Aashish Tater's multibaggers: Linc Pens and Videocon

1361 Investors following Linc PenandPlas. Share this News with them.

0

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

Aashish Tater's multibaggers: Linc Pens and Videocon

Aashish Tater, head of research at Fort Share Broking picked out his favorite stocks today on CNBC-TV18. He chose Linc Pens and Videocon as multibagger ideas for today. Check out his comments on the stocks.

Post your opinion here

 

0

Tweet

Share on Tumblr

Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets BSE | NSE 01/01/70 Are Mutual Funds betting on ? Other Stocks in this news Kokuyo Camlin | Videocon Industries |

Aashish Tater, head of research at Fort Share Broking picked out his favorite stocks today on CNBC-TV18. He chose Linc Pens and Videocon as multibagger ideas for today. Check out his comments on the stocks.

On Linc Pens

If you look from a consumption perspective, I think there is lot of opportunity in this particular space. Camlin also entered into a JV with Kokuyo and they paid 1.6 times market cap-to-sales. If you look at Linc's valuation, it's available at 0.2-0.3 times and it also is in talks for a foreign partner- Mitsubishi.

The company's bottom-line is right now on a shrinking phase because the company is aggressively expanding in terms of advertisement cost and retail presence, and that's why they have their new brand ambassador, Katrina Kaif. So from that angle, it's not material enough to look from bottom-line perspective.

But we feel this is one stock which has a potential, if a foreign partner comes in, to taste Rs 95-100, based on our expectation of close to Rs 350 crore of sales for FY14. So from two-year's view, it's a safe bet because the company has been a consistent dividend payer and last year, they paid close to Rs 1.80. We feel even for this year, they would pay Rs 1.50.

Due to aggressive marketing expansion plans, I think the bottom-line would be subdued, but they would still post a decent number. This is the time, if I take a quantitative look at the stock, the weighted average lows for the year have been close to Rs 36.40. Incidentally, the low for this year already is Rs 39. So we feel there would be lot of interest around this Rs 36-42 odd mark. On upside, till the announcement of Mitsubishi, happens, the stock could go and test Rs 70-75 on good days when the market sentiment would be positive. If that announcement actually materializes, it would be close to Rs 100. So a very safe bet, a good buy and a very attractive business model. I think this is definitely an accumulation stock from a longer term perspective.

On Videocon

If you take a technical snapshot of this particular stock, it has been consolidating almost for one year and has done nothing in terms of price movement. What interested me was the recent announcement by the company on its Mozambique gas plant. They have actually doubled the gas estimate from 15 tcf to 30 tcf. I was not so sure about how to value this particular asset, so I had gone and checked how its partner Anadarko, which owns 36% stake in Mozambique gas, is valued.

Analysts from Raymond James and other reputed institutions have upped the estimate target for the stock of Anadarko by USD 6 and on valuation of the asset, the analysts have taken a weighted average mean of USD 8 per asset on a conservative side.

Anadarko is a USD 40 billion company. So a 10% increase in the price target price roughly works out to be USD 4 billion for the asset. 36% is owned by Anadarko, which gives a valuation of USD 4 billion. Videocon Holdings, Hydrocarbon Holdings own 10% in the stock, which roughly gives a valuation of USD 750 million. There is a small challenge in this particular area because the discounting factor for us is higher than that considered by the American analysts. Adjusted for that also, it roughly works out to be USD 550 million.

The second thing that we actually saw was on a quantitative basis. Last time in April-May, the stock had a badla of Rs 50 just before expiry because of excess shorts in the system and the short side got squeezed. I think similar pattern is visible because if you see February futures, it's trading at Rs 2 discount to current market price.

This is the 25th year for Videocon Industries and the company has been focusing on hiving off its pain, that is the Next Retail, and they have already announced that they would be looking for sale to Best Buy, for which they have actually announced their due diligence and hired investment bankers.

The catch over here is that if FDI in multi-brand retails is announced, this particular asset would be hived off at a very decent valuation which would reduce the cost. So here is a chance where technically, there is a W-formation at Rs 176.50. That means your stop loss should be at Rs 171-176. You should have a two-three months perspective on the stock.
This Mozambique asset itself can give you a very fast return, and if shorts are squeezed, there is higher probability the stock would go and test Rs 220.

The other rumor that is running among the brokerage circle is that the company is looking for strategic re-org, that is to separate its four divisions into four individual entities, which would again create actual value for the shareholders. We valued sum of total parts at around Rs 285 taking a valuation for Next Retail, and if all this development happens within the next six-eight months, the stock can give you 40-50% return in no time. There is hardly any downside because we have put our stop close to Rs 171 on closing basis.