SBBJ has target of Rs 530: Aashish Tater

Aashish Tater, Head of Research, Fortunewizard.com told CNBC-TV18, "There has been a very interesting development into the State Bank of India's (SBI) subsidiary post the statement of the managing director. What has happened is that the company is looking to merge its subsidiaries and three of them is listed with the parent SBI itself. So what will happen is that State Bank of Bikaner and Jaipur (SBBJ) will go for a book value merger at a discount of 20-25 percent. Looking at the adjusted book value for next year for SBBJ, somewhere around Rs 743 we feel at current market price this is one of the cheapest bank available from price to book value perspective."

He further added, "When we ran our model that we are likely to trade for PSU stocks especially for PSU banking stocks, it gave us a very clear indication that you should be buying something at this level because the worse you can see is 0.7 price to book but it is trading much below that. This is because ultimately it will go and merge with the SBI."
"Once this process starts in over next 12-15 months, the stock will give you a return of almost 25-26 percent from
current levels for a target of Rs 530. Now, when we ran the same model on something which was not there, State Bank of Indore, the price to book value was given at 0.7 times, 34 to 100 shares if I recall it correctly for SBI to State Bank of Indore exchange ratio. So, even on similar platform since we get something like 0.7 times, the worse we are going to get is Rs 530 but in next fifteen months, you are going to get two times dividend which is Rs 14.5 for this fiscal and even for next fiscal we are looking at the similar dividend payout. So that 28-29 handsome reward would also be factored into your profits."
"So at current levels, given the worse is already factored into the company, we feel simple mathematic is to invest right now and wait for the merger to happen. If it happens within 12-15 months as indicated by management, we feel this is a surely 25-30 percent return giver from next one year perspective. So this is another stock where we feel safety is there even it is a PSU bank still there is a lot of safety in the stock because of the new development that has happened." Disclosure: Stock discussed may have been recommended to clients.