McDowell Holdings can touch Rs 115: Aashish Tater

McDowell Holdings can touch Rs 115, says Aashish Tater, Head of Research, Fort Share Broking.

Tater told CNBC-TV18, "We had recommended United Breweries and United Spirits. Then we felt that the momentum is shifting into the lower space, so we picked up United Breweries. Now, given the run up in these, we feel McDowell Holdings is relatively undervalued to the holding discount of the same group. It roughly has a market cap of approximately Rs 85-90 crore odd."

He further added, "If you see it owns United Breweries Limited 4% stake which roughly works out to be Rs 650 crore odd. Apart from that what is interesting is that deal has to happen and if the deal happens then the cash that will come to the company will be at least 4-5 times the current market cap of the company. That means you should treat this as a company where there is almost cash that is going to come in. The time factor is the only question mark."

"If the time factor is taken as a discount, the market cap should be somewhere around Rs 150-170 crore given that the deal will happen at Rs 600 plus for United Breweries. Apart from that, they hold United Breweries Holdings and Mangalore Chemicals. We are ignoring that fact as part of residual value. At Rs 150-160 crore there is a clear cut arbitrage for shareholders of United Breweries Limited. So, a small allocation should be done into this particular stock."

"The stock can stabilize at Rs 85-90, but because of the momentum, it can touch Rs 115. A base shift from Rs 60-85 is roughly 40%, which is a decent upside from next six months perspective."

Disclosure: I have no personal holdings in the above stock.