Tater's Multibagger ideas: Hexaware & PTL Enterprise

In an interview to CNBC-TV18, Aashish Tater, head of research, Fortunewizard.com gives his views on two stocks he is bullish on. Tater recommends Hexaware and PTL Enterprise and expects the stocks to reap benefits in the future.

Also read: Sukhani's warning: Do not time market and go short

Below is the edited transcript of Tater's interview. On Hexaware

We have been focusing on few merger and acquisition (M&A) deals. This is a part of our stocks where we feel there could be a possible exit for existing players and the deal will happen at much higher levels. Recently, we covered Karnataka Bank, Cipla and even United Spirits which was our top pick last year for a target of Rs 1,440 at that point of time with much higher levels being revised.
Talking about Hexaware, we feel that now this particular pattern has actually emerged and given a strong buzz. If I align both the things, we feel the deal should happen somewhere around Rs 135-140 range. What interests me in this particular play, is that there are three possible players and when we actually align with the annualised equivalent value that we actually follow for, we feel that roughly the valuation should fetch approximately Rs 136 per share to the players who want to exit this particular stock.
General Atlantic and Chris Capital has already been reported to have hired investment bankers some six months back. Now we feel the way the pattern has emerged, the likely possibility is that within the next two months, the stock would give you a reward of almost 25-30 percent.
If you see that W pattern that has emerged, the stock has actually given you a defined stop loss of Rs 98.65 which is on closing basis. So on risk reward basis, if I assume the technical snapshot, the fundamental aspects and this particular deal size that might happen; we feel the risk reward is extremely beneficial for short-term momentum. On PTL Enterprise

PTL Enterprise is one stock where we feel the asset is very heavy on the balance sheet, but the market has still not re-rated this particular stock. From our point of view, it is a hidden gem. What happened in last four to five years, is that the company was acquired by Apollo Group and since then, the company has actually transformed from the angle that it has actually created lot of assets for itself through subsidiaries. The company has a hospital in Gurgaon which is right now having 300 bed capacity. According to the company, it is going to expand to 550 bed capacity which we feel is a non-strategic asset for the promoters. They would like to exit from this particular company which will give them a valuation of roughly Rs 75 lakh per bed, approximately Rs 400 crore odd along with Rs 200 crore debt. So on a Rs 200 crore market cap, you are getting Rs 200 crore after paying your debts.
What interests us in this particular space is the reports of Rs 40 crore of annual rental that the company is getting from Apollo Group. We feel that post this restructuring of entire game plan, the company will go and merge with Apollo Tyres itself. It does not make much sense for the company to operate on a lease/rent basis. If it happens, it will happen somewhere around an approximate value of Rs 55, because that would be the fair value for this particular stock.
Another interesting thing is that they have got some land bank even in Kochi which we have valued close to Rs 250-300 crore on conservative side. If we align all these things in total, we feel that on the downside, there is hardly any risk because the company is available at 8-10 PE multiple because of the rental that the company gets. However, because of annualised equivalent value, we feel there is a lot of potential in this particular stock. On risk reward basis, this is like almost 100 percent from current levels. We have a target of Rs 55 as a merger with Apollo. So you can expect almost 70-80 percent upside from next one year perspective on this particular stock. Disclosure: Safe to assume that the stocks discussed have been recommended to clients.