Multibagger picks: PN Vijay bets on Syndicate Bank & Sun TV

In an interview with CNBC-TV18, Portfolio Manager PN Vijay picks two stocks as his multi-baggers for the day. Vijay opts for Syndicate Bank and Sun TV with targets of Rs 170 and Rs 550, respectively, for the next twelve months.

Also read: Sukhani says remain on long side; suggests buys Below is a verbatim transcript of the interview: On Syndicate Bank Syndicate Bank is a government owned bank based in the south. It was originally founded by the Pai family of Mangalore and then was nationalised in 1969. The last quarter i.e. Q3 of FY2012-2013 has been good for the bank. The net profit went up by 50.4 percent due to lower provisioning and a tax write back. The loan growth was stable at 17 percent and the net interest margins (NIMs) stood at about 3.25 percent. The bank has one of the better asset qualities among PSU banks. The provisioning is as high as 85 percent and the net non-performing assets (NPAs) is less than 1. I like Syndicate Bank because of its focus on retail and small and medium enterprise (SME), which has the potential to grow faster and where the margins are good. Also, after the infusion of more than Rs 500 crore by the government during this financial year, the capital adequacy would be good around 12 percent. The stock trades at about less than 0.9 price to book and at about 4.7 times estimated earnings for 2012-2013. This is very attractive price and a big discount to other public sector undertaking (PSU) banks. It is a buy at this level with a target price of about Rs 170 in the next 12 months. The only risk one can think of in this stock is a southern accretion to NPAs, there might be a southern deterioration asset quality in one-two large accounts but given the focus on the bank on SMEs and retail, it is unlikely to happen. On Sun TV Sun TV is a leading TV channel operator substantially in the south of India. It has monopoly in the four southern states, which account for close to 40 percent of TV viewing in India. Sun TV apart from the channels that runs also has a direct-to-home (DTH) business, which is growing. In the last quarter, Sun TV had a reasonable quarter. The good point was the steep hike in ad revenues that went up substantially and a good growth in DTH that went up by about 13 percent. Programming cost however, went up a lot and because of that the net profit growth was normal around 13.5 to 14 percent. This programming cost would get reflected in additional revenues in the next quarters as they begin to get aired. There are quite a few triggers in Sun TV at this point in time. One is Chennai is going into the last quarter of mandatory digitalization and a lot of subscription that is expected to be added in this last quarter. Secondly, the government is going to start second phase of digitalization in more than 30 cities and in six of those, Sun TV has a pillar position in the cities of Bangalore, Hyderabad, Cochin, Coimbatore, which are large catchment areas. Third is, recently the High Court (HC) decided that the government of Tamil Nadu could not enter into the distribution of television. The government has started its own distribution just to cut its political opponent Sun TV down to size but that has been thrown out and this is a very big relief for Sun TV. In terms of valuations, Sun TV is reasonably priced compared to other media stocks, which are seen as sunrise stocks. The stock trades -- I expect the price earnings to be around Rs 22 based on an earnings per share (EPS) of about Rs 20 for 2012-2013 in the current market price of about Rs 435 or so. I give Sun TV a target of about Rs 550 in the next twelve months. Their business is very complex and it is growing and the business model itself is excellent. However, the only risk one can think of in the stock is that the company is owned by political family and quite often because the involvement in the 2G matter, the share does see big ups and downs. So investors with a good risk appetite can buy this stock. Disclosure: I have no holdings in the stocks discussed.