Buy A K Capital Serv; target of Rs 817: Firstcall Research

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Buy A K Capital Serv; target of Rs 817: Firstcall Research

Firstcall Research is bullish on A K Capital Services and has recommended buy rating on the stock with a target of Rs 817 in its January 4, 2011 research report.

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Firstcall Research is bullish on A K Capital Services and has recommended buy rating on the stock with a target of Rs 817 in its January 4, 2011 research report.

"A K Capital Services is India's leading Securities & Exchange Board of India (SEBI) registered category-I merchant banker. Company is engaged in providing various feebased services such as fund mobilization through issue of debt, equity, structured hybrid instruments and through loan syndication, etc for various central and state government undertakings, private and nationalized banks, financial institutions & private sector corporates."

"The members of the company have approved the raising of funds by placement of equity shares to Qualified Institutional Buyers (QIBs) through Qualified Institutional Placement (QIP) for an amount not exceeding Rs 200 crores. The company is associated with deals of over Rs 490 billion in the FY2009-10 as against approximately Rs 440 billion in the last year (FY2008-09), cornering a market share of approximately 29%. The company has instituted AK Capital Finance, as a subsidiary of AK Capital Services, a NBFC to carry out fund based activities like providing loan against securities. Net Sales and PAT of the company are expected to grow at a CAGR of 18% & 25% over FY09 to FY12E."

"A.K. Capital Services reported a rise in standalone net profit for the quarter ended September 2010. During the quarter, the profit of the company increased by 39.06% to Rs 167.07 million from Rs 120.14 million in the same quarter previous year. Net sales for the quarter rose 26.47% to Rs 473.72 million, while total income for the quarter rose 22.72% to Rs 482.63 million, when compared with the prior year period. During the quarter, it reported earnings of Rs 25.31 a share."

"At the market price of Rs 710, the stock trades at 7.27x and 6.32x for the earnings of FY11E and FY12E respectively. Earning per share (EPS) of the company for the earnings of FY11E and FY12E is seen at Rs 97.71 and Rs 112.27 respectively for equity share of Rs 10 each. Revenue of the company is expected to grow at a CAGR of 18% over FY09 to FY12E."

"AK Capital is fully equipped and dedicated to take further initiatives to add more vigor in the debt markets and it has been instrumental in innovating and introducing new debt instruments like India`s first perpetual NCD issue from a NBFC - Magma Fincorp as a `sole arranger` in the market and has maintained an unparallel track record of delivering near 100% strike rate in bond placements. Its robust business strategies and firm understanding of the Indian debt capital market, have aided it to further step the upward path to reach the pinnacle and set new industry benchmarks in the Market."

"The company has instituted AK Capital Finance, as a subsidiary of AK Capital Services, a NBFC to carry out fund based activities like providing loan against securities. Company intends to extend its services to portfolio management services for both retail and institutional investors and it will soon be foraying into providing 12 retirement advisory solutions, where its plan is to offer both discretionary and nondiscretionary investment advisory services to retirement funds in India. So we recommend 'BUY' in this particular scrip with a target price of Rs 817 for Medium to Long term investment," says Firstcall Research Report.

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To read the full report click on the attachment