Fort Share view: 4 stocks that could give you good returns

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Aashish Tater of Fort Share Broking, in an interview with CNBC-TV18's Latha Venkatesh and Sonia Shenoy spoke about his multibagger stock picks.

Below is a verbatim transcript. Also watch the accompanying video.

Q: Meghmani Organics that used to be quite a favorite with traders at one point in time. How does the stock look on the charts and what kind of a target price do you have on it?

A: Meghmani Organics has been one boring stock for investors for quite sometime. Right from its listing, it has been rangebound and I feel it will bore the investors for another six-eight months. If I look at the fundamentals of the company, the fundamentals have just been right. It is the right time to pick this particular stock from a long-term investment perspective.

The company is available at just Rs 17 but the market cap of the company is close to Rs 450 crore because it's a Rs 1 paid-up share. Looking into the financials of the company, they are going to clock close to Rs 2.5-3 of EPS in the current fiscal but the real story comes from the next year when I am betting on the chlor-alkali plant that the company has planned, where IFC actually picked up a 25% stake at Rs 30 per share into one of its subsidiaries Megmani Finechem.

If I look into the brands of the company which are renowned and looking at the potential growth of the company with cheap availability access to raw materials, I find the bottomline actually speaking for the company. On a standalone basis, I expect the company would clock close to Rs 3.5-4 of EPS for the next year.

Given that they have the potential to become a midcap; it can easily trade around that 10-12 odd mark. That means on a longer-term basis, the company is going to trade close to its earning of Rs 3.5 to Rs 35 sort of levels. That means a 100% upside from a 15 month perspective.

Their Finechem business which is a subsidiary of their business is going to clock Rs 200 crore of sales once it's fully operational in 2011. In another 10-12 months, the company would add to the bottomline of close to Rs 18 crore. The company owns 57% of that. That means the value of that particular subsidiary is going to be one third of the total marketcap as of now which is roughly Rs 7-8 is reflected only from one of its subsidiaries.

At Rs 17 what is interesting is that there is no downside onto the stock and the stock has a potential to give 100% return in the next 15 months. What is also interesting is the dividend has consistently been going up.

Q: The other stock that you have picked up is Time Technoplast . Like Meghmani, do you think the better times come next year?

A: Time Technoplast is one story that Fort has just recommended to its clients on Thursday and Friday itself. This has been also a Bulls Eye pick from our side. This is one stock which is a long-term multi-bagger from our perspective. The company is soon going to acquire 90% stake in a Taiwan based company making it the largest polymer product company in Asia.

Looking at its peers, it is trading at an enterprise value of 30% discount to its peer set. That means the largest player is available at 30% discount to its competitors. If I look into the true business I see tremendous value going forward.

Globally, there are only three players of which Kompozit Praha that was acquired by Time Technoplast recently, is into composite cylinder business which will get operational in June 2011. If I look into the peer set valuations, the company can easily trade at 15-20 times going forward for the Kompozit Praha cylinder business.

If I look at their marketcap, the company is a midcap company of close to Rs 1,100 crore and with its subsidiaries they will show their true colors in 2011 and 2012 going forward. This stock is a sure shot multi-bagger on a longer-term perspective with a target of Rs 150.

Q: Amar Remedies  had a really good time but after hitting its 52 week high of Rs 170 in November or so, it pretty much fell off a cliff. Do you expect it to comeback to those levels?

A: Amar Remedies is a stock which has been battered down for reasons that these kinds of plays have actually entered into the stock. If I look into the operational performance, the last time Fort upgraded this stock with a target of close to Rs 160 when the market price was close to Rs 70.

We have again come up with a buy report and this time with an aggressive target of Rs 200. This is an FMCG player with its brand Nature's Company having just 6 units across the metropolitan areas, the recent being in the South City mall of Kolkata, the company is actually planning to double its capacity.

It also has a tie-up with AIOCD that has 5 lakh retail outlets. If I look into the financials of the company, Amar Remedies is one stock which has strong brand equity and operational performance to justify its valuations. There were some rumors on margin cutting and that's why the stock kept on hitting down circuits. Once the stock actually bottomed down at around Rs 83-84 levels, we think the downside of the stock has been capped now.

That is the exact level that we are recommending that you should be buying with a three months target of close to Rs 125-130 on charts. If someone wants to own this stock from another year's perspective or so or 15 months, the stock is a clear cut multibagger with a target of Rs 200.

If I see into the average PE multiple that an FMCG of this size gets, its close to 14 times and we are betting on an EPS of close to Rs 14. The company has already clocked close to Rs 7 for the first half and the company has started paying off dividends to its holders. I think the stock will definitely hog the limelight and will trade in the Rs 180-200 benchmark in the next 12 months from a fundamental perspective. On charts, my chartists have suggested with a target of Rs 125 with a 45-50 days technical call on a swing trading basis.

Q: Why are you bullish International Travel House ? The markets haven't been kind in the past eight weeks or so where it's lost about Rs 40?

A: International Travel House is a low trading stock with low volumes but I see true value in the business. A promoter group like ITC which owns 61% and has got strong brand equity like ITHL which is a pioneer in the domestic airspace, air ticketing and conference management, I think the stock is a no brainer.

Look at the valuation of Cox & Kings. I am not taking a call that this should be a replicated model of Cox & Kings but going forward this particular concept when it enters into strong hands, the stock will definitely get rerated. If I look into their business, they have got clients like NDTV, HCL, Samsung, Mac, Aircel and Infosys.

The company is going to clock close to Rs 22 of EPS for this year and it's a very small paid up equity of just Rs 8.7 crore. Next year, the company would clock close to Rs 29-30. If Cox & Kings deserves to trade at 20-25 times forward, this particular stock because of ITC, should trade close to 15-16 times forward. That means Rs 385 in the longer-term and on charts the stock should test Rs 320-330 levels.

Also for the next year there are three great developments, thanks to the World Cup, the M&A activities because of economic upside that we are seeing and also that this can be used as a concept stock once it is accumulated by large players. This stock has a very low free float. All these stocks that I have recommended need not be bought at just one go, it should be bought on a systematic basis.

In the longer-term, these stocks are set to give good returns and I see limited downside on the stock and potential upsides and these are all multibagger ideas where a very small amount should be invested rather than taking huge chunks into the stock because if 8 out of 10 actually click with our targets, I think the stock gives you 35-40% in the next six-nine months which is a decent return on any portfolio but there is always a liquidity risk into the stock.