STOCK WATCH

As Spanco Telesystem (95.00) transferred its BPO division on slump sale basis to its indirect wholly owned subsidiaries with effect from March 2008, its fourth quarter nos, includes the results of BPO divisions for only two months. Still on a standalone basis it recorded 30% growth in sales to Rs 139 cr. But due to very high interest cost to the tune of 14 cr its NP declined by 60% to Rs 3.70 cr. However for entire FY08 it recorded 30% and 20% increase in topline and bottomline to Rs 565 cr and Rs 38 cr respectively. This works out to an EPS of Rs 18 on equity of Rs 20.65 cr. Company’s core competency lies in offering telecom systems integration which includes implementation of multi-location, multi-services converged networks for carrying diverse multimedia traffic (voice, data & video) based on latest technologies like ATM, MPLS, Frame Relay, TCP/IP etc. Its also active in RFID space thru another 51% subsidiary. On the back of strong order book position, it is expected to report total revenue of Rs 750 cr and PAT of Rs 50 cr i.e. EPS of Rs 24 on consolidated basis. Company has allotted 28.50 lakh warrants @ Rs 215 which may not get converted considering the CMP. A good scrip to accumulate.

For the March’08 quarter, Numeric Power (590.00), the undisputed leader in uninterrupted power supply (UPS) systems reported 30% growth in sales to Rs 108 cr whereas NP more than tripled to Rs 10 cr. Accordingly, for the full year it registered 40% growth in sales to Rs 387 cr with PAT more than doubled to Rs 40 cr leading to an EPS of Rs 80 on a tiny equity of Rs 5 cr.. Apart from manufacturing UPS, stabilizers and power conditioners, company also undertakes turnkey projects and offers end to end solution for SCADA/EMS package, large network of industrial process, power transmission support systems and distribution management. It even has a joint venture with the French UPS major SOCOMEC SA to distribute, market and service the 3 phase range of UPS systems (greater than 10 KVA) products to customers in India. As per unconfirmed reports, around 75% of the ATMs in the country are fitted with UPS supplied by the company. For FY09 it may report sales of Rs 450 cr and profit of Rs 45 cr i.e. EPS of Rs 89. Secondly, with an estimated reserve of more than Rs 125 cr on tiny equity of Rs 5 cr, scrip is fully ripe for liberal bonus as well. Keep adding on declines.

Lloyd Electric (85.00) posted satisfactory numbers for the March qtr and ended FY08 with sales of Rs 668 cr (up 40%) and net profit of Rs 60 cr (increase of 40%) i.e. EPS of Rs 19 on equity of Rs 31 cr. Being India’s largest manufacturer of evaporator and condenser (E&C) coils with around 60% market share, company has got itself forward integrated into lucrative business of contract manufacturing of window / split air conditioners for various MNCs in India. It is also into manufacturing of roof mounted packaged unit i.e. packaged AC for railway coaches on turnkey basis and even has an agreement with Australian company for metro rail AC units. Further company is contemplating to diversify into production of roll bond and frost free coils for refrigerators and has tied up with a Korean company. But most importantly, couple of months ago it acquired 100% stake Luvata Czech s.r.o. in Prague, Czech Republic which is also into manufacturing of heat exchangers / coils and has good presence in European market. On a consolidated basis it is expected to clock a turnover of Rs 850 cr and PAT of Rs 65 cr i.e. EPS of Rs 21 on current equity. Company has allotted 50 lakh warrants @ Rs 225 which may not get converted considering the CMP. A screaming buy at current levels.

After hitting a new low of Rs 49 last week, share price of Quintegra Solutions Ltd (62.00) has recovered somewhat by 30% to current levels. Company’s broad capabilities include application management, product engineering, enterprise solutions such as SAP, testing & validation, technology consulting, professional services and proprietary product suites. Presently, company focuses on six main business verticals including BFSI, Heatlhcare, Education & Training, Engineering Services, Logistic and Telecom. Unlike other companies, Quintegra has invested in creating products in its chosen verticals. Importantly in Oct 2007, it acquired M/s. PA Corporation, Virginia, USA (PAC) which specializes in high end IT consulting and leadership in middle-space IT services such as enterprise application services, date architecture & data validation, audit compliance documentation, business process management, integration architecture & deployment and testing & configuration management. Financially, for FY08 Quintegra’s top line as well as bottom-line has increased by five times to Rs 390 cr and Rs 35 cr respectively thereby posting an EPS of Rs 13 on equity of Rs 26.80 cr. For FY09 it is expected to earn a NP of Rs 42 cr on revenue of around Rs 600 cr i.e. EPS of Rs 14 on diluted equity of Rs 29.50 cr. However company is looking to raise Rs 400 cr thru equity route which will dilute the share capital significantly.

Allahabad Bank - 58.00 Rs

Incorporated in 1865, Allahabad Bank (AB) - one of the oldest public sector bank in India is today the sixth largest bank with 2154 branches consisting of 983 rural, 405 semi-urban, 452 urban and 314 metropolitan branches. Besides it has 98 extension counters, one overseas branch at Hong Kong and one representative office at Shenzhen, China. Nationalized in 1969, AB is presently led by Mr. A C Mahajan. Apart from carrying out the general banking and treasury operations, AB offers housing loan, education loan, depository services, life insurance, bankassurance, mutual Fund, wealth management services etc. It has launched reverse mortgage scheme for senior citizens and offers online education loan sanction facility for nearly 250 educational institutes. It is already having tie up with NICL & LIC in the respective fields of non-life insurance and life insurance business respectively. To bump up its fee based income, bank has multiple tie ups with county's leading AMGs namely UTI, Principal PNB, Kotak Mahindra, Franklin Templeton & Reliance Mutual Fund for promoting their wide range of products. It has tied-up with Wall Street Finance, the primary agent of Western Union Money Transfer, for inward remittances from various foreign countries. AB also has a subsidiary called AllBank Finance which has obtained Category-I Merchant Banking and Underwriting registration from SEBI and is engaged in corporate advisory services, project appraisal, issue management, loan syndication and underwriting. Although AB has major presence in central & eastern India but it is looking to expand in western and northern region. It opened 94 branches in FY08 and has authorization for opening more 117 new branches in the current fiscal.

Notably AB has achieved 100% computerization of all its branches, extension counters, currency chests & offices. But on the other hand, only 209 branches and Mumbai zonal office has been covered under Core or Centralized Banking Solution representing nearly 50% of bank's business. However bank aims to take the total count of branches with core banking facility to 900 by March 2009. In line with technological developments, bank also provides internet banking, mobile banking, SMS banking and e-Payment facilities. Its 157 branches are participating in RBI sponsored RTGS transactions whereas NEFT has been made live in 147 branches. At the same time it has enabled 183 branches for Electronic Accounting in Excise and Service Tax and 167 branches for direct tax - OLTAS system. Currently AB has installed only 211 ATMs but has joined National Financial Switch project of sharing ATM network across 28 member banks thereby facilitating customers to use more than 18500 ATMs across the country at a very low cost. It is having principal membership of VISA for issue of ATM-cum-Debit card and has issued nearly 3 lakh card to its customers. Interestingly the bank is in the process of implementation of cheque truncation system in 61 branches under National Capital Region (New Delhi).

Financially AB has been doing excellent and has ended FY08 on quite a buoyant note. Its deposits as well advances, each grew by 20% to Rs 71,616 cr & Rs 50,312 cr respectively. The net interest margin fell marginally to 2.78% against 2.97% last year but its total income increased by 35% to Rs 7,136 cr. Remarkably, banks fee based income increased by 22% to Rs 438 cr. The business per employee increased from 4.95 cr in FY07 to Rs 6.04 cr in FY08, an increase of 22%. Notably, bank has reduced its gross NPA to 2% from 2.61% and net NPA to 0.80% from 1.07%. Astonishingly, bank’s agriculture NPA is only about 3% of overall NPA for FY08. Its reserves and surplus currently stands at 4800 cr leading a healthy book value of Rs 117. On the other hand, the capital adequacy ratio is 12.04% as per BASEL II and 12.23% as per BASEL I. To boost this bank is planning to come out with right issue in next 2 years. Well for FY08, bank recorded a Net profit of Rs 975 cr, after providing for higher provisions, contingencies and tax to the tune of Rs 505 cr. Thus it posted an EPS of Rs 22 on current equity share capital of Rs 447 cr and declared 35% dividend which gives a whopping yield of 6% at CMP. For future AB has projected a business level of Rs 2 lakh cr by FY10 against 1.21 lakh in FY08. The bank plans to open its overseas branches in the upcoming economies of the globe like Kenya, Tanzania, New Zealand, Australia, China etc apart from Bangladesh. For FY09 it is estimated to report total income of Rs 7750 cr and PAT of Rs 1000 cr i.e. EPS of Rs 22 on current equity. Despite hardening of interest rate, debt waiver scheme and govt steps to control liquidity are causes of concern still investors can buy at current levels for a price target of Rs 90 in 15 months.

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Small & Beautiful

Once again Shakti Metdor (150.00) has come out with encouraging set of nos for the March quarter. Sales improved by 25% to Rs 21 cr and PAT shot up 40% to Rs 3 cr. For the entire year it registered a growth of 15% in sales to Rs 73 cr and 20% rise in profit to Rs 12.50 cr thereby registering an EPS of Rs 45 on a very tiny equity of Rs 2.75 cr. However, for FY08 company has announced a dividend of 30% same as last year with a poor divided payout ratio of less than 7%. Company is a market leader in making special scientific doors, fire doors, stainless steel doors and general doors. In short it is one shop stop for total door solutions. It primarily caters to infrastructure industry, information technology, ITES, BPO, pharma and healthcare sector. To maintain its leadership, company is regularly expanding its manufacturing capacity and is contemplating to triple its capacity to 200,000 units of door from 60,000 units currently. On the export front, company is looking at South Asia, among other regions, as a possible growth area for its product and is actively exploring it. Despite the rise in steel prices, company is estimated to maintain its bottomline to around Rs 13 cr on sales of Rs 85 cr i.e. EPS of Rs 47 for FY09. Secondly with a huge reserve of around Rs 35 on such a small equity, scrip is ripe for bonus as well. Accumulate at declines.

After hitting a new low of Rs 49 last week, share price of Quitegra Solutions Ltd (62.00) has recovered somewhat by 30% to current levels. Company’s broad capabilities include application management, product engineering, enterprise solutions such as SAP, testing & validation, technology consulting, professional services and proprietary product suites. Presently, company focuses on six main business verticals including BFSI, Heatlhcare, Education & Training, Engineering Services, Logistic and Telecom. Unlike other companies, Quintegra has invested in creating products in its chosen verticals. Importantly in Oct 2007, it acquired M/s. PA Corporation, Virginia, USA (PAC) which specializes in high end IT consulting and leadership in middle-space IT services such as enterprise application services, date architecture & data validation, audit compliance documentation, business process management, integration architecture & deployment and testing & configuration management. Financially, for FY08 Quintegra’s top line as well as bottom-line has increased by five times to Rs 390 cr and Rs 35 cr respectively thereby posting an EPS of Rs 13 on equity of Rs 26.80 cr. For FY09 it is expected to earn a NP of Rs 42 cr on revenue of around Rs 600 cr i.e. EPS of Rs 14 on diluted equity of Rs 29.50 cr. However company is looking to raise Rs 400 cr thru equity route which will dilute the share capital significantly.

Kamat Hotels (115.00) primarily operates a 245 room five star Ecotel hotel “The Orchid” near Mumbai domestic airport and 190 room service apartment ‘Lotus Suites’ (now renamed as VITS) near Mumbai international airport. In Dec’07 cmpany has opened another 100 rooms five star hotel called “Garh Heritage” in Pune and a 200 room “Orchid Hotel” in Vaishnodevi. Besides it runs around 10 highway restaurants which contribute less than 5% of turnover. Notably, company is adding 130 rooms to “The Orchid” with an investment of Rs 80 cr and has a capex of Rs 250 cr for setting up various properties under VITS brand at Aurangabad, Nagpur, Pune, Nashik, Goa, Baroda etc. To fund its expansion plan, last year company raised a capital of Rs 80 cr thru FCCB route to be converted into equity shares @ Rs 225 per share. For FY08, it reported 30% growth in topline as well as bottomline to Rs 148 cr and Rs 27 cr respectively. This translates into EPS of Rs 20 on current equity of Rs 13.80 cr. Incidentally, foreigners contribute around 40% of the total revenue but company follows single-rupee tariff system. Although company boasts of very aggressive expansion plan but is actually slow in execution. Hence on a conservative basis for FY09 it may report total revenue of Rs 175 cr and net profit of Rs 30 cr which works out to an EPS of Rs 17 on diluted equity of around Rs 18 cr. A strong buy for 50% gain in 12~15 months.

3i Infotech (100.00) is the fourth largest Indian software products company offering a comprehensive range of software products & solutions primarily for banking, insurance, capital markets, mutual funds, telecom, manufacturing, retail & distribution industries. For the latest March qtr its revenue increased by 70% to Rs 352 cr and net profit jumped up 60% to Rs 50 cr. With significant growth anticipated in the transaction services business in India, company has set up a hub and spoke model spanning across the country with cost efficient delivery capabilities and is into processing of credit cards, insurance applications, contact point verification, soft collections, cheque clearing services, reconciliations, etc. As on date company is having a very healthy order book position of Rs 865 cr. For entire FY08 it recorded 80% and 75% growth in sales and NP to Rs 1223 and Rs 183 cr respectively. This translates into EPS of Rs 14 on current equity of 130.50 cr. However the EPS works to Rs 11 on fully diluted equity (conversion of all FCCB) of Rs 165 cr. Recently company has acquired a strategic stake of 26% in Hyderabad-based Locuz Enterprise Solutions Ltd for an undisclosed amount, with a commitment to acquire remaining stake over a period. A strong and a safe bet.

Smart Investments (Guj)

Godawari Power & Ispat Ltd

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Sujana Towers Ltd

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Kamat Hotels India Ltd - 108.00 Rs

Incorporated in 1986, Kamat hotels India Ltd (KHIL) was founded by Late Venkatesh Krishna Kamat and is the flagship company of Mumbai based Kamat Group which is one of the fastest growing hospitality groups in the country. Presently under the leadership of Mr. Vithal Kamat, KHIL boast of developing and running the Asia’s first Ecotel hotel – “THE ORCHID” way back in 1997. Since then, the hotel has won around 42 national and international awards. Presently the company is engaged in operating and managing following hotels.

The Orchid (Mumbai) - This is the 245 room 5 star Ecotel hotel located adjacent to the domestic airport in Mumbai. With an ARR of almost 10,000 Rs and Occupancy rate of more than 85%, this flagship hotel contributes roughly around 70% of company’s revenue. On the back of robust demand, KHIL is in the midst of expanding its room capacity by further 130 rooms in a phase manner.

VITS (Mumbai) – KHIL owns and operates 190 rooms service apartment in Andheri near International Airport. Erstwhile known as Lotus Suite, this is a four star Ecotel hotel with Occupancy rate of 75% and ARR of around 6000 Rs.

Orchid Heritage (Pune) – KHIL took over an existing fort Jadhav Gadh on Pune-Saswad highway on a long term lease and got it converted into a 40 room palace hotel in Phase I. It has been recently opened in Dec 2007 and commands an ARR of Rs 15,000.Another 60 rooms will be developed in phased manner.

VITS (Nagpur) – KHIL’s has taken an existing 55 room hotel ‘Sunny International’ on lease and is converting it into ‘VITS’ the 4 Star business hotel brand of the company. Company is also developing 120 room 5 star eco friendly hotel under the brand The Orchid near the International Airport by 2010.

Kamats Hotel Siddharth (Nasik) – Lately company has upgraded and renovated all the 32 rooms of the hotel. It is also looking at setting up a 80 room new luxury hotel at Nashik, under the brand name 'VITS' within a year

VITS (Belgaum+Aurangabad+Baroda+Aronda+Amboli) - KHIL also manages or is looking to manage 60 rooms hotel in Belgaum, 100 room hotel in Aurangabad, 100 room in Baroda, 34 room in Amboli Sindhudurg & 34 room in Aronda, Goa.

White Orchid (Vaishnodevi) – Under the joint venture with Concept Hospitality last year company undertook the management of a property in Katra Jammu consisting of approx 200 rooms.

The Orchid (Raipur) – Considering the fat development of Raipur state into a hub for for steel, mining, cement and power industry, company is constructing a 120 room 5 star ecotel under brand name The Orchid to be operation within next two year.

Hotel in Balewadi (Pune) - KHIL has entered into a joint venture with BSEL Infrastructure Realty Limited and Unity Infraprojects Limited to build, operate and manage 200 room 5 star and 200 room 3 star hotels at Balewadi, Pune

KHIL currently operates around 7 F&B outlets and 6 banquet halls in Orchid Hotel and VITS. It has a variety of F&B outlets in its hotels namely Boulevard, Gourmet, Vindhyas, Mostly Grills, Merlins, Cirkus Cirkus and Behind Bars which add to its revenues and creates wide publicity for both the hotels. Presence of these outlets ensures that the company has an active clientele apart from their room guests and provides stability to revenues in case of a fall in occupancy rates and room rates. F&B revenue is estimated to have contributed around 20% of revenue for FY08. Besides KHIL is operating around 20 restaurants in various locations in Maharashtra state and is well on track to establish around 100+ Vithal Kamat veg restaurants in various locations in Maharashtra, Gujarat, Rajasthan, Goa and Karnataka in the next 5 years, some of which will be executed under a tie-up with HPCL and ONGC.

Lately company has acquired 60% stake in Concept Hospitality Ltd @ Rs 127/- per share thereby making it a subsidiary of the company. Concept Hospitality is engaged in hotel management of reputed hotels like Rodas-Mumbai, Uppals Orchid-Delhi, Lagoona Resort-Lonavala, Floatel-Kolkatta, Wall Street-Jaipur, Beach Orchid-Kerala etc. Earlier to fund its expansion KHIL has raised nearly Rs 80 cr thru FCCB route to be converted into equity @ 225 per share. Not a single FCCB has been converted yet. For FY08, company reported 30% growth in topline as well as bottomline to Rs 148 cr and Rs 27 cr respectively. This translates into EPS of Rs 20 on current equity of Rs 13.80 cr. Incidentally, foreigners contribute around 40% of the total revenue but company follows single-rupee tariff system. Although company boasts of very aggressive expansion plan but is actually slow in execution. Hence on a conservative basis for FY09 it may report total revenue of Rs 175 cr and net profit of Rs 30 cr which works out to an EPS of Rs 22 on current equity and Rs 17 on diluted equity of around Rs 17.50 cr. Investors can buy with a price target of Rs 180 in 12~15 months.

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