ORG Infomatics Ltd - 100.00 Rs

Incorporated in 1976 & promoted by Amabalal Sarabhai group ORG Informatics Ltd (ORG), was among the several small sized IT hardware and software service companies that were struggling to survive in the post dotcom era and was saddled with accumulated losses. But its fortunes changed dramatically in 2003, with the acquisition of the management control by Global Asia Partners (GAP) led by Ajoy Khanderia. Today, ORG is the niche player in converged IT and telecom space with expertise in various telecom technology domains such as CDMA, GSM, IPTV, DTH, Wi-Max & IP based solution. Company has broadly segmented its business model into three divisions namely system integration, managed services and software solution. Under first two divisions, it provides complete integrated solution in the field of billing & operation support system, NGN/VOIP, SatComm, Wimax, CDMA, IPTV, CRM, Vehicle Tracking system etc. Under third division it offers tailor made as well as pre-packaged applications based on multiples channels like web, phone, mobile etc.

ORG is the pioneer in providing remote sensing turnkey VSAT solutions for enterprise and corporates including banks, financial institutes, manufacturing units, educational institutes etc Initially it started VSAT support with 95 sites which has now spread to more than 5000 VSAT sites across the country. Its solutions include complete supply, installations and maintenance of VSAT equipments, alongwith satellite bandwidth solution. It is also one of the few in the world to deploy GSM networks on VSAT. ORG is registered member at the international Wi-max forum. Its client base includes Airtel, Hutch, Spice Telecom, MTNL and BSNL. Globally, it has presence in 21 countries with clients like Roshan Telecom (Afghanistan), Telebartha (Bangladesh), Mobiletel (Srilanka), Spice Nepal, Saudi Telecom, Maxis (Malayasia), Reuters, Citibank and Mobifusion. Offlate, company has expanded its operations to Tanzania, Nigeria and is also considering DTH (Direct To Home) business in Europe. Few months ago, it has successfully completed the pilot phase of MTNL IPTV commercial rollout and the supply phase of 425 cr MTNL convergent billing project.

Importantly, ORG has a wholly owned subsidiary called ORG Telecom which is also growing at a scorching pace. Earlier in December 2006, ORG raised around 45 cr through a GDR route @ Rs 155 per share to acquire 100% stake in two companies namely - DGIT Solutions (Singapore) and Unified Technologies (Bangalore). Besides, ORG DTH, ORG Singapore, ORG FZE (UAE) & ORG Inc (USA) are few of its other subsidiaries. In early 2007, company also acquired 18% equity stake in Six Dee Telecom Solutions. Meanwhile, last month ORG got a good breakthrough as it signed an agreement to acquire the satellite based business of Belgacom Group, Belgium which is the country national operator. Post acquisition, ORG will be able to provide various satellite-based services including broadcasting across Europe, the Middle East and Africa. To fund this, company intends to raise around 120 cr thru FCCB or private placement route in near future.

Financially company is doing exceptionally well as its topline as well as bottomline, both increased by 100% to 307 cr and 17 cr respectively on a consolidated basis for FY07. Hence it reported a consolidated EPS of 10 Rs on equity of 17 cr. For the first quarter also ORG reported encouraging nos with an OPM of more than 9.50%. Accordingly it may end FY08 with total revenue of 375 cr and PAT of 20 cr excluding the recent takeover of Belgium business. This translates into EPS of 12 Rs on current equity of 17 cr. However, going forward its equity is expected to get diluted by 50% to the extent of 25 cr but at the same time Belgium business will give a fillip to its topline as well as bottomline. Despite being in such a high growth sector and having strong fundamentals, the scrip is trading at its 52 week low. Investors are strongly recommended to buy at current levels as share price can easily appreciate 50% in a year’s time.

STOCK WATCH

At the time when Sensex is hitting all time high above 16K, Bihar Caustic (58.00) is one the safest bet with negligible downward risk. Belonging to Aditya Birla group, it is among the leading manufacturers of caustic soda, chlorine and hydrochloric acid. After increasing its caustic soda capacity by 50% last year, company is now further expanding it from 225 to 265 TPD by addition of electrolysers as well by debottlenecking. Besides, it is putting up a stable bleaching powder plant at an estimated cost of Rs.7.50 cr to be operational by mid 2008. But most importantly, company has recently set up an aluminium chloride project and the commercial production has just begun. It expects to produce and sell about 12000 MT of aluminium chloride in FY08 which will give a good fillip to its topline. On the margin side, company is consistently reporting an OPM of around 45% and NPM of more than 20% which is excellent as per any standards. For FY08 it is estimated to clock a turnover of 185 cr and profit of 40 cr which leads to an EPS of 17 Rs on equity of 23.40 cr. Considering reserves of 125 cr & gross block of 305 cr it’s a value buy at current market cap of merely 135 cr. Although debt of 112 cr is bit on higher side still scrip is bound to cross 100 mark sooner or later.

Despite most of the fertilizer scrips buzzing on the bourses; Liberty Phosphate (19.00) is trading at a steep discount from its 52W high of 55 Rs. It is the largest manufacture of Single Super Phosphate commanding more than 14% market share. Presently, it has four manufacturing units having an total installed capacity of 4,63,000 MTPA of SSP fertilizer. Against this, its production stood at only 2,80,000 tonne for FY07 i.e. capacity utilization of merely 60%. On the back of good monsoon and govt’s special thrust on agriculture, demand for single super phosphate is expected to increase considerably in the current year. Accordingly company is estimated to produce and sell around 3,50,000 tonne this fiscal representing 25% rise in volume terms compare to FY07. In order to fund its higher working capital requirement and improve the operating efficiency, company raised 5 cr thru preferential allotment of nearly 20 lac equity shares @ 25 Rs per share. Further, it issued 8% redeemable preference shares for another 5 cr. Hence company is now on a strong footing and may end FY08 with sales of 175 cr and PAT of 3 cr. This works out to an EPS of 5 Rs on diluted equity of 6.13 cr. Having a book value of 25 Rs and P/E ratio of less than 4x times, scrip has the potential to appreciate 50% in a year’s time.

Due to some non compliance, trading in equity shares of the Micro Forge (32.00) was suspended. But from 3rd May 2007, it has been revocated with the base price as 23.00 Rs. Since then it made a high of 52/- Rs in early June and has now settled down to 30/- Rs. It is engaged in manufacturing of forging and machined components for automobile industry with an installed capacity of 14,000 MTPA. Apart from making flanges, it also forges alloy steel, stainless steel, carbon steel etc in partially or fully machined like connecting rods, crankshafts, camshafts, crown wheels, bull gears and various other auto part ranging from 0.5kg to 40 kg single piece weight. Company made a strong turnaround for FY07 as sales jumped up 40% to 79 cr but PAT increased multifold to 3.10 against 0.30 cr on back of improved operating efficiency. For the June qtr its sales and NP stood at 17 cr and 0.7 cr respectively posting an EPS of 1.25 Rs for the qtr. Although it may not register phenomenal growth from hereon, still a topline of 85 cr and bottomline of 3.50 is estimated for FY08. This translates into EPS of 6 Rs on equity of 5.60 cr. At a market cap of less than 20 cr it’s a value buy and share price can once again test 50 levels in medium term.

Belonging to well known RUCHI group, National Steel (30.00) is engaged into manufacturing of galvanized corrugated & plain steel sheets as well as coils under the brand name “APPU”. It also has a cold rolling mill and a modern state-of-the-art colour coating line which produces sophisticated and unlimited range of coloured steel with high corrosion resistance. To cater to the increasing demand, company has been constantly expanding, and currently has a capacity of 2,10,000 tonnes of galvanized steel, 2,40,000 tonne of cold roll steel and 80,000 tonne of colour coated line. In near future, company intends to diversify further to manufacture galvalume and other products like aluminium, zinc, alloy coating etc. For this it has an capex plan of 75 cr for FY08 under which it will add new capacity to produce 1,50,000 tonne of galvalume and also increase the pre-painted galvanized steel capacity by 20000 tonne. On a conservative basis it is expected to end FY08 with sales of 2200 cr and PAT of 22 cr i.e. EPS of approx 7 Rs on equity of 32.60 cr. Notably company has been making highest tax provisioning of around 34%. With a book value of 58 Rs and replacement cost of more than 500 cr, company is available fairly cheap at an enterprise value of around 300 cr.