STOCK WATCH

KLG Systel (780.00) specializes in offering technological solution for entire business life cycle i.e. right from concept and creation, through plant design, project execution and management operations & optimisation to expansion/ revamp. It also provides on-line IT solutions to distribution utilities, using its self-developed software Vidushi, SG61 Technology and solution for determining the transmission & distribution losses, fixing the areas of power theft, on-the spot billing & cheque collection, increasing revenue collection efficiency of the utilities and addressing consumer grievances. It already serves 16 of the 44 power distribution companies across the country and this business is estimated to constitue more than 75% of total sales in couple of years from 50% currently. On the other hand, to capitalize the Engineering Services Outsourcing (ESO) potential company has gained engineering design domain-expertise in various industry verticals and has ventured into planning, design and erection of large scale infrastructure projects in India. Hence it is aggressively bidding for EPC (Engineering procurement and commissioning) contracts and has recently acquired 51% stake in Atlantis Lab Pvt Ltd, a dedicated engineering solutions company. Further it is looking for other companies in the aerospace for acquisition. For FY08 it may report a topline and bottomline of more than Rs 300 cr and Rs 55 cr respectively. This works out to an EPS of Rs 42 on diluted equity (post FCCB conversion) of Rs 13.20 cr. However, for FY09 it has the potential to register an EPS of Rs 55 on fully diluted (post warrants conversion & ESOP) of Rs 14.50 cr. Accumulate only at sharp declines.

Selan Exploration (170.00) is involved in onshore drilling for exploration of oil and gas and presently boasts of owning four oil fields Bakrol, Indrora, Lohar, Ognaj and one gas field Karjisan; all in and around Ahmedabad, Gujarat. Incidentally, company has been producing crude from three oilfields as the mining lease for Ognaj oilfield is still awaited from the government of Gujarat. But its Bakrol field alone is stated to have oil/gas reserves of around 45 million barrel which is huge by any standard. However, due to limitiation of funds and not so aggressive management company produced only 1 lakh barrels of crude in FY07 and is expected to do 140,000 in current fiscal which may move up to 2,00,000 barrels in FY09. With assured offtake of the entire oil and gas production from these blocks by the government, as per the terms of the production sharing contract there is zero marketing risk Secondly, with international crude oil prices expected to remain high the future earning of the company looks very encouraging. Although company may report an EPS of Rs 11 for FY08, but considering its oil reserve company is available at fairly cheap valuation.

KEI Industries (88.00), the second largest power cable company in India is enaged in manufacturing of high and low tension cables (HT and LT), control and instrumentation cables, house wires and stainless steel wires. In near future it plans to manufacture Extra High Tension cables which will serve the modern power transmission segment. It is also contemplating to move up thevlaue chain from manufacturing and supplying cables to executing EPC contracts and manufacturing and supplying transformers. Last week company started commercial production at its new 100% EOU unit in Alwar-Rajasthan for manufacturing of HT and LT power cables. Hence it has increased its capacity by 10,000 Kms thereby taking the total cable manufacturing capacity to 50,000 kms per annum. Company has already registered excellent performance for H1FY08 and may clock a turnover of Rs 900 cr and PAT of Rs 58 cr for FY08. This translates into EPS of Rs 7 on fully diluted equity (post conversion of all FCCB) of around Rs 15.75 cr. But considering companys recent expansion and future growth plans it is estimated to report an EPS of more than Rs 10 for FY09. Depsite company having huge debt of Rs 310 cr, investors are advised to accumulate at sharp declines.

Though currently small but Ram Informatics (16.00) is a budding company in e-governance space. It has completed various IT projects especially for different divisions of govt of Andhra Pradesh like computerized administration of sales tax, tourism, state road transport corporation, AP housing board etc. Besides company has desgined, developed and maintains several govt portal like BangaloreOne(Karnataka), eSuvidha (UP), iSetu (Maharastra), Eseva, Sales Tax and Fire Service(AP) etc. Recently, it got an order from Karnataka govt for executing 'Karnataka One' project which is on Boot model for a period of 7 years and the revenue model is based on per transaction. Offlate, it has also won a contract to implement and manage `Bus Pass' automation system in the city of Visakhapatnam, A.P. on Build, Operate and Transfer (BOT) model for a period of 5 years. Few months back company has launched an insurance portal thru which it intends to tap 2%-5% of the agents of LIC for subscription to its portal for a nominal price per year apart from generating income via hosting Ads. On the other hand, it has developed smart software products for automation in banking, insurance &retail. It is also into education & training and offers courses for call centre training, corporate training etc. On the flip side it has invested whopping Rs 32 cr in its US subsidiary called Aravali Technologies Inc which has not yielded much returns.