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STOCK UPDATE
3i Infotech
Cluster:
Emerging Star
Recommendation: Buy
Price target:
Rs244
Current market price: Rs187
On an
acquisition binge
3i Infotech has announced an agreement to acquire a 51%
stake in the US-based Professional Access with an
understanding to acquire the remaining 49% stake over a period
of time. Professional Access specialises in the area of
providing e-commerce services and solutions to leading banks
and financial institutions globally. The company has an
impressive customer base that includes reputed names like
Goldman Sachs, JP Morgan and CitiBank. It also has presence in
the retail vertical.
Jaiprakash
Associates
Cluster: Ugly
Duckling
Recommendation: Buy
Price target:
Rs800
Current market price: Rs666
Up on
expressway
Key
points
-
The
Uttar Pradesh (UP) state cabinet has cleared the Taj
Expressway project without any changes and allotted the
project to Jaiprakash Associates (JAL).
-
JAL will
construct a 165km 6-lane access control expressway between
Agra and Noida at a cost of Rs6,000 crore. We expect that
JAL is likely to fund the project at a debt-equity ratio of
3:1, which implies an equity funding of Rs1,500 crore for
the project.
-
The
construction period will be 5-6 years depending on the land
acquisition. The concession period will be for 36
years.
-
Around
6,050 acres of land across five locations will be given to
JAL by the UP state government on a 90-year lease as the
project sweetener. Each location will have 1,200–1,250 acres
of land.
-
JAL
already has 600 acres of land in its possession out of the
total 1,200 acres of land to be allotted in Noida. The
balance land is expected to be alloted to JAL in next 12-18
months. We believe that out of the 1,200 acres of land at
Noida, JAL will sell 300 acres of land to raise the equity
component of the project. Consequently, the residual value
attributable to the equity shareholders would be from the
balance 900 acres of land at Noida.
-
We have
valued the 900 acres of land at Rs5.5 crore/acre as per the
last auction price in Noida, which was won by Unitech in
June 2006. JAL's expressway land at Noida is diagonally
opposite this land that Unitech won. Hence, the minimum
value of the land would be Rs4,950 crore or Rs210/share of
JAL. This is only the value of the land at Noida. We have
not valued the entire Taj Expressway project on account of
unclarity of traffic projections.
-
We have
valued JAL on the sum-of-the-parts (SOTP) measure. Factoring
in the value of the land at Noida at Rs210/share, the
revised SOTP price target works out to Rs800 per share. With
a strong order backlog of Rs7,200 crore coupled with the
sharp rise in the prices of cement we expect JAL's
consolidated earnings to grow at a compounded annual growth
rate (CAGR) of 30% over FY2006-08. At the current levels JAL
is trading at 22x its FY2008 consolidated earnings and 10x
its FY2008 consolidated earnings before interest,
depreciation, tax and amortisation (EBIDTA). We maintain our
Buy recommendation on the stock with a revised price target
of Rs800.
SECTOR UPDATE
Telecom
Bharti
rings the loudest
The upswing in the Indian wireless telephony
service industry continues with the addition of a brilliant
6.6 million new users during October (a growth of 5.1% over
October 2006). The total user base now stands at 133.1
million. The falling tariffs and lucrative offers by the
service providers continue to attract new mobile customers.
Both the GSM and the CDMA segment rendered strong performances
in the month.
INDUSTRY UPDATE
Strong fund flows strengthen equity
AUM
The assets
under management (AUM) for equity funds increased by 4.9% to
Rs127,943 crore in October 2006. The strong fund flows arising
out of new fund offering (NFO) collections aided the equity
AUM. |
