Invest Shoppe Views on Rolta, Allied Digital Services

Rolta India

The company has strong order book of Rs 1500 crore as on June 2008 with 75% executable over FY09. Of the order book, 55% is domestic and 45% is international. For FY09 the company has guided 23%-24% growth in its earnings post MTM losses. At the current market price, stock trades at 8.9x of FY09E earnings. This makes the stock very attractive, keeping in mind its strong visible growth estimated in all the segments. Since more than 50% of the revenue is from domestic operations and the company does not focus on BFSI Sector, it has limited risk from exchange fluctuations and negligible fear of delay in execution of orders due to the turmoil in international markets. Further, we believe that various JVs in particular their partnership with Stone and Webster for exploiting opportunities in the nuclear power space seems very promising for the long run.

Allied Digital Services

Allied Digital Services (ADSL) is riding on high-growth domestic markets of system integration (SI), IT infrastructure management services (IMS) and remote infrastructure management (RIM). RIM is expected to be $13-15bn opportunity for the Indian IT industry by 2013 from the current US$3.6bn, as per the latest Nasscom and McKinsey report. Recent acquisition of EnPointe Global Services (EGS), the US-based IMS provider, marks ADSL’s foray into international markets. Strong revenue visibility, changing business mix, improving margins and higher return ratio make it a good investment bet. We expect 60%-70% compounded annual growth rate in earning per share over the next three years. At the current market price, stock trades at 11x and 6.8x of FY09E and FY10E earnings, which makes it quite an attractive investment bet