Multibaggers: Tulsian picks Dena Bank, Vakrangee Softwares

SP Tulsian, sptulsian.com picks Dena Bank and Vakrangee Softwares as his multibaggers. He feels both these stocks will yield multi-fold returns going ahead.

In an interview to CNBC-TV18, Tulsian says a PE multiple of 3.6x with earnings per share (EPS) of close to Rs 23, having declared by Dena Bank for FY13, makes it a good entry point. Also Read: Near-term mkt trend on downside; remain short: Sukhani
He recommends a price target of Rs 100 and Rs 90 for Dena bank and Vakrangee Softwares respectively for the next six months. Below is the verbatim transcript of SP Tulsian's interview on CNBC-TV18 On Dena Bank
This is a mid-sized PSU bank. They have about 1,400 branches and about 550 ATMs. When you compare the mid-sized PSU banks, this bank is quite cheap amongst many comparable ones for the simple reason that it is ruling at a PE multiple of 3.6x, price-to-book of 0.6. Apart from that, the dividend declared by the bank of 47 percent is Rs 4.70 and yields about 5.56 percent.
The share is going ex-dividend on June 20. All those who will be buying the stock will be able to get the dividend, because they still have about 8 days to pocket the dividend of Rs 4.70. So straightway, your cost comes down to a level of about Rs 78 which is quite low at its lower end when you see its 52-week high and low as well. Also, if you see their gross non-performing asset (NPA) at 2.2, net NPA at 1.4 percent is also quite low when you compare it with many other mid-sized PSU banks.
I am not comparing it with bigger ones like Punjab National Bank (PNB), State Bank of India (SBI). In the similar space the net and gross NPA is also quite low with the net interest margin (NIM) placed at over 3.15 percent for the year. Taking the overall call and the kind of weakness in these mid-sized PSU banking stocks, it makes for an ideal entry point ahead of the dividend, because now the next dividend chance will come only after one year. So taking all this into account, price-to-book of 0.6, PE multiple of 3.6x with earnings per share (EPS) of close to Rs 23 having declared by the bank for FY13, makes a good entry point into the stock with price target of Rs 100 in next six months or so.
On Vakrangee Softwares
They are one of the Aadhaar enrollment agencies. They have exhibited excellent execution capability and have enrolled more numbers of applicants under the Aadhaar registration ahead of Wipro. Many companies that too are in the listed space, have not been able to fulfil their commitments given to the Aadhaar enrollment and that is a big plus point for this e-governance company. They are now into financial inclusion project.
They are very active in states like Rajasthan, UP. This financial inclusion project will eventually get connected to the Aadhaar and things like direct cash subsidy transfers are going to take place in the time to come for which this company is very active in Rajasthan and UP both. Apart from that, they are making the national population register, land records and many state governments are after them. This is because substantial progress is likely to be shown by these people ahead of the general elections.
The elections will be fought on this agenda by all the political parties and the ruling parties are also trying to catch the deadline like in the state of Rajasthan, UP, Maharashtra. All this will give good advantage to the company. Their top-line has also been quite respectable for FY13 close to Rs 1,500 crore plus with earnings before interest, taxes, depreciation and amortisation (EBITDA) of Rs 380 crore and the profit after tax (PAT) has been at about Rs 100 crore.
Going forward, I am expecting a big jump into the revenue as well as EBITDA margin, because the kind of network that they are expanding is very difficult for any other company to make. You cannot penetrate in the villages where these setups are being created by the company.
Last year, the company gave a 1:1 bonus, went for split and the share has seen a good run up. Despite that, considering the Life Insurance Corporation (LIC) holding, 5.7 percent stake in the company, Stock Holding Corporation of India (SHCIL) holding 1.7 percent stake in the company also gives the confidence, because both are PSU investment arms and have information of the business model of the company. Taking all this into account, there is still good upside for the stock, but for the six months or so one can look for a price target of Rs 90. Disclosure: No holding or interest in both stocks.