PN VIjay's multibagger ideas: Zylog Systems, Dewan Housing

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PN VIjay's multibagger ideas: Zylog Systems, Dewan Housing

Portfolio manager PN Vijay picked Zylog Systems and Dewan Housing as his multibagger stocks for the day. He expects these stocks to earn better returns ahead.

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Portfolio manager PN Vijay picked Zylog Systems and Dewan Housing as his multibagger stocks for the day. He expects these stocks to earn better returns ahead.

Speaking to CNBC-TV18, Vijay said, he expects Zylog to close the financial year with an EPS of slightly above Rs 100. He has a price target of Rs 1,100 in the next 12 months. He feels that Dewan Housing is at a very attractive valuation and expects it to touch Rs 400 in the next 15 months.

Below is the edited transcript of Vijay's interview with CNBC-TV18's Udayan Mukerjee and Mitali Mukherjee. Also watch the accompanying video.

On Zylog

I have a buy on Zylog. It is a midsize IT firm based out of Chennai and they are into IT product solutions and services. They have gone into a fairly onsite business model with acquisitions in Dubai, Canada and they are a company that believes in local profits and local geographies through local people, so Obama will like this company. It is a bit different from all other Indian IT companies like TCS and Infosys, who have huge offshore location and because of this Zylog has an excellent per hour billing rate.

In last quarter they had USD 58 per hour billing rate, which is far higher than what the tech biggies show. They have centres in New Jersey and Chennai and large corporation in Dubai and Canada. They had a pretty impressive last quarter, the topline and bottomline went by 16% and 8% quarter on quarter.

I expect the company to close the financial year at an EPS of slightly above Rs 100, Rs 110 is my expectation. The stock is closing around Rs 490. I am giving a target of Rs 1,100 for Zylog in the next 12 months as I feel it will get rerated at some point in time. I am a financial advisor to the company.

On Dewan Housing

Dewan Housing is an interesting stock. People don't talk too much about it; they prefer to talk about LIC Housing . This company has a different business model. They are concentrating on Tier 2 and Tier 3 cities and lend to middle income families. Ticket size of their loans is much lower. They have a company in which they have a majority holding as a Joint Venture with Vysa Bank. They have now taken it over and are merging it with the parent. They took over Deutsche Postbank Holdings and that is also getting merged. So, one is going to get a much bigger balance sheet to play around with.

The net interest margins are not that high, they are around LIC Housing's levels of about 2.9%. The loan growth is excellent; net provisions are pretty low at 0.7%. The trigger for this stock will come, apart from natural growth in the balance sheet things, from the fact that their liability side is pronouncedly with the banks 70% of their funding comes from bank only they pay 12%.

They have changed tact in going more to NHB and the market for financing. I expect the NIM's to expand to about 3.4-3.5%. It is steadier, very attractive valuation at about 40% discount to LIC Housing and I don't see any reason for that to happen. The stock is trading at Rs 260. In the present bullish sentiment and the reemphasis of Housing in the scheme of things, I expect Dewan to be about Rs 400 in the next 15 months. This is in our proprietary and portfolio management portfolios.