Wednesday, November 30, 2011

>INVESTMENT STRATEGY: Based on Dividend Yield

High Dividend Yield would be one of the factors to select stock in the current scenario where market is at its low.

High dividend yield becomes an important criteria for investment when stock prices are at
two year low and short term scenario is uncertain. Dividend yield is simply the amount of
dividends paid by the company, divided by the share price which is the clear cash return to
the share holder.

Investors expect dividends to increase as business profits improve on the other hand, companies
reduce dividend or eliminate dividends altogether, in response to economic recession and falling
profits or during the expansion phase. High dividend yield indicates the financial strength and
business safety of the company while low dividend yield in few cases is an indication of
overvaluation. In addition to this, high dividend yield also counteract inflation risks
associated with rising price levels and lost of purchasing power (economic fluctuation). We
have used dividend-yield as a yardstick to pick few of the stock which could provide some
protection against inflation and are potentially strong enough to participate in the market rally in
the long term.

We are recommending the five stocks with high dividend yield ratio (~3.5% or more) which are
considered to be fundamentally strong with, high level of cash, low debt to equity ratios, and
strong balance sheet. Any one or in combination the following stocks could be added to your
portfolio to get better overall returns.(dividend yield + capital appreciation)

To read more about: INVESTMENT STRATEGY

>IPO ANALYSIS: Manganese Ore India Limited (MOIL)

Fairwealth Research Desk rates the Initial Public Issue (IPO) of Manganese Ore India Ltd - Subscribe. The issue will open on Nov. 26, 2010 and close on Dec. 01, 2010 for retail investors and on Nov 30, 2010 for Institutional Investors. The face value is Rs. 10 per share and the price
band for the issue is Rs 340-375. It is a 100% book building process aggregating over Rs 1230cr.

Manganese Ore India Ltd (MOIL), a Miniratna Public Sector undertaking, is the largest producers of manganese ore by volume in India. It operates with 10 mines across India, of which six mines are located in the Nagpur and Bhandara districts of Maharashtra and four in the Balaghat district of Madhya Pradesh. All these mines are about a century old. Except three, rest of the mines is worked through underground method.

The outlook for Manganese ore looks strong on the back of strong domestic demand from steel industry and huge investment pipeline of Indian infrastructure.

On the price band of Rs 340-375, company is available at P/E of 12.68x on the lower price band and 13.98x on the higher price band based on FY10 earnings. At the book value of Rs.99.84 the stock is priced at P/BV of 3.76x on the higher price band and 3.40x on the lower price band.
MOIL has a net worth of Rs 1860cr and NAV of Rs 110.71/share.

We expect the demand of manganese ore to cross 4mt by the first half of FY13. Long term investors can consider the IPO with an expected return of 50-60% with a time horizon of 12-24 months whereas short term investors can expect listing gains of 20-30%.

To see issue details: MOIL



■ Correction in the Bangalore realty market

The Bangalore real estate market is a stable, healthy and mature market. The momentum seems to have picked up since the second half of the calendar year 2010. The pace is expected to slow down in the short run and prices are expected to stagnate amidst high interest rates and inflation, which is adversely affecting the purchasing power of the end users.

However, the uptrend in prices in the long term shall remain, largely supported by the inherent end-user demand, which is largely fuelled by the growth in the IT industry. According to a recent survey by manpower firm Ma Foi Bangalore stood second in terms of salary hikes (16.9%) in the first half of the calendar year 2011. The IT/ITeS sector continues to record double-digit growth and has added 91,000 jobs in India in the first half calendar year 2011.

■ Demand for apartments in the range of INR 3.0-5.5 million is high

The real estate market in Bangalore is an end-user and budget-driven market, i.e. budget emerges as the main determinant as well as constraint for end-users.

Demand is high for units priced in the range of INR 3.0-5.5 million; however, it dips to moderate levels for
apartments, priced at INR 6.0 million and above.

In terms of supply, while premium builders are in the INR 6.0 million and above bracket, there is a high level of small builder presence in the INR 3.0-5.5 million segment, almost to the extent of 75% of the total supply in the INR 3.0- 5.5 million bracket. Moreover, most buyers do not mind investing with a smaller builder subject to the builder having a good track record.

■ Is there an oversupply in the realty market?

As of today, there is no oversupply in the market as there were only a few launches during the recession. There is a lack of ready-to-occupy properties. New launches announced after the recession are expected to hit the market by 2014-15 and the future off-take trend is likely to be highly correlated with the performance of the IT industry.

■ Bangalore real estate market is predominantly IT-ITeS driven

The IT-ITeS industry has been the primary driver of real estate in Bangalore. The development of IT-ITeS
catchments along South and East Bangalore, has led to the unprecedented growth of the city during the past
decade. Micromarkets along Whitefield, Outer Ring Road Sarjapura, Bannerghatta Road and Electronic City, have developed into self-sustaining hubs. Areas along the northern corridor of the Outer Ring Road, such as Hennur Road and Thanisandra are also emerging as attractive locations catering to the housing requirements of the ITITeS catchments present along the north-eastern corridor.

■ Water is a predominant infrastructural challenge emerging in Bangalore

Water is emerging as a major issue in Bangalore, with the problem more pronounced in the northern and eastern regions. On a relative basis, the problem is not as acute in south and west Bangalore as it is located much nearer to the water table.

IT and commercial office developments in these markets are overshadowing the infrastructure constraints.
Builders are trying to overcome the problem mainly by providing methods like rainwater harvesting and water tankers.

■ Huge volume projects have showcased a mixed bag performance
Homebuyers should execute caution while looking at projects, which have huge volumes. Traditionally, large
format projects, unless supported by commercial presence in the vicinity have not done well.

■ 'Namma Metro' set to change the dynamics in Bangalore real estate

Real estate prices in Bangalore are yet to completely factor in the metro effect. The north-south corridor from Nagasandra to Puttenhalli and the east-west corridor from Byappanahalli to Mysore Road, once completed, can lead to a rise in property prices as Bangalore gradually wakes up to `how the metro can make life easier and simpler'. A few builders are holding up to 30% of their available stock, which will be launched at a 25-30% premium once the metro in the particular region becomes operational.


⇒ Public-sector companies like Bharat Electronics Limited, Hindustan Machine Tools, Bharat Heavy Electricals Limited and esteemed institutes such as the Indian Institute of Science and University of Agricultural Sciences are present in this region.

 The north-eastern belt has developed into an IT catchment, creating demand for housing and driving growth in this belt.

Easy accessibility to the International Airport and the Outer Ring Road has helped improve connectivity.  

To read the full report:: BANGALORE REAL ESTATE


>ALEMBIC PHARMACEUTICALS LIMITED: “Erstwhile Alembic is now a pure pharma play”

Investment Rationale
The recent demerger of the erstwhile Alembic into Alembic and Alembic Pharma has positioned the latter as a pure pharma play, helping it to focus on its growth momentum and we believe that this `12bn enterprise trading at 4.8xFY'13E earnings offers good value in the pharma space.

The `7bn domestic formulation franchise is today no longer just driven by its leadership in the Macrolide segment of antibiotics but by life style segments growing at rates faster than the category growth.

Domestic branded portfolio enjoys good brand equity with prescribers and its three macrolide brands figure among the Top100 brands with even its brands like Zeet and Wikoryl from the mature cough and cold segment figuring among the Top300 brands.

APL’s `2bn formulation exports to regulated markets, which contributes around 21% to the total revenues is gaining traction with 41 ANDA filings and 56 DMF filings and is expected to make additional contribution to its revenue basket with gradual approval in products.

As a part of ongoing restructuring, APL is aggressively ramping up its capacity in order to cater the increasing demand for drugs in the regulated markets. It will invest `1 bn in a new drugs facility, which will not only boost the productive capacity of the pharma major but will also soar up its revenue basket.

We expect APL to end this fiscal with revenues of `14.5bn and a net profit of `1.2bn and forecast a 30% growth in profits next fiscal which would be driven by a slightly muted revenue growth of 16% and aided by a lower debt and interest outgo.

Alembic Pharmaceuticals is now a pure pharma play with strong foothold in the domestic formulation business and increased focus on regulated markets. The formulation business is expected to escalate at a higher pace and revenues from the US generic market are expected to scale up on the back of product approvals going forward. The company to its credentials has 41 ANDA filings and 56 DMF filings.

APL trades at 6.3xFY'12E and 4.8xFY'13E earnings and we recommend a BUY with a one year price target of `75. Good earnings visibility and reasonable valuations support our investment argument.

To read the full report: ALEMBIC PHARMACEUTICALS