In an interview to CNBC-TV18's Latha Venkatesh and Anuj Singhal, SP Tulsian of sptulsian.com shared his views and outlook on the fundamentals of the market and specific stocks.
Below is the verbatim transcript of the interview.
Anuj: Mystery stock, Infibeam Incorporation, ever since it has been in Futures and Options (F&O), post the stock split, it has been even more volatile. But what explains this intraday swing of 50 percent?
A: Nothing but the speculative activity. What happens, because you have seen the stock falling by 30-35 percent, at some point, I do not know, intraday, it fell to as Rs 90 and then you have seen the sudden volume in the cash segment of about 3.5-4 crore shares. Because I have heard Naveen analysing the financial data and all that but I wish to draw the attention of the people because the red-herring prospectus (RHP) could be the best document instead of analysing the Q1 and FY17 numbers.
One must analyse the RHP because public about a year back, so you have the RHP data. In fact I have not seen the mockery of the financials in any of the issue in this last maybe five years where revaluation reserves were capitalised, again reversed and kind of share capital having increased. So you have used the mystery stock, so I think mystery lies on everything, maybe in terms of the financials, maybe in terms of the business model, maybe in terms of the structuring of the IPO.
And if you really see the situation on the shareholding pattern because financials have all got discussed, there is no point in discussing now again because if you really see the retail float, it is less than 2 percent. Less than 2 percent is the retail float. And in fact these type of stocks, in fact I have been very vocal when the stock was with a face value of Rs 10 ruling at Rs 1,000 plus that I do not see value of even Rs 100-150 in this because you can very well, by using the fancy word of payment gateway, e-payment solutions being provided by the company with margin of 33 percent, firstly, there is no consistency.
If you really see, maybe probably FY17 you will find that e-model or e-service business segment giving you an earnings before interest and taxes (EBIT) of about 50 percent, Q1 maybe 33 percent, their e-commerce business has been loss-making. So you can easily have any kind of turnover and all sort of things. In fact, I am not convinced with the business model so there is no point in taking the earnings estimates also. Whether I estimate the earnings per share (EPS) at Rs 1.50 or Rs 2, on any parameters can you give a price-earnings ratio P/E) multiple of 60-80 times? I have my doubts and that too, if you rely on these financials.
If you do not rely on the financials, in fact when the company went public, I happened to talk to the promoters also, never got any satisfied reply also in this. So probably, maybe those who wish to look into the company from an analytical point of view, as an analyst, just to analyse, not for investment, they must look to the RHP also, go into the details and then take a call on the financials. I am not convinced at all. In fact I do not find value even to the extent of 10 percent of the current price of which it has been ruling because now it has been sub-divided with a face value of Rs 1.
Anuj: What is your view on non-banking finance companies (NBFC) and Godrej Properties?
A: Coming first on NBFCs, definitely this is a right time. Maybe one can say that whether to buy now or maybe 2-3 percent lower. And if you really want to suggest me some of the stocks, probably 3-4 stocks which comes, I am not including microfinance and housing finance companies in this list, but 3-4 companies comes to my mind that is Bajaj Finance, Capital First and Shriram Transport Finance Corporation and one can add even Cholamandalam Investment and Finance Company. So all four are looking good. Maybe one can buy now or stagger it to buy maybe now and remaining half quantity with a fall of about 2-3 percent.
Coming specifically on Godrej Properties, I am not keeping a positive bias on the stock because the valuations have been holding quite rich and if you see the financial performance lately has not been very much assuring. And the kind of sales policy which I have seeing that more than 50 percent of the property in their phases kind of things.
So the kind of problems which was seen in the past with many of the developers probably may get repeated here also because you have sold your properties now at the 'x' price while the inflation and all that can eat away your margin, because once the project will get completed in next 3-4 years. So not keeping a positive view on Godrej Properties, but yes will advise buying in NBFCs.
Latha: What is your view on Dr Lal PathLabs?
A: I will advise him to exit because for 2-3 reasons, if you see the share has been hitting continuously the 52-week low and I do not know whether the company will really be able to sustain the growth which market was expecting because these are the high fancied stocks where the expectations were built very high. Maybe one can give the example of the United Spirits where Diageo kind of things, people gone very bullish at the level of Rs 3,200-3,300.
So similar is the case here also that Dr Lal PathLabs, if you really take an earnings view, I do not know, Rs 24-25 EPS kind of things and whether you can justify the price at which it has been ruling now. So, maybe selling or profit booking will keep coming in because an investor gets tired when he sees wealth erosion happening which has happened in case of this stock also having corrected by about 35-40 percent in this last six months or so.
And I do not see any kind of justification for holding this kind of valuation for the stock so better to exit in spite of the share ruling closer to about 52-weelk low.
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