Thomas Cook

Prime Broking on Thomas Cook - Target price Rs 110

Prime Broking has recommended a Strong Buy on Thomas Cook with a target price of Rs 110 - an upside of over 80%.A report released said: Based on our recent meeting with the Thomas Cook management, we revise upwards our CY10E and CY11E estimates for the company because of the following:

1) Stronger and quicker rebound in the Outbound (including Domestic) and Inbound segments of the Travel industry and early signs of recovery in the corporate travel segment;

2) Significant improvement in volumes in the company's foreign exchange division after a steady CY09;

3) Improved margins in the company's foreign exchange and travel businesses.

We expect CY10E and CY11E revenues to grow at 42.0% and 19.6%, respectively. We estimate CY10E and CY11E EPS of Rs. 4.1 and Rs. 5.5, respectively. The company is currently trading at a P/E of 14.7x and 11.1x and EV/EBITDA of 8.1x and 6.2x times CY10E and CY11E numbers, respectively. Our price target on the stock is Rs 110 at a P/E multiple of 20.0x times its CY11E earnings.

Thermax

Edelweiss on Thermax - target price Rs 694

Edelweiss has maintained its Buy rating on Thermax with a target price of Rs 694 - an upside of 21%.

A report released said: Our current order inflows estimate for FY10 at the standalone level is at INR 37.7 bn, which we revise upwards to INR 42.9 bn. This implies additional order inflow of INR 8.9 bn in the balance part of FY10. Earlier, management had expressed confidence that orders are likely to come from chemicals, petrochemicals, and pharmaceutical industries even as those from the ferrous vertical are likely to decline. Please note that our implied incremental required order inflow numbers for FY10 may be overstated, as the company does not announce small ticket size orders during the quarter, which essentially understates actual YTD order inflow.

Upgrades to FY10 order inflow estimates lead to upwards revision in our FY11 and FY12 sales and net profit estimates. For FY11, our consolidated EPS estimate now stands at INR 32.3, higher by 2.1%, significantly ahead of consensus. The consensus EPS estimate (BB) for FY11 is at INR 27.5. For FY12, we revise our EPS estimate up by 5.7% to INR 40.6."We are upgrading our one year DCF value for TMX to INR 694 (higher by 6%), implying a 21.5% upside from current price levels.

We have upgraded our one year target price due to higher growth in cash flows in explicit forecast period driven by increase in order inflow. Historically, the stock has traded at one year forward P/E band between 15x and 20x. At our target price of INR 694, the implied P/E is 21.5x and 17.1x for FY11E and FY12E, respectively. At our current estimates, the stock is trading at P/E of 24.8x, 17.7x, and 14.1x for FY10E, FY11E, and FY12E, respectively. We maintain our ‘BUY’ recommendation on the stock.

Prakash Industries

Khandwala Securities on Prakash Industries - Target price Rs 380

Khandwala Securities has issued a buy call on Prakash Industries (PIL).

In a report issued on November 20, the brokerage house has said, the stock currently trades at 5.1x 1-year forward EB/EBITDA and 1.2x 1-year forward P/BV and the company is transforming itself from a steel producer to a power company.

Mining and power would ensure 43% CAGR in EBITDA during FY09-13 while cash generation from steel would fund further power capex, says Khandwala recommending a 'BUY' with target price of Rs 380 (FY12), 166% upside from current market price.

PIL is likely to post an EBITDA and PAT growth of 43% and 50% during FY09-13, while EPS growth would tickle down to 44% due to dilution from conversion of FCCB and warrants. The company is trading at P/E of 5.2x, 2.9x and 1.9x for FY11, FY12 and FY13 respectively, while EV/EBITDA multiple for company stood at 5.0x, 2.6x and 1.4x for the same period. Investors should enter this stock with 2-3 years perspective to take the benefits of entire expansion. We assign ‘BUY’ rating with FY12 target price of Rs 380 (4x FY13 EV/EBITDA); 20% discount to 1-year forward EV/EBITDA of 5x for last five years. However, we may see more upside following higher multiple to power business going forward.

Prakash Industries (PIL) has forayed into mining and power as new growth area. The company has shown tremendous resilience during the downturn and attained a healthy 21% EBITDA margins during 2HFY09 (peak of the crisis), thanks to its backward integration in coal and power.

Birla Sun Life to Start Selling Funds on NSE

Birla Sun Life AMC has started selling its funds through the National Stock Exchange (NSE). Birla Sun Life will sell 44 of its funds, which includes open-ended equity, balanced, MIPs, debt and government securities funds. Liquid and Liquid Plus category has however, been excluded as of now. The subscription amount per transaction should be less than Rs 1 crore.

Securities and Exchange Board of India (SEBI) paved the way for funds to be sold through exchanges, with UTI MF being the first to start selling its funds on  the NSE from November 30.

 

NSE's Mutual Fund Service System (MFSS) enables its brokers' network to buy and redeem units of eligible mutual fund schemes using network and order collection mechanism provided by NSE. This will facilitate purchase and redemption of mutual fund units by investors through any NSE brokers and sub-brokers across its network of almost 2, 00,000 terminals spread over 1,400 towns and cities.

 

Interestingly, on day one, when MFSS became active on NSE, 300 applicants bought UTI funds worth Rs 75 lakh (on November 30, 2009). 

With NSE taking the lead, BSE is also about to roll-out its fund transaction platform.

Trent

Private Labels Save The Day; Co Boasts Of Lowest Leverage Among Listed Retailers

 

MUMBAI-BASED retailer Trent is one of the few retailers to have beaten the broader market. The stock has given whopping returns of 224% in the past one year as compared to 96% returns posted by the benchmark index. In the same period, ET Retail index was up 75%. It managed to beat the slowdown blues because of its focus on private labels.

   Started in 1998, Trent runs a lifestyle chain Westside, Star Bazaar, a hypermarket chain, Landmark, a books and music chain and Fashion Yatra, a complete family fashion store. Additionally, Trent has cemented partnerships with proven players such as Tesco, the British retailing giant, Spain's Inditex Group (Zara) and Benetton of Italy to expand its portfolio. The only organised retailer with close to 90% private labels, Westside has 41 stores in 23 cities across India, selling clothes, footwear, fashion accessories and home products. The company's Westside stores caters to the mid-segment of consumers in tier-1 and tier-2 cities while Star India Bazaar is present in the value segment. Going ahead, Trent hopes to have 50 hypermarkets in five years, which should generate a turnover of Rs 3,000 crore.

   With 3.8% net profit margins, Trent plans to increase the share of its private label products. It reported a 5.9% growth in revenue for the quarter ended September 30, 2009 to Rs 136.4 crore as compared to Rs 128.9 crore in the same quarter last year. Net profit for the same period registered a 49% growth at Rs 5.3 crore compared to Rs 3.5 crore a year ago.

   Currently, at 0.19 debt-to-equity ratio, Trent is the least leveraged amongst listed retailers. The stock is currently trading at a P/E multiple of 63x and valued at less than one time its sales (market capitalisation to sales) compared to Pantaloons (0.9x) and Koutons (1.3x). At a price-to-book value (P/BV) of 1.08x, Trent is much cheaper than its peers Pantaloon's (1.1x) and Koutons (3.7x).

   At the annualised EPS of Rs 27.1, its one-year forward P/E will be 30x. Though the business model is right, it is the speed of scalability that needs to be improved. With an improved growth, the company will be able to justify its high earnings multiple.

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ING Vysya Bank

Edelweiss Securities on ING Vysya Bank

Edelweiss Securities has maintained 'BUY' call on ING Vysya Bank and rated it an 'Outperformer' on relative basis.In a report issued, the brokerage has said, VYSB has been constantly increasing contribution of fee income, while steadily improving operating leverage and delivering consistent earnings. Given the current cost structure and management's commitment under the new leadership, we continue to believe that the bank's operating leverage has potential to generate substantially higher RoE (~13% currently). The bank is currently trading (post dilution) at attractive valuations of 12x earnings and 1.6x FY11E adjusted book, which, we believe, is attractive compared with its private peers.

The improved net interest margins, strong focus on fee income and controlling cost have helped the bank deliver consistent performance in the past. The bank, under the new management, has improved RoE to ~13% and RoAs to 0.7% (from -0.3% in FY05), in FY09. In Q2FY10, the bank raised INR 4.2 bn in equity which has helped improve tier-1 capital from 7.4% in Q1FY10 to 9.7%. Given scope for improvement in the long term, especially on operating leverage, we continue to maintain our positive bias on further expansion of RoE as the bank steadily leverages its balance sheet and franchise. We expect RoAs to improve to ~0.9% by FY11E.

The bank is currently trading at valuations of 12x earnings and 1.6x FY11E adjusted book (post dilution). Given the metrics, adequate capital to fund balance sheet growth and scope for improvement, we believe it is trading at attractive valuations compared with peers.

Highlights:
• Steady, consistent performance aids turnaround

• New MD and CEO strengthen top management

• Strong support of the ING Group aids visibility

• Cost-income ratio for the bank was maintained at 58%.

• Overall capital adequacy ratio for the bank improved to 14.5% with tier-1 capitalimproving ~230 bps, to 9.7%.

Zee Entertainment

Edelweiss on Zee Entertainment

Edelweiss has maintained its Buy rating on Zee Entertainment after a meeting with the management of the company.

A report released said: The ad spending scenario continues to improve. Subscription revenues will continue to grow strongly on the back of increasing digitalization, rapid DTH subscriber additions and incremental revenues from HITS. Thus, given improving ad and subscription revenues, ZEEL’s strong position within GEC genre, prudent cost rationalisation measures, and a strong management, we raise our FY10E and FY11E EPS by 2% and 5% respectively. We maintain our BUY recommendation on the stock. On a relative return basis, the stock is rated Sector Performer.

Edelweiss has a Buy recommendation on stocks that are expected to gain more than 15% over the next 12 months