Thursday, May 27, 2010

JSW Steel CMP: Rs. 1,071 Rec – BUY

JSW Steel Ltd. (JSW) is the largest private steel maker in India with an installed capacity of 7.8mt post commissioning of India's largest blast furnace of 2.8mt. The company has the most modern steel plant with latest technologies for both upstream and downstream processes. At CMP of Rs 1,071, stock trades at P/E of 12.8x FY'10. We assign BUY recommendation on the stock on the back of improved earnings quality associated with higher raw material integration and hassle-free superior volume growth, attractive returns on capital and better shaped balance sheet. Please follow the link for further reading
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Nifty can face resistance at 5100 and support at 4900

Indian stocks are likely to open positive today on the back of strong global cues. SGX Nifty is trading at 5049, up by about 64 points than previous closing.

Asian markets were trading higher. China's Shanghai Composite added 0.73% or 19.33 points at 2,675.25. Hong Kong's Hang Seng rose 1.98% or 385.02 points at 19,816.39. Japan's Nikkei surged 1.74% or 168.13 points at 9,807.85. South Korea's Seoul Composite gained 0.75% or 12.12 points at 1,619.62. Taiwan's Taiwan Weighted was up 1.49% or 107.87 points at 7,351.03.

Economic data coming out of US was slightly mixed. The second estimate for first quarter GDP showed that the US economy expanded at 3%. This is slower than the 3.2% increase that came with the advance estimate.

Wall Street saw a triple digit rally after China said it remains a long-term investor in Europe. Stocks surged, volumes were high and the gains were led by energy, technology and financials. The upbeat tone persisted through the entire session and stock markets settled pretty much at the highest point of the day. The volatility index too dropped below 30.

On the daily chart we can see nifty has bounced back from its support level of 4800. And close above its resistance level of 5000. In today trade nifty can face resistance at 5100 and support at 4900.

Wednesday, May 26, 2010

ndian stocks are likely to open flat today

Indian stocks are likely to open flat today. SGX Nifty is trading at 4915, up by about 9 points than previous closing.

Asian markets were trading lower. China's Shanghai Composite slipped 1.55% or 40.72 points at 2,585.07. Hong Kong's Hang Seng fell 0.94% or 180.56 points at 19,015.89. Japan's Nikkei was down 0.43% or 40.99 points at 9,481.67. Singapore's Straits Times was down 0.40% or 10.75 points at 2,685.27. South Korea's Seoul Composite was flat at 1,581.48. Taiwan's Taiwan Weighted shed 0.57% or 41.12 points at 7,126.23.

US economic data contained a couple of positive surprises. New home sales for April spiked more-than-expected to an annualized rate of over 5 lakh units, which was the highest level in two years. Meanwhile the total durable goods orders for April proved to be stronger-than-expected with nearly 3% increase.

The US markets closed lower and the Dow ended the session below the 10,000 mark as traders booked gains in the latter half. Financials and technology led the market fall.

Mahindra takes control of Reva:

The company, which will buy out the promoters' stake and make a Rs45 crore infusion of fresh equity, declined to disclose the total value of the transaction in which it will get a 55.2% stake in the Bangalore-based firm, which will be renamed Mahindra Reva Electric Vehicle Co. Ltd.

The deal comes just after M&M bought out Renault in a joint venture that makes and markets the Logan sedan, and is a part of chairman Anand Mahindra's strategy to expand his $6.3 billion (around Rs30,000 crore) group through acquisitions.

OIL Q4 net rises 20.76% on increased production: State-owned Oil India Ltd, or OIL, said net profit rose 20.76% in the fiscal year ended March on account of a production increase, a rise in the realization price and forex earnings.

Net profit for the year rose to Rs2,610.52 crore on a 9.17% increase in revenue to Rs7,905.55 crore in the year, said OIL, which declared a dividend payout of 340%. OIL had already announced an interim dividend of 180%. The explorer's share of the subsidy on fuel sales fell to Rs1,548.81 crore

PSU divestment nod will come with names of merchant bankers:

The government on Wednesday announced measures to streamline and fasten the process of divesting stake in public sector units, as it tries to meet the Rs 40,000 crore target from disinvestment proceeds in 2010-11. It will now clear the appointment of merchant bankers and other market intermediaries at the same time as it approves the case for disinvestment in public sector unit.

Air India in damage-control mode: With over 120 flights cancelled in the span of two days and hundreds of passengers facing inconvenience. While the airline operated a modified schedule till midnight on Wednesday, they had plans of roping in larger aircraft to deal with loads on busy sectors and deploying extra manpower to manage passengers from Thursday.

Siemens mulls 35 million euro for India, China ops: Siemens group plans to invest e35 million by 2013 in India and China to strengthen local operations of its wholly-owned metal andmining technology from Siemens. The investment will fund expansion of local production, engineering and project handling capabilities in the two key emerging markets. As a part of the expansion it also plans to add 300 engineers and projects managers besides 200 sales personnel in the two countries over the next 2-3 years

Chinese ban to hit Indian iron ore exports: Nearly half of India's iron ore exports to China are in serious danger of being wiped out. The local government has imposed a ban on import of low grade iron ore while major Chinese companies are buying up ore mines with two billion worth of reserves in Africa. "The ban will surely have an effect because about 50% of our exports are low grade iron ore," Royston Machado, an industry consultant working jointly with China Inspection and Quarantine, said. India sold 107 million tonnes accounting for 18% of Chinese imports in 2009.

RBI moves to prevent a possible liquidity crunch:

THE Reserve Bank of India has announced measures to help money markets tide over an imminent cash crunch in June. The measures will result in Rs 22,600 crore additional funds being made available to banks through the central bank's overnight lending facility. The measures announced are in effect a temporary half percentage point reduction in statutory liquidity ratio requirement — a norm which prescribes the extent of government bonds banks need to hold. RBI has also said it will make overnight loans available to banks twice a day under its liquidity adjustment facility (LAF) against the present system where banks bid for funds under an auction once every morning.

Monday, May 24, 2010

Standard Chartered PLC Price 100-115 per IDR (5% Discount to retail)

OPENS ON: 25/05/2010

CLOSES ON: 28/05/2010

COMPANY DETAILS:

• SCB, one of the leading international banking and financial services company. SCB particularly

focuses on the markets of Asia, Africa and the Middle East.

• The Company offers its products and services in the personal, consumer, corporate,

institutional and treasury areas.

• The Group operates in approximately 1,700 branches and outlets, 5679 ATMs in more than 71

countries – a key part of the distribution network for the Consumer Banking Business.

• The Company has over 300 direct and indirect subsidiaries, joint ventures and associates.

• 2009 is the 7th consecutive year in which the Company has demonstrated a sustained and

consistent track record of delivering record operating income and record profits. Over this

period, the Company achieved a CAGR of 19% for income and 22% and for profits.

• The Group has significant operations in the Asia region, which accounted for over 75% of its

US$5,151 million total profit before taxation.

Issue Details:

Issue Size 240,000,000 IDR's

Face value 10 IDRs represent one share

Exchanges NSE & BSE

Minimum Lot Size for Retail 200 IDR's

Minimum Lot Size for HNI 1050 IDR's

Bid Multiple 50 IDR's

Price band 100-115 per IDR (discount of 5% to retail investors whose

Bid is less than Rs.1, 00,000)

OBJECTIVE OF THE ISSUE:

• To provide Indian investors with an opportunity to invest in the Company and participate in its

growth.

• The Company has been established in India for many years, is committed to India's future and

believes that India will remain a growing and key market – the Issue demonstrates that

commitment;

• To increase the market visibility and brand perception of the Company in India;

• To support growth across the Company's businesses globally. The current economic

circumstances and related market dislocation have presented unique opportunities to deploy

capital into selected areas where the competitive environment, pricing levels and returns are

particularly attractive;

• To widen the Company's invest or base and to provide a new source of capital.

Thursday, May 20, 2010

ICICI Looks unattractive right, but may improve profitability

ICICI – BoR Deal Analysis

Event

ICICI Bank to acquire Bank of Rajasthan Ltd. (BoR)

The Deal

ICICI Bank will offer 25 shares for every 118 shares of Bank of Rajasthan.

Items	ICICI Bank	BoR
Swap Ratio	25	118
Share Outstanding (Cr)	111	16
Pre Announcement Price (Rs)	890	99
Pre Announcement MCap ( Rs Cr)	99,221	1,597
Deal Value (Rs Cr)	3,042

Benefits to ICICI Bank

ICICI Bank is expected to benefit in terms of an addition of 463 braches of BoR to its existing branch network of 2000 branches, which will in turn enhance its earning potentials, return on assets (RoA) and return on equity (RoE).

Analysis

Expensive Deal…

At a swap ratio of 25:118, the deal value comes at Rs 3,042 cr, translating into a P/BV ratio of 5.4x and 2.9x to the adjusted book value of Rs 559 cr and un-adjusted book value of Rs 1,080 cr respectively as on 31^stDec. 2009.

Valuations paid by ICICI Bank looks very expensive, as public sector banks and private sector banks are currently traded at an average P/BV ratio of 1.2x and 2.2x respectively.

Private Sector Banks	BV	CMP	P/BV
Kotak Mahindra Bank Ltd	128.8	744.2	5.8
HDFC Bank Ltd	469.4	1868.8	4.0
IndusInd Bank Ltd	52.7	180.6	3.4
Axis Bank Ltd	395.6	1205.1	3.0
Yes Bank Ltd	90.8	265.4	2.9
Dhanalakshmi Bank Ltd	66.0	146.5	2.2
Karur Vysya Bank Ltd	248.1	507.2	2.0
City Union Bank Ltd	17.7	33.6	1.9
ICICI Bank Ltd	462.9	825.0	1.8
ING Vysya Bank Ltd	185.2	307.5	1.7
Development Credit Bank Ltd	27.1	44.1	1.6
United Western Bank Ltd (Merged)	18.0	25.9	1.4
Jammu and Kashmir Bank Ltd	621.0	771.9	1.2
South Indian Bank Ltd	129.8	152.3	1.2
Federal Bank Ltd	273.9	312.9	1.1
Karnataka Bank Ltd	136.8	148.7	1.1
Lakshmi Vilas Bank Ltd	73.4	79.6	1.1
Average		2.2

Public Sector Banks	BV	CMP	P/BV
State Bank of India	1038.8	2214.9	2.1
Punjab National Bank	514.8	1005.4	2.0
Bank of Baroda	375.7	674.7	1.8
Union Bank of India	174.4	294.9	1.7
Andhra Bank	90.9	128.4	1.4
Canara Bank	305.8	423.1	1.4
Central Bank of India	108.2	148.5	1.4
Indian Bank	154.7	209.3	1.4
Bank of India	243.7	323.3	1.3
Corporation Bank	402.6	505.5	1.3
Allahabad Bank	131.7	153.8	1.2
Oriental Bank of Commerce	292.2	324.9	1.1
State Bank of Mysore	575.1	622.1	1.1
Dena Bank	83.4	89.9	1.1
UCO Bank	65.7	70.4	1.1
State Bank of Travancore	568.1	591.2	1.0
Vijaya Bank	53.5	55.5	1.0
IDBI Bank Ltd	113.1	111.6	1.0
Bank of Maharashtra	55.8	54.4	1.0
State Bank of Bikaner and Jaipur	483.5	442.5	0.9
Syndicate Bank	99.9	87.8	0.9
United Bank of India	91.7	78.7	0.9
Indian Overseas Bank	116.5	92.8	0.8
Average		1.2

Equity Dilution

Our calculation reveals that at the 25:118 swap ratio, to fund the deal, ICICI Bank will issue about 3.42 cr new shares, which amounts to a 3.1% equity dilution.

Leading to fall in value of ICICI Bank…

Right after the announcement of the deal, share of ICICI Bank shown a heavy selling pressure and finally settled at Rs 825, down by 7.3%. It is interesting to note that ICICI Bank has lost a market cap of around 7,250 cr, which is 2.4 times the deal value. On the other hand, share of Bank of Rajasthan capped at 20% upper circuit, translating into a gain in market cap of Rs 323 cr.

Items	ICICI Bank	BoR
Post Announcement Price (Rs)	825	119
Post Announcement Mcap (Rs Cr)	91,975	1,920
MCap Lost/Gain on Announcement (Rs Cr)	(7,246)	323
MCap Lost/Gain to Deal Value	(2.4)	0.1

Our View

The motive of merger clearly is related to the branch network. At 463 branches, ICICI Bank adds 22% more branches, which otherwise could have taken up to two years to ramp up organically. Owing to higher valuation paid for the deal, ICICI Bank is looking unattractive at current valuations, however once the benefits from additional branches come into play, will led to improvement in profitability.

Wednesday, May 19, 2010

Shriram Transport NCD - FULLY SUBSCRIBED.

Dear All,

NCD issue of Shri Ram Transport Finance Co. Ltd. has been fully subscribed. In this connection, attaching herewith copy of notice advertisement of the same, appeared in the financial daily, Financial Express dated 19^th May, 2010.

On account of Full Subscription of the issue, the committee of Directors of the company has decided for an early closure of the subscription list of the issue i.e. 22^nd May, 2010.

Tuesday, May 18, 2010

Nifty downtrend is still on, see a new lower level

Below 50-HEMA

In today's session Nifty saw selling pressure near the 61.8% retracement level of the previous fall, which indicates that the downtrend is still on and we will see yet another lower low in the near future. Furthermore, Nifty failed to pierced the duo of 20- and 50- hourly moving averages, which confirms the possibility of a slide from hereon.

Trading Ideas

Remain stock specific from current levels.
Mid term trading ideas which we like are SRF (Target Rs260), JP Associates (Target Rs144),Escorts (Target Rs208) and MSK Projects (Target Rs200). Traders maintain stop loss accordingly.

Investment Ideas

Great Offshore: CMP @ Rs460 (Target Rs528)

Wednesday, May 12, 2010

Nifty Bounce may extend upto 5295levels

Bounce on the cards

Finally, Nifty saw a breakout from the bullish Flag, which was witnessed on the hourly chart. Hence we feel that the current bounce may extend upto 5295 levels, as it is an important swing high where some supply pressure may be witnessed. Additionally, on hourly degree we saw a positive crossover of 20- and 50- hourly moving averages which also indicates that a possibility of a bounce is open.

Trading Ideas

Remain stock specific from current levels.
Mid term trading ideas which we like are IFCI (Target Rs60), Voltas (Target Rs190), Ranbaxy (Target Rs495) and Dena Bank (Target Rs98). Traders maintain stop loss accordingly.