Looking for long term bets? Aashish Tater picks

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Looking for long term bets? Aashish Tater picks

Aashish Tater, head of research, Fort Share Broking recommends investors to buy into Parsvnath Developers and Patel Integrated Logistics as they are good bets from a long term perspective.

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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 Patel Integrate BSE | NSE 01/06/12 Are Mutual Funds betting on Patel Integrate? Other Stocks in this news Parsvnath Developers |

Aashish Tater, head of research, Fort Share Broking recommends investors to buy into Parsvnath Developers and Patel Integrated Logistics as they are good bets from a long term perspective.

Parsvnath Developers

Parsvnath has been a bet right from Rs 40 odd levels, where we suggested going long on Parsvnath and short on Unitech or DLF and this strategy has worked very well for us. In fact, Parsvnath has been a strong outperformer in the reality space. What we like about the company is that it is focusing on reducing its debt by diluting its stake at SPV level. That means by guaranteeing an internal rate of return (IRR) of 14-15% to Sun Apollo and other private equity players, they have actually been able to reduce the financial risk, and perhaps that has been liked by the markets.

We suggest that you should go long Parsvnath and short on DLF at a ratio of around 3.5 times. That means DLF at Rs 205 versus Parsvnath at Rs 60 odd levels. We have a target of 2.8 times because we are seeing DLF to be in the range of Rs 180-190. For Parsvnath, above Rs 64 will give a fresh breakout for a target of Rs 78. Another positive factor is the confidence of the promoters. They have actually gone and acquired in a creeping acquisition manner even in these turmoil times.

Thus, we are keeping a stop loss of Rs 55 for this particular pair trade for Parsvnath on down side or a ratio of 3.72 on either side; if it gets triggered, the position should be closed. But we feel that 15-16% can be made on this pair trade. If someone wants to keep a plain vanilla long on Parsvnath, keep a stop loss of Rs 55 for a target of Rs 78.

Patel Integrated Logistics

A couple of weeks back we recommended Gati, where there was a risk because promoters were pledged by almost 90%. While going through the numbers of Patel Integrated Logistics, which is into almost a similar space, we got a comforting factor. Gati does a revenue of around Rs 1000 crore and is available at a market cap of Rs 480 crore. On the other hand, Patel Integrated Logistics with its reviewed audited financial result did revenue of close to Rs 420 odd crore and is available at a market cap of just Rs 47 crore.
So we feel there is an arbitrage possibility in market cap to sales into the stock.

Also, if I look into the learning of experience, the first quarter result has been very good for Patel Integrated Logistics. They have improved their EPS by almost 60% on a year on year basis. Going by the similar projections for the full year, we expect the company will stabilize its net profit margin of close to 1.3% on sales of Rs 540-560 crore. That would translate roughly into a net profit of Rs 7.5 crore which will give me a PE of less than 6 times for next year.

So I think this is one stock which can be looked on every dip from a longer term perspective. We have a first target of close to Rs 47 which is the 52 week high for the stock and Rs 59 because of the book value of the stock. We think this stock can be traded for these two targets keeping a strict stop of Rs 27 odd marks.

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