Bajaj Auto to Replace ACC in SENSEX From Dec. 6

Bajaj Auto Ltd. will replace ACC Ltd. in the Bombay Stock Exchange’s benchmark Sensitive Index from Dec. 6, according to a statement on the exchange’s website today. Glaxosmithkline Pharmaceuticals Ltd., Zee Entertainment Enterprises Ltd., Rural Electrification Corp. and Yes Bank Ltd. will replace Aban Offshore Ltd., Century Textile & Industries Ltd., India Cements Ltd. and Punj Lloyd Ltd. on the BSE100 index, the statement said.

Blog including the analysts and others involved in the preparation or issuance of this material and their dependants, may on the date of this report or from, time to time have "long" or "short" positions in, act as principal in, and buy or sell the securities, mutual fund units, or derivatives thereof of mutual funds, asset management companies mentioned herein. Our people, dealers, traders, advisors and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinion that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

IPO note on Career Point Infosytem

Investors can consider taking exposure to the initial public offering by Career Point Infosystems, a tutorial services provider, given the encouraging prospects for its business with sustainability and visibility over the long-term. At the upper end of the price band (Rs 295-315), the offer discounts the company's estimated FY-11 per share earnings by about 25 times on a fully diluted equity base. This makes the offer expensive and investors may have to hold on to the shares for a two-three year period for reasonable capital gains. Although there are no comparable peers, companies that broadly come under the ‘education' category have enjoyed superior valuations.
Career Point saw its revenues grow at a compounded annual rate of 31.2 per cent over a three-year period to Rs 67.8 crore in 2009-10, while net profits expanded at the rate of 18.4 per cent during the same period to Rs 19.9 crore. These figures may have been better but for FY-09, when the profits grew a mere 4.5 per cent due to a spike in manpower costs. In FY-10, profits have grown by 22.8 per cent over the previous fiscal, which is more in line with the rates at which Career Point has historically grown its profits. A strong enrolled student base, a business that may be sustainable given India's competitive entrance-exams' dynamics and the ability to innovate with the latest audio-visual technologies in its pedagogy, are key positives for the company. Besides, a strong presence in Kota, the hub for ITT JEE coaching, and a near debt-free balance-sheet are added attractions.

Career Point Infosytem is a tutorial services provider in India. They provide tutorial services to high school and post high school students for various competitive entrance examinations including AIEEE, IIT - JEE All India Pre-Medical and Pre-Dental Test. The tutorial services are provided through classroom training programs conducted through a network of Company Operated and Franchisee Centers.

As on July 31, 2010 they had 17 Company Operated Training Centers and 16 Franchisee Centers and during the four months period till July 31, 2010 they have received 28,626 enrollments. The company has a team of 231 faculty members as on July 31, 2010 (excluding faculty members of franchisees) comprising of graduates in engineering and science.

They have, over a period of time, built their content repository of over 10,000 pages of text content and over 12,000 minutes of video content for various tutorial services offered by them. For students who are not able to attend the regular classroom program, they offer distance learning program comprising of correspondence and test series courses which have been systematically designed to provide effective and efficient education to students in a simple and lucid manner.

They plan to use technology as a tool to provide access of their content repository to students across India. To leverage their content repository and to provide a personalized learning environment to the students, they have recorded the lectures of their experienced faculty members through Career Point Knowledge Lab. Further, they have designed and developed Synchro-School program to synchronize preparation for competitive examination with formal school education.

They have recently forayed into Education Consultancy and Management Services ('ECAMS'), catering to K-12 and Higher Education segments. Further, to address larger base of potential students, they have introduced technology enabled education delivery platform for delivering content through 'TechEdgeClass'.

Festive Season Marks Indian Boom for $12,500 Bridegroom Suits, Titan Watches

S.K. Singhal, head of textiles at India’s biggest fabric maker Raymond Ltd. had a talk with Bloomberg reporter, he bought the finest wool Australia ever auctioned this year to make fifty $12,500 suits. In the wedding and festival season starting tomorrow, he expects to sell the lot. Singhal’s optimism shows how sentiment has rebounded since 2008 when his company Raymond Ltd. paid a record price for a wool bale that is still partly unused. Analysts forecast this year’s four-month consumer binge will help push sales at companies including watch and jewelry maker Titan Industries Ltd. and carmaker Maruti Suzuki India Ltd. to records.

“This year I should be able to clear everything,” Singhal said in an interview at his office in Mumbai. “The way trade is behaving, and the eagerness to buy my fabric, it tells me that there is a buoyancy in the market.”

The world’s third-fastest growing major economy may expand 8.5 percent in the year to March 31, the most in three years, the central bank said on July 27. That’s encouraged a consumer spree in the second-most-populous nation fueling the second- fastest inflation rate in the Asia Pacific and prompting the bank to raise rates four times in six months to try to damp price gains.

Selloff bells ring for Manganese Ore India

The government today approved Manganese Ore India’s divestment plans. The Centre will hive off 10 per cent of its equity, while the Maharashtra and Madhya Pradesh governments each want to offload 5 per cent.The initial public offering of the Nagpur-based firm is likely to hit the market by the end of this fiscal. Analysts expect the IPO to raise about Rs 1,500 crore and help the government to meet the Rs 40,000-crore divestment target for the fiscal.

“This (initial public offering) will lead to Manganese Ore India listing its shares on the bourses. Following the divestment, the government’s share in the company will come down to 71.57 per cent,” home minister P. Chidambaram said after the meeting of the Cabinet Committee on Economic Affairs. After the selloff, the Maharashtra government’s holding will come down to 4.62 per cent, while the Madhya Pradesh government will have a 3.81 per cent share in the company. Employees and retail investors will get shares at a 5 per cent discount to the offer value.

On the timing of the IPO, Chidambaram said, “It will depend on the market conditions. The empowered group of ministers will take a final decision. Pricing will be decided by the government later The book value of the company was Rs 99.84 a share as on March 31.” JPMorgan Chase, Edelweiss Capital and IDBI Capital Market Services will manage the offer.

Blog including the analysts and others involved in the preparation or issuance of this material and their dependants, may on the date of this report or from, time to time have "long" or "short" positions in, act as principal in, and buy or sell the securities, mutual fund units, or derivatives thereof of mutual funds, asset management companies mentioned herein. Our people, dealers, traders, advisors and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinion that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

PVR - Pioneer of the Multiplex Revolution

Screen additions/movie pipeline to drive exhibition business: Management has guided for a robust 2Q/3QFY2011 for the exhibition business, aided by both domestic and Hollywood strong movie pipeline (We Are Family, Dabangg, Anjaana Anjani, Action Replayy, Golmaal 3, Guzaarish, Khelein Hum Jee Jaan Say and Tees Maar Khan), and substantial screen additions (PVR has added 28 screens and ~7,500 seats over the last six months). PVR has guided for an ambitious 57 new screen addition in FY2011 (it has already opened 13 screens in 1QFY2011 and is opening a six-screen multiplex in LDA mall, Lucknow with the release of Dabangg on September 10).Management expects a pipeline of almost 14-15 3D English movies (most of them being sequels) to be released over the next 18-24 months, and contributing ~27-28% to top-line. The exhibition revenues (total consolidated revenues excluding Blu-O and PVR Pictures) is likely to log 34% CAGR over FY2010-12E, aided by the substantial 34% CAGR in net exhibition revenues (higher seat additions coupled with 4-5% improvement in the ATP) and 36% CAGR in advertising revenues.

Gold Rallying to $1,500 as Soros's Bubble Inflates

Investors are accumulating enough bullion to fill Switzerland’s vaults twice over as gold’s most- accurate forecasters say the longest rally in at least nine decades has further to go no matter what the economy holds.

Analysts raised their 2011 forecasts more than for any other precious metal the past two months, predicting a 10th annual advance, data compiled by Bloomberg show. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21. Holdings through bullion-backed exchange-traded products are already at more than 2,075 metric tons, within 0.1 percent of the all-time high.

“Either a swift economic recovery or further dismal economic performance should bring new buyers into the market,” said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt who was the most accurate forecaster in the first quarter and expects the metal to rise as high as $1,400 next year. “A stronger economy would create more jewelry demand. If the economy stays weak or gets worse, then investors will be looking for a safe haven.” 

Investors added to their gold holdings through ETPs for three consecutive weeks, reflecting demand for assets typically favored in times of financial stress. Two-year Treasury yields fell to a record low of 0.4542 percent on Aug. 24 and the yen reached a 15-year high against the dollar the same day. Pacific Investment Management Co., Deutsche Bank AG and Citigroup Inc. have announced or are offering funds or traded instruments designed to guard against sudden market declines.

BUY Apollo Tyres Target of Rs. 112

BUY Marg Ltd. Target of Rs. 250

Marg Ltd (530543)

When the market is in a confused state with a negative bias and fund managers are expecting correction in the range of 5-10%, stocks like MARG Ltd (530543) are offering more than 20% upside potential. at  CMP of 205. MARG Ltd is one of the India’s fastest growing EPC and Infrastructure development companies established in 1994 and headquartered in Chennai. MARG has interests in Infrastructure Development with presence in diverse sectors such as ports, ship repair yards, dredging, marine logistics, special economic zones (SEZs), airports, power and multi-level car parks. MARG's real estate business constitutes commercial spaces like malls, serviced apartments, hotels and residential spaces including villas, row houses and affordable homes. Counter has witnessed an increase in volume activity in last couple of sessions and after consolidation for 8-9 months has come out of the trading range of 150-215.  Stock has bounced back from its 50 DMA and on MACD chart stock is trading in positive space. Buy stock with a target price of Rs 250.

Indian Hospitality - Future Trends

We have been tracking the performance of the Indian hospitality sector since 1995/96 and have been witness to the various trends and cycles the industry has experienced since then. 

Indian Hospitality Sector - Trends

As presented in the adjacent chart, the nationwide occupancy equated to 66.5% in 1995/96, but exhibited a downward trend over the next few years to 53.9% in 1999/00. The Indian hospitality sector benefited from the economic boom in the United States in 2000, attaining increases in both occupancy and average rate in that year. The US recession in 2001 soon spread to other parts of the world, including India, and had a significant impact on hotels in the country, resulting in decline in occupancy to its lowest level in the 15 years. The decline in occupancy was accompanied by a decline in average rate as hotels reduced rates in an attempt to remain competitive in a price-sensitive market and chose to focus on maximizing occupancies. These simultaneous declines in both occupancy and rate resulted in a steep decline in RevPAR in that year. The Indian hospitality sector, however, proved to be very resilient with occupancy rebounding by roundly 11.0% in 2002/03, and by over 13.0% the next year. Such a recovery was even more significant given the fact that international travel was affected by the global recession, the SARS outbreak, and the Iraq war. This downturn saw the domestic traveler step in to save Indian travel and hospitality and serve as the more stable, albeit lower rated, alternative to the international traveler. We note that while the nationwide occupancy increased in 2002/03, nationwide average rate continued to decline in that year as hotels continued to focus on improving occupancy levels at the cost of rates, especially as they modified strategies to target the rate-sensitive domestic market.

BUY Bombay Dyeing Target of Rs. 740/880

This Textile counter had been forming an accumul- ation pattern for the last 7-8 months. During that period valuation level of 601 had proved to be a strong resistance. Last week saw prices stage an excellent breakout from Saucer pattern as well from resistance and closed near new swing highs. Momentum has got a fresh boost with this up move and shifted in to bullish zone. Volume is also expanding aggressively showing optimism here. So we recommend here to buy this counter for a short term target of 740 with a stop-loss of 605. If the stock sustains above the level of 740 on a good level, then in the next leg of upmove it may test the level of 880.

BUY B F Utilities Ltd. Target of Rs. 1350

Prices of this Electric Utility counter B F Utilities has rebounded smartly from the support of 30day EMA. Previous session they also overcame the hurdle of 970 (23.6% retracement) and closed above it. Aggressive participation with higher volume and MACD chart placed in bullish zone further reaffirms, strength prevailing here. Look to buy stock at CMP with a target price of 1350, which scrip is likely to achieve in a month's timeframe.

Indian Cement Sector - A Contrarian Buying Opportunity

Shares of cement companies started rallying higher after reports that the Maharashtra based cement companies have hiked price by Rs 10-20 per 50 kg bag from today. Leading domestic brokerage house Religare has upgraded outlook on the Cement sector from Neutral to Positive and reset recommendation to BUY on UltraTech, ACC and Ambuja Cement among large caps. Religare believe the cement sector downcycle is close to bottoming out, and investors should accumulate stocks in order to ride the upcycle that will follow over the next 3–4 years. FY11 was the trough year for cement as prices likely to bottom out in Q2, following which the sector would turn a corner, as – a) the demand environment improves, backed by higher infrastructure and real estate offtake, b) capacity utilisation rises as incremental additions ease off, and c) cement prices firm up. We find current valuations appealing – stocks have corrected 8–28% over the past four months – and the downside limited. M&A activity in the sector could also fuel a re-rating. 

 

Indian Film Industry Back In The Spotlight

The Indian Film industry eclipses Hollywood both in terms of number of films produced and theatrical admissions. Overall, 2009 was a difficult year for the film industry. While the multiplex – producer stalemate left the industry with significant losses, the general elections and the swine flu scare also kept audiences away in early 2009. The total annual theatrical admissions in Indian cinemas are around 3 bn, as compared to 1.5 bn tickets sold annually in the US.