Multibagger ideas: Aashish Tater's 2 long-term picks

Aashish Tater, Fort Share Broking has picked up Cox & Kings and South Indian Bank as his multibaggers for the day.  

Cox & Kings, he says, can give 25% returns in the next six-twelve months. According to Tater, South Indian Bank is also a good long-term bet. Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video. Q: Cox & Kings, what is the story there? A: Cox & Kings has to be under tremendous pressure in the short-term. But eventually it is a very attractive buy around Rs 120-135 range because of a couple of reasons. The price, right now, is reflecting the worst in that global scenario. Thus, we feel there is hardly 10% downside on the stock. Take a call on our quant model that we have been suggesting for various stocks like Sintex, United Breweries etc. In the last five years, they have gone for inorganic growth. They have acquired assets of high quality. That is what is attracting me at the current market price. Holiday Breaks PLC, the company’s recent acquisition last year is very attractive for the future growth. It is a proper vertically integrated play on the tourism sector. Now, if you look from valuation perspective, Thomas Cook recently got acquired at Rs 14.8 annualised equivalent value. From FY13-end perspective, we finished trading somewhere around at AV of almost 20%. That means 30% minimum upside from next 18 months perspective. But we feel that the stock should go and stabilise. Right now, it is bit vibrating between this level of Rs 130 and 140. It will stabilise around at Rs 170-175 levels. So, someone who is taking a call from next six-twelve months perspective, I think he should be looking atleast 25% jump from hereon. If I take a valuation call, we are roughly working out with the number of close to Rs 188-202, depending upon how global scenario comes up in next twelve-eighteen months. So, this stock is very safe and the worst is already factored in into the stock price. Thus, if someone is taking a bet, he has hardly anything to lose on downside and he can use the fresh strategy to accumulate the stock. On upside, even if he gets Rs 170-175, he will make a handsome return of 25-30% in a very short span of time. Q: What about South Indian Bank? A: South Indian Bank, DCB and many banks are available in the range of Rs 20-60. We have gone and studied how big banks have become very big and how Rs 70-80 stocks became Rs 250-300. We took a snapshot of those patterns. We felt two things that could benefit. They had been slowly growing in terms of branches. Secondly, they have been investing on loan books, which was relatively safe. South Indian Bank is a conservative bank with almost 637 and targeting 700 branches by the year-end. We feel the stock is relatively undervalued, given the market-cap is Rs 2,800 crore. We had gone and studied how banks were acquired, which were distressed at much higher valuation than South Indian Bank. The valuation that now we are pegging at is Rs 6.5 crore to Rs 7 crore per branch for banks like South Indian Bank on conservative side because it has got good asset quality. Last quarter, we expected a big slippage. That has now been reversed. We are expecting close to Rs 125 crore for this particular quarter and over Rs 550 crore for the full year. This is story to bet for three-four years. We have seen Karur Vysya Bank, ING Vysya Bank, even PSU banks like UCO Bank, Vijaya Bank and Allahabad Bank shaped out with development into their story. Once they reach that more than 750 branches, their valuation got refined. South Indian Bank is the perfect proxy in this particular scenario. There is a strong support at Rs 22-23. Right now, the stock is at Rs 25 because of the good expectation from numbers. It is a very good buy at this Rs 22-23-25 levels from three-four years perspective. If the bank crocess Rs 1,200 by FY15-FY16, because as far basel III norms are concerned, they require roughly around Rs 1,400 crore. So, if I adjust that also, shareholders who are buying right now would get atleast 20-23% year-on-year (YoY) growth from next three-four years perspective. Asset, which gives you more than 20% growth from next three-four years perspective, is a blind bet. You have hardly anything to lose on valuation front. So, it is a ‘win-win’ situation for long-term players. Disclosure: Safe to assume that the stocks discussed have been recommended to clients. No personal position.