Avoid Swajas Air Charters IPO: MLR Securities

2 Investors following Swajas Air. Share this News with them.

0

Like this story, share it with millions of investors on M3

Avoid Swajas Air Charters IPO: MLR Securities

The Rs 37.5-crore initial public offering of Swajas Air Charters (SACL), an air charter services provider, closes today. MLR Securities has recommended investors to avoid the issue, in its research report dated September 28.

Post your opinion here

 

0

Tweet

Share on Tumblr

The Rs 37.5-crore initial public offering of Swajas Air Charters (SACL), an air charter services provider, closes today. MLR Securities has recommended investors to avoid the issue, in its research report dated September 28.

Swajas Air Charters is a non-scheduled airline operator offering services such as general air charter, off-shore transportation, medical evacuation and maintenance, repair and overhauling (MRO). The company predominantly operates in South India and intends to expand its operations subsequent to the proposed IPO.

The report says, "Company's topline grew at a CAGR of 63% in the last three years to Rs 33 crore in FY11 while bottomline grew at a CAGR of 50% to Rs 1.3 crore during the same period. SACL's margins are quite volatile owing to volatility in the ATF prices, in FY11 it posted an EBITDA margin of 8% and a PAT margin of 4%. SACL is quite comfortably leveraged with debt equity level of 0.3:1. Company's RoE fell from 29% in FY10 to 14% in FY11 on the back of equity infusion."

"SACL's market cap is Rs 150 crore on upper price band of Rs 100. Its Mcap to sales ratio is coming to 4.6 which is quite aggressive. Company is asking for a valuation of 76-84 times its FY11 EPS of Rs 1.2 and the P/BV is 16-18 times its FY11 book value of Rs 8.32. Its closest peer Global Vectra's is trading at a market cap to sales ratio of 0.2 and a P/BV of 1.7. We believe valuation does not justify its weak fundamentals. We recommend investors to avoid this issue," the report added.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment