Apr 09, 2012, 10.42 PM | Source: CNBC-TV18
SP Tulsian of sptulsian.com, points out the signs that IVRCL is going to sell its stake in Hindustan Dorr Oliver and rubbished the news of HMT's revival and is upbeat about JP Associates
SP Tulsian (more)
CEO, sptulsian.com | Capital Expertise: Equity - Fundamental ,IPO
The market expert sobered the elation of the sharp rise of Hanung Toys and set a realistic valuation at Rs 150. Tulsian is upbeat about JP Associates and also explains that Coal India will soon resolve its problems.
He adds that Dhanlaxmi Bank ís confidence at the recent press conference made it a good bet. Inadequate news about Gammon Infra , according to Tulsian, caused the stock to fall. The weakness in IGL was seen on news of regulation in gas-transportation prices, the analyst concluded.
Below is an edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.
Q: Your thoughts on Hindustan Dorr Oliver, which has performed very well today, is part of IVRCL which we have been discussing over the last couple of weeks.
A: It was up 20% on Wednesday also and today it is frozen in the upper circuit at 10%.
The discussion about IVRCL is hoped to trigger an open offer in Hindustan Dorr Oliver in which IVRCL holds 55%.
I am not prepared to subscribe this view based an independent valuations of Hindustan Dorr Oliver and the initiatives by the promoters of IVRCL to monetise different assets.
They are in the process of monetising three of their BOT projects. Add to this the company extending its accounting year to end in June and the restructuring exercise, it is clear that the stake in the company is being sold.
When the promoters did not receive the valuation of about Rs 80-90 per share and toned down their expectations, the share fell to as low as Rs 34-35 and now has started again moving back.
Q: There are talks of reviving HMT with a Rs 960-crore package. Would you buy the share based on this news?
A: No. In fact, HMT and ITI are both classic cases of a low public float allowing those who have invested in the stock to manipulate it.
If you see, the float is less than 1% of the stocks, 98.9% is held by the government and out of the 1.1% float, maybe less than 1% is held by the retail public.
So, I donít think that any kind of revival is really possible. In FY11, the company had a topline of Rs 500 crore and losses of Rs 500.
The company has an employee-bill of Rs 300 crore and an interest bill of over Rs 200 crore plus. I donít know what kind of revival plan you can really put it in place.
Q: Do you track Hanung Toys which has suddenly shot up 16%-17%?
A: If you take a fundamental call, I donít think that the stock is really expensive even after seeing such a good run-up.
There was talk of a liquidity crunch, delays in FCCB or QIP issue and with a bit of margin call pressure coming into the stock, we saw it correcting to about Rs 100.
Sometimes you see this kind of run-up coming back into the stock and fizzling out. So the realistic or fundamental valuation can be taken at about Rs 150.
The companyís furnishing and toys business are contributing equally to the topline as well as to the bottom-line. I wonít give a value of more than Rs 150 and could keep an eye on the stock.
Q: What about JP Associates? It was a stock which would get hit the moment the market saw some weakness. Over the last two-to-three weeks, itís shown a lot of resilience and is still trading at Rs 83, while the market is grinding to 5,200. Any signs that the stock may have bottomed out?
A: The bottom could be taken at about Rs 70 based on the run up in the stock in the last one month which has seen the stock rise by about Rs 15-18 and there has been some kind of profit-booking.
So based on the good performance of all the verticals on the stock exchange, we can take as support or base the price at about Rs 70.
The correction today is attributed to more on the account of profit-booking on the good run up of about Rs 15 which we have seen in last two-to-three weeks.
Q: What is your expectation on the outcome of the Coal India board meet on March 16 to decide on the penalties on the 80% FSAs which maybe diluted?
A: I donít think that any deadlock will really occur. The penalty has been estimated at Rs 114 crore, if Coal India is unable to meet the 80% commitment. But we forget that on the other hand, they have the bonus also.
I donít know what sort of penalty there will be as there is no rational for the company to incur the losses and if they need to import the material then that the cost will be passed on to the actual user at the landed cost.
The coal minister and secretary have stated that the company was capable of increasing production to meet the increased demand and the the company need not fall back on the imports at all.
So, firstly, the assessment might not be Rs 114 crore and secondly, it is not such a big amount. Even if there is a penalty, I donít think it will really fall on the head of the company. Overall, the issue is likely to get resolved and the situation will return to normal for Coal India.
Q: Dhanlaxmi Bank held its first press conference under by the new chairman. What are your observations regarding the chairmanís address and would you bet on Dhanlaxmi Bank despite the recent underperformance?
A: I found them confident. I donít think that they have really admitted to any kind of mistakes that could not be fixed.
Taking into account the confidence in the statements on cost control, business rationalisation and handling the non-Kerala branches with 275 branches and a share price of about Rs 75, I maintain positive view.
Since the stock has run-up in the last one week or so by about Rs 15, it has touched below Rs 60. So, maybe some profit-booking element will come, but I hold a positive view and set my expectation at Rs 80. I now expect in the next 3-4 months to see the share moving back to about Rs 100 or so.
Q: Your thoughts on two stocks Ė IGL which is showing a downtake of 7% and Gammon Infra which is down 18%?
A: There is no specific news on Gammon Infra about why it is down. Maybe there must be some problem in their projects.
IGL has been witnessing weakness and has corrected since the time the news was broke out on the regulation of gas transportation or gas carrier prices.