Tater's multibagger picks: Indian Hotels & Dhanlaxmi Bank

In an interview to CNBC-TV18, Aashish Tater of fortunewizard.com picks two midcap stocks as his multibaggers.

Aashish believes Indian Hotels will touch Rs 67 from a short to medium term perspective. For Dhanlaxmi Bank he has a target price of Rs 44 from six months perspective. Also read: Not practical to buy RComm until telecom biz improves: IIFL Below is a verbatim transcript of his interview on CNBC-TV18 Indian Hotels Company
In the last one year the stock Indian Hotels was punished because of its move to acquire a US based hotel company Orient Express Hotel. The stock tanked from Rs 67 to Rs 45 levels. Now, we feel that this particular open offer overhang is about to get over.
Basically, there are three major triggers which have gone unnoticed by market and it is going to be very price sensitive once the company actually notifies this. If you check the US Securities and Exchange Commission (SEC) website it shows that Orient Express Hotel has no open offer right now. It has been removed because the Orient Express actually rejected the bid from Indian Hotels. So that is not a deal that is going to happen and everything that the stock lost because of that particular move will now be recovered.
Secondly, if one sees how US SEC actually works on open offer; it is not an infinite period offer where you can think of revising it. It has a six months window if the target company rejects the bid price. Therefore, after six months window you need to notify the same thing that you want to revise it or not. Since six months plus three months of grace period has also been removed, so considering that this could be a huge speculating activity the provision says that the company which is trying to acquire, the target company will not be able to make an open offer at least for next 24 months. That means the entire Orient Express saga is over, which will be taken very positively by shareholders.
We have actually invested or made people invest, our logic is the ‘W’ wave that we look from technical perspective and the stock incidentally made that W in the three-year charts. We feel that July 17 will be the date when Orient Express Hotel informs that no such bid has actually been revised for and that will see a huge short covering in this particular stock.
Therefore, for this particular month we are suggesting that you can go for a buy call by buying 50-55 Call Options and waiting for the news to come in. This will be a very handsome risk-reward.
Even from medium term perspective those who are long holders in the stock they should be looking for a target of Rs 67. So Rs 2-2.5 Call Options spread can give you at least five-seven times in the current series itself, once the July 17 goes and we do not see any counter offer under any circumstances for this stock.
Taking the fundamental value of Indian Hotels at current levels. It is having a key value of less than Rs 50 lakh for its properties and any three or four star property that analyst work with, gives them a valuation of at least Rs 95 lakh to Rs 1.2 crore. So under any circumstance this is an asset based story where we feel the first target of Rs 67 is likely to achieve from short to medium term perspective. On Dhanlaxmi Bank
For this stock, the current market cap is at a level where any new bank would be spending much more. It has got presence across south and has got limited presence across north. However, if you see the number of branches and the value per branch that it is getting right now, we feel all the negatives in terms of asset quality and management have already been factored in this particular space. By infusing Rs 400 or Rs 500 crore you are getting a branch network which is having rural presence also.
Therefore, adding both these factors we feel this is one strong takeover candidate, where we feel a valuation of close to Rs 58 would eventually come. But we are taking a target close to Rs 44 for next six months perspective.
Also, anything in the move of merger and acquisition in the banking consolidation phase, private sector banks like Dhanlaxmi Bank with no identical promoters will be a soft target for getting it merged at much better valuation because the branch valuation at current level is available at a throwaway price. So this is one stock where a lot of money can be made in the banking space.