fresh prospectus with Sebi. In fact Deccanwas to bring the IPO in February, which got delayed because of a deal thatthe company was negotiating with Airbus. While ABN Amro and JP Morgan werecomfortable with the public issue coming up in February-March, they nowhave other assignments.
However, sources say, the investment bankers were also not too comfortablewith the pricing as indicated during the road shows overseas; they found itaggressive. At that time, the price being talked about was between Rs300-325 per share. The overseas investors have been a little wary of theaviation stocks because Jet Airways, which came out with its IPO inFebruary last year, is currently trading below Rs 1,100. However, theshortage of aviation stocks and the lower pricing should generate interestfrom both foreign and local investors, say merchant bankers.
Deccan Aviation incurred a net loss of Rs 19.5 crore for the year-endedMarch 2005, on a net income of Rs 305.5 crore. The loss for the six monthsended September 2005, was Rs 72.5 crore, on a net income of Rs 328.86crore.
The issue will result in a dilution of 25 per cent of the post-issue equityof Rs 98.18 crore and the price band of Rs 250-250 would mean a marketcapitalisation of Rs 2,000-2,500 crore. Jet, which trades at Rs 970 has amarket capitalisation of Rs 8,378 crore.