>Allcargo Global Logistics: Buyback announced…

The Board of Directors of Allcargo Logistics Ltd at its meeting held on June 20, 2012 has approved the buyback of equity shares of the company under the open market mechanism at a price not exceeding | 142.5 setting aside a consideration of not more than | 75 crore for such a buyback. If the company utilises the entire | 75 crore on buying back shares, the equity base would reduce by ~ 4%. The company does not have an aggressive capex plan for FY13E, which could be one of the reasons for the company to go for a buyback in this year. The buyback limits the downside of the stock price and shows the confidence of the

promoter in the company’s operations. However, it does not impact the fundamentals of the company and such a low quantum of buyback is unlikely to generate investor’s interest.

􀂃 Outlook

The new CFS facility at JNPT with a capacity of 1,00,000 TEUs is expected to be operational by the end of July. In the CFS business, the company experienced a slowdown in terms of volumes in Q4FY12. However, in April, it experienced a rebound and volumes are back to pre-January levels. The project and engineering division has an order book of ~ | 300 crore for the next 12-18 months. The company is yet to take a decision on the way in which the demerger of the NVOCC segment will take place.

Valuation

At the current price of | 130, the stock is trading at a P/E multiple of 6.5x FY13E EPS of | 17.2. We believe the demerger of the NVOCC segment would be positive for the company. We have revised our estimates and lowered our P/E multiple to factor in the global slowdown and its impact on the company’s business. We recommend a HOLD rating on the stock with a target price of | 138, 8.0x FY13E EPS.

RISH TRADER