Buy LGS Global; target of Rs 199: Sunidhi Securities

“LGS Global (Incorporated in 1999) - earlier known as Lanco Global Systems provides end-to-end Enterprise Solution offerings and specializing in ERP Solutions, Microsoft and Open Source Systems development. In 2009, the name of the company was changed from Lanco Global Systems to LGS Global Limited. The main focus of LGS is on providing IT services in sectors such as Financial Services, Healthcare, Manufacturing, Chemicals Life Sciences and Retail Services. LGS has three subsidiaries namely Techorbit Inc, Global IT Inc situated in USA and LGS Global FZE in United Arab Emirates. Exports constitute 25 per cent of sales.”

“LGS is positioned to capture at least 15% of Bi/Administrative Services market from all healthcare providers. LGS currently provides technology services to National Guard Health Affairs, which manages King Abdullah International Medical Research Centre. LGS has also partnered with Albert Einstein College of Medicine NY to develop AIDS tracking system as part of DHHS, NIH Grant. LGS has partnered with Deloitte to provide business transformation services to EDA USA. LGS is also engaged domestically with Delhi Hospital, AP Healthcare Services, Ministry of Health - Orissa and Rajasthan State Hospital. LGS is planning to bid for similar projects in states such as Bihar. LGS Global’s e-governance projects would double the contribution to `200 crore from India in 2010-11.”

“LGS is raising upto USD 30 million by issuing FCCBs to fund its acquisitions and expansion. It is conducting due diligence of two companies in the healthcare space. It has appointed Grant Thornton as an advisor. LGS expects to acquire both the companies - one in US and the other in UK this year for a total consideration of USD 20 million. New product start-ups are increasingly focusing on areas such as security solutions, ERP applications, e-learning and business intelligence, which not only provide access to untapped markets but also favorable exit options. The global market for ERP applications is expected to grow to USD 49.8 billion in 2013 at a CAGR (2008 to 2013) of 2.7 percent providing a huge market for Indian vendors. The global intelligence market is expected to grow at a CAGR (2008 to 2013) of 13.3 percent to reach USD 13 billion by 2013. LGS’ clients and partners include global fortune 500 companies, which offer significant scope for expanding its share of their IT budgets and this is indicative of the continued potential for growth. At the CMP of Rs 72, the share is trading at a P/E of 3.6x on FY11E and 3.1x on FY12E. We recommend BUY with a target of Rs 199 in the medium-to-long term,” says Sunidhi Securities research report.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management.Moneycontrol.com advises users to check with certified experts before taking any investment decisions.