He sees a 20-22% return in a 2-3 year time horizon in GIC Housing Finance, and find ACG a 'very good stock' for the time horizon of 1 year with an expected return of 30%.
Below is an edited transcript of his comments on CNBC-TV18. Also watch the accompanying video.
On GIC Housing Finance
It is a company in the housing finance sector and has been promoted by the five general insurance companies and all of them have stakes to the extent of about 45%. In the non promoter category, LIC holds stakes of about 5%.
Going by the financials of the company, an EPS of more than Rs 20 makes the stocks rule at PE of 4, book value of more than Rs100 .The book value at the end of FY12 will be higher which makes the stock to rule at a price to book of 0.9.
A 55% dividend had been declared by the company last year and they have always been liberal in distributing the good dividend due to the of EPS of 20 plus being posted by the company every year. So, 55% dividend that is Rs 5.50 gives a dividend yield of close to about 6% and the Q1 performance looks to be on track and the company should be able to post an EPS of 20 plus yet again.
The non-metro pockets of the country are showing a decline in the real estate prices which will eventually attract the middle income groups to go for the housing finance and that will give them a robust business.
A top line of Rs 400 crore, EPS of 20 plus makes this a sound investment and one can expect a return of may be about 20% to 22% on an annual basis even, if it is held for a 2-3 years time horizon.
On Auto Corp Goa
It is a company making sheet metal and bus bodies, catering to the Tata Motors, which is also a promoter of the company, holding about 45% plus stake in the company. The Economic Development Corporation of Goa (EDC) also holds 6% plus stake in the company. The combined stake of both the promoters is to the extent of about 51%.
FY10 had been horrible for the company where they did not show any PAT. In fact the bottom line was practically zero but there was a sharp turn around in FY11. The company showed a record performance, they made about 4800 bus bodies and it led the company to post an EPS of close to about 42 for FY11, with a PAT of close to about Rs 25-26 crore.
The company has a very low equity base and in FY11 the company declared a dividend of 150% for FY11. As of March 31, they have Rs 80 crore lying as Inter-Corporate Deposits (ICD