Ten stocks worth investing in – Part I

Aban Offshore

In light of rising global crude oil prices, drilling oil from the deep water has become an alternative and feasible option. This, however, has also led to increasing demand for offshore drilling services.
As a result of this, the day-rates for different offshore drilling equipment and services have gone up significantly and the availability of rigs has reduced drastically.

This is despite the fact the numbers of rigs added during FY09 were the highest. The favourable change in the industry has also meant better days for the companies in this space, like Aban Offshore, one of Asia's largest oil drilling equipment and services providers. The company operates about 16 jack-ups, three drill ships and one semi-submersible ship.

Apart from higher demand, the company will also benefit from re-pricing of its existing assets at higher day-rates as contracts come up for renewal, besides substantially ramping up of its asset base through organic and inorganic initiatives.
The company is estimated to maintain a strong revenue growth of about 70-80 per cent over the next two years. Analysts say that if its Singapore-based subsidiary, Aban Singapore gets listed, it would help the company raise some funds that may be used to reduce debt (on its own books) raised for the acquisition of Sinvest, and unlock value for its shareholders.
The stock is trading at attractive valuations viz. at a one-year forward PE of just 7 times its consolidated FY09 earnings.

Bharti Airtel

Bharti Airtel, which commands about 24 per cent market share of the Indian mobile industry, will be the key beneficiary of the fast growing subscriber base.
India's mobile subscriber base is expected to touch 500 million by FY10 from 300 million currently, translating into an annual growth of over 30 per cent, mainly on account of rising affordability.
Also, the company has amongst the most extensive networks in the country covering 71 per cent of the country's population, which Bharti aims to increase to 80-85 per cent by March 2009.
Besides the growth from its core business, the embedded value in the company's tower businesses is equally worth a mention. The combined value of the tower business of Bharti Infratel and Indus Towers is estimated at Rs 165-170 per share of Bharti.

Going forward, even as the core business continues to grow at a healthy pace, new offerings like DTH and IPTV (to be launched soon) and foray into markets including Sri Lanka, should boost growth rates further.
Analysts expect Bharti's consolidated topline and bottomline growth to range 25-30 per cent (annually) during FY09 and FY10. At Rs 748, the stock is trading at a PE of 17 times and 14 times its estimated FY09 and FY10 consolidated earnings, respectively.

HCC

Hindustan Construction Company , a leading construction company, has presence across diverse segments including transportation, hydro and nuclear power, irrigation and water supply, marine projects, utilities and urban infrastructure.
The company's diverse portfolio of projects along with higher spending towards infrastructure makes HCC one of the better investments among companies in this sector.
Also, diversification has not only helped in managing growth, it has also helped sustain high margins.
The rising contribution from the power, water and irrigation segments has helped the company to improve its operating margins from 9.1 per cent in FY07 to 11.9 per cent in FY08.
Besides, in real estate business, it plans to develop 186 million sq ft of land on 14,000 acres of land in Maharashtra. Out of this, the 12,500-acre Lavasa-based Township (near Pune) is HCC's flagship realty project, which will be developed in phases over 12 - 15 years.
However, considering the prevailing uncertainty in the realty market, the stock has been hammered down. Analysts believe that there is excessive negative sentiment built up in the stock price, which is why the stock is trading at discount to its fair value.
Fundamentally, rising infrastructure spending in the country should drive the growth in HCC's core business. A strong order book of Rs 9,560 crore, which is 3.1 times its FY08 revenues, provides visibility. Any improvement in the sentiment towards the real estate sector should provide further fillip to the stock.
On an SOTP basis, HCC's fair value is pegged at Rs 165 per share, comprising of core business at Rs 98-110 per share and Lavasa project at Rs 34-40 per share. Adjusted for Lavasa and other real estate projects, the stock trades at 9 times it's FY09 estimated earnings and 6 times FY10 earnings.