STOCK WATCH

Bhagyanagar Metals (Code No: 512296) (Rs.27.50) is a good speculative buy. Company has finalized a scheme of restructuring under which it will demerge its metal / telecom business to Surana Infocom / Bhayanagar Telecom and will acquire infrastructure business from Surana Infocom / Surana Telecom. It will also merge Value infrastructure, an unlisted company with itself. Accordingly it will rename itself as Bhagyanagar Infrastruture, a pure infrastructure company and is planning to raise Rs.70 cr. through FCCB route to part-fund the development of an IT park, which would have about 3,50,000 sq. ft. of office space near the GE facility at Hyderabad. Only aggressive investors are advised to buy as promoters don’t enjoy good reputation as far as share market is concerned.

In a market where engineering and infrastructure companies are richly discounted even against their FY07 earning, Petron Engineering (Code No: 530381) (Rs.222) is available at reasonable PE multiple of 12 against its FY06 earning and at a market cap of with Rs.160 cr. Investors might not be aware that it has orders in hand of nearly Rs.400 cr. as it doesn’t inform the exchange every time it bags an order. For FY06, it may report a turnover of around Rs.385 cr. and NP of Rs.13.50 cr., which works out to an EPS of Rs.18 on its tiny equity of Rs.7.50 cr. A solid buy.

Sugar is the flavour of the season and the entire sugar sector is being re-rated. Simbhaoli Sugar (Code No: 507446) (Rs.119), one of the oldest and largest integrated sugar producers is still available at a reasonable valuation. It operates two mills in UP, one having a capacity of 9500 TCD at Simbhaoli and the other at Chilwara whose capacity is being expanded to 6000 from 3800 TCD currently. It is also setting up a new plant with 4500 TCD capacity at Ghaziabad, which will be operational form next season i.e. Oct 2006. Apart from setting up a new 60 KLPD ethanol plant at Chilwara, the company is expanding its ethanol capacity by 30 KLPD and distillery capacity to 120 KLPD at Simbhaoli unit. It also intends to setup a co-gen facility of about 26 MW and 24 MW at both its plant. Just grab it before it shoots up.

Due to the fall in freight rates, shipping sector has been an underperformer in 2005. Still GE Shipping (Code No: 500620) (Rs.243) has performed reasonably well and made a smart upmove last week. Its demerger is already finalised and shareholders will get 4 shares of GE Shipping and 1 share of Great Offshore Ltd. for every 5 shares currently held. This will unlock shareholder value substantially as the offshore business is richly discounted by the market. From the CMP 20~25% appreciation can easily be expected post demerger. Hold it patiently as the dividend yield is also good.

Mid caps and small caps are back in action, hence Fenoplast (Code No: 526689) (Rs.19) is expected to see some action in the near future. It is a reputed manufacturer of PVC leather cloth and PVC films. PVC cloth is used for domestic upholstery, automobile upholstery, soft luggage, footwear industry etc whereas its PVC films are used for blister packaging meant primarily for the pharmaceutical industry. Nearly 30% of the production is being exported to over 28 countries including UK, USA, Germany, France, Holland, South Africa and Singapore and it has a huge reputed domestic clientele. For FY06, it may post sales of Rs.100 cr. and NP of Rs.1.40 cr. i.e. EPS of Rs.3 on its small equity of Rs.4.60 cr. Having a book value of Rs.27 and market cap of merely Rs.9 cr. it can once again test its high of Rs.29.

Indo Asian Fuse Gear (Code No: 532658) (Rs.158) is among the top three players in the domestic compact fluorescent lamp market besides being a leading manufacturer of electrical safety devices such as miniature circuit breakers, HRC fuses, transformers, switchgears wires & wiring accessories, industrial plugs & sockets, contractors relay, distribution boards etc. It is undergoing rapid expansion by setting up 3 units at Haridwar at an investment of Rs.66 cr. For future growth, the company has entered into a joint venture with Nordex Lighting Spa of Italy to manufacture specialized outdoor lighting equipment. Company is planning to acquire two firms in the UK and Germany in a bid to ramp up its international presence. For FY06, the company is expected to post an EPS of Rs.12 which may shoot up to Rs.18-20 in FY07. Scrip has the potential to touch Rs.250 within 12 months.