In an interview with CNBC-TV18, SP Tulsian of sptulsian.com picks Indiabulls Securities as his multi-bagger idea for the day. According to Tulsian, Indiabulls Securities looks a penny stock or a little risky one but can be bought with a price target of Rs 15 in next twelve months or so.
Below is a verbatim transcript of the interview:
On Indiabulls Securities
Apparently, it looks that Indiabulls Securities is a high-risk stock. Before coming to the business model and the financial performance, two points I want to mention. The company had a net loss of Rs 10 crore for FY12 and they posted a net profit of Rs 40 crore in nine months. This is not the end of the story here. With Rs 40 crore profits after tax (PAT), the company has already declared two interim dividend of 50 percent each. That means the amount, which has been earned by the company has also been distributed amongst the shareholders. So those who will be buying the stock now at Rs 12 current market price (CMP) will be getting Re 1 dividend.
To come to the business model, this is predominantly a broking company of Indiabulls Group. I have observed that, lately they have ventured into the selling of the insurance products and the real estate also. Though it has not been reflected into the working, if you see their broking and related services on a consolidated basis, the ramp up in the bottom-line has primarily come because of selling of these two products.
I think that this trend is likely to continue, this is a Rs 2 face value share and we are likely to see an earnings per share (EPS) of more than Rs 2 for the coming year i.e. for FY14. Already they have posted an EPS of Rs 1.80 and have declared two 50 percent interim dividend that is making 100 percent dividend payout on this stock for the current year.
Based on this, if you have a book value of Rs 12 and in fact the kind of valuations, which are being talked by the closely held broking companies as many of them have been looking to exit from the stock, this stock is ruling at its book value with market cap of close to about Rs 280-285 crore. So I don’t think you have any concerns on the earnings if they keep posting this kind of performance with an EPS of more than Rs 2. The share is ruling at a price to earning (P/E) multiple of Rs 5-6. The dividend payout ratio, if continues in the same way, will give you the dividend yield. Even if I do not presume that, the dividend of Rs 2 can be expected for FY14, the dividend yield itself is closer to about 15 percent or so.
Taking all these parameters on face of it, it looks a penny stock or maybe a little risky one but this can be bought with a price target of Rs 15 in next twelve months or so.
Disclosures: I have no personal holding in the stocks discussed.