Description
The presentation on portfolio Restructuring.It covers a lot of companies.
Portfolio Restructuring
Background
• Indian markets was one of the surprises of the last global equity market boom • Led by rising consumption and a high investment rate • Twelfth largest equity market in the world • In the past 10 years, it has delivered returns at a CAGR of 14.9%
Some Statistics
Size and growth make India a compelling asset.
Consumption set to explode
India transitioning to a large economy
India is fast catching up with the bigger economies of the world due to the higher growth rates. The Indian economy will be one of the biggest among developed and developing countries, nearing that of Canada in the coming years.
Source: Based on recent data from Bloomberg
Economy Review
• • • • • • • • • • India is a secular growth story facing a temporary slowdown and some short-term pressures. Stable Consumption demand Robust Investment demand Crude Oil & Steel spike are resulting in higher inflation, interest rates, BOP, Fiscal deficit & lower INR. Margin pressure on corporates on account of increasing commodity prices Rise in political uncertainty These problems are temporary on one hand and not insurmountable on the other. Real estate is facing large slowdown (actually very positive for long term growth) After a moderation in FY09, growth rates may accelerate from FY10 onwards. Globally too, equity portrays a gloomy scenario and the Indian picture is only a reflection of a bigger global problem.
• India’s vulnerability to oil
Equity Markets are forward looking, hence most probably have bottomed out
Investment in Current Market Scenarios
• There are two ways of investing in a bear market – By Buying on dips and selling on rallies and – By buying stocks with strong fundamentals for the long term. It ideally rewards investors who adopt the latter strategy.
• However, few strategies promulgated :– – Short term investors stay away from markets to near medium term – Long term investment horizon always pays – Prefer high dividend yield and low beta stocks – Stay in defensive and non-cyclical sectors
Sensex reverts to attractive P/E’s
Source: CLSA Asia-Pac Markets
Portfolio Summary
•70% equity •5% Cash in liquid funds •25% FMP (Lotus India FMP - 375 Days Series XVII)
Aban Offshore
(BSE: 523204 | NSE: ABAN | ISIN: INE421A01028)
CMP - INR 2306.20 Target - INR 2900
Financials • Operating profit margin increased by 310 basis points to 56.5% on the back of greater operating efficiencies and improved realisations. • The top line grew to Rs2,021.1 crore in FY2008 from Rs718.7 crore in FY2007. • Adjusting net translation loss of Rs194.4 crore for FY2008 on account of adverse exchange rate movements, the net profit of the company stood at Rs317.4 crore in FY2008 Future • Main Demand drivers are sustained increase in oil prices, pressure to accrue new reserves, viability of marginal fields. • Benefiting from increased oil exploration and production activities globally • The resulting robust demand environment is leading to firm day rates for the company’s assets. • In addition to re-pricing of its assets at higher day rates of USD 550,000 to 600,000 • The company is also benefiting from the efforts taken to substantially ramp up the asset base through organic and inorganic initiatives. • Expected stable business with long term contracts • At the current market price the stock trades at 7.1x FY2009 and 5.2x FY2010 estimated earnings.
Entertainment Network India
(BSE: 532700 | NSE: ENIL | ISIN: INE265F01028)
CMP Target
-INR 290.40 -INR 633
•
•
•
•
•
• •
ENIL is a play on two of the fastest growing segments in Indian media: radio and out-of-home advertising. Leading private FM radio operator in India (operates under the brand Radio Mirchi ), with 32 city licenses and marketing tie-ups with 10 radio stations. Rapidly emerging as a key player in the out-of-home advertising industry with contract wins for Mumbai and Delhi airports, Mumbai bus shelters, Delhi metro stations and billboards in the two metros. Businesses (radio, outdoor advertising and events) are city-centric, enabling the company to extract maximum synergies by leveraging its sales networks across divisions. Well-positioned to secure additional funding given the solid financial standing of its promoter group, Bennett, Coleman & Co. Limited Management has a strong track record of execution Trading at an FY2009E P/E of 42x and EV/EBITDA of 15.8x. ENIL reported FY2008 net profit below expectations: loss of Rs171mn (Bloomberg consensus: + Rs54mn)
Cairn India Ltd
(BSE: 532792 | NSE: CAIRN | ISIN: INE910H01017)
CMP Target
- INR 221.65 - INR 374
•Cairn India has a Scottish heritage. Cairn Energy PLC, a UK based crude oil and natural gas E&P company, spun off its India assets into Cairn India Ltd (CIL) in 2006. •Largest producing oil field in the Indian private sector and has pioneered the use of cutting-edge technology to extend production life, with interest in 15 blocks in India, has two processing plants, 11 platforms, 200km of sub-sea pipelines and operations spanning the Indian continent. •Cairn India sells its oil to four major refineries across India and its gas to both public and private buyers. Future •Resource potential to support plateau production of 175,000 bopd from Mangala,Bhagyam and Aishwariya (MBA) fields in Rajasthan •First oil from Mangala on schedule for H2 2009 •Rajasthan growing resource base with long term growth potential •MBA potential plateau gross production ? 175,000 bopd •Enhanced Oil Recovery (EOR) for MBA : potential for plateau extension and enhancement •Pipeline construction commenced •Shifting of delivery point from Barmer to Gujarat coast approved •Already scouting for growth opportunities to invest its strong cashflows from CY10. It is looking to leverage its expertise in exploration (either through auction rounds or farm in opportunities) in the region, project execution in upstream development, etc •Trading at a multiple of 16.6X 2009E & 3.12010E
Larsen & Toubro Ltd
• Larsen & Toubro (L&T), the largest engineering and construction (E&C) company in India, is a direct beneficiary of the strong domestic infrastructure development and industrial capital expenditure (capex) booms. • The international business is expected to emerge as one of the key drivers going forward with immense opportunities from the Gulf Corporation Council markets. • There lies innumerable opportunities in the new verticals in which the company is entering, namely ship building, defence, railways, thermal and nuclear power. •The company is likely to maintain its margins going forward despite rising costs on the back of rising operational efficiencies, larger ticket-size and more complex nature of orders, better raw material sourcing and integration, and higher contribution of its new businesses which carry higher margins. • Its current order book of Rs58,200 crore provides strong visibility to its future earnings, key argument for our bullish view. • We expect the order inflows to continue owing to ongoing capex wave and asset creation drive in Hydrocarbon and Infrastructure segments. We expect the revenue visibility i.e. order backlog to revenue ratio to remain intact at 2.1X-2.2X in FY2008-10E period. •The core business of L&T is valued at 25x FY2010E earnings, or Rs3,038 per share, while the subsidiaries are valued at Rs1,006 per share of L&T. At the current levels, the stock is trading at 18.9x its FY2010E consolidated earnings. Strong order book, good execution skills and good track record and inherent value in subsidiaries make this stock fundamentally strong and must in every portfolio.
Mercator lines Ltd
• Mercator Lines Ltd. is the second largest private sector shipping company in India MLL increased its tonnage from nearly 1.98 million DWT to 2.45 million DWT. Showing an increase of 23%. Current MLL Fleet Size – 29 vessels ,70% of vessels on chartered basis and 30 % on Spot basis. Average fleet age of tanker would be around 14-15 years, while average age of dry bulk carriers will be 2 years. MLL has recently forayed into offshore business and reaping the benefits of the boom in the offshore segment. Placed an order for construction of a new offshore jack up rig at a cost of Rs. 810 crore with Keppel, which is on a 3 year long term charter contract. 92600 USD per day starting from March 2009. Operating profit rose to Rs. 587.3 crore from rs. 322.92 crore, Year on year growth of 99%. Net Profit rose to Rs. 327.6 crore from 134.9 crore in Q4 FY 08, a growth of 142% year on year.
•
• • •
• •
Finally,
In the last 20 years,
we’ve seen …. - Wars, terrorism, droughts & floods, - At least two major financial scandals, - Assassination of 2 prime ministers, - At least 3 recessionary periods, - 10 different governments, and - Sept 11th , Pokharan blasts etc., Yet, GDP has grown nearly 15% p.a. and the Sensex by 19% p.a. Indian equity markets have undergone significant change in the past decade or two and is expected to continue with the changes in sector compositions
doc_654081366.ppt
The presentation on portfolio Restructuring.It covers a lot of companies.
Portfolio Restructuring
Background
• Indian markets was one of the surprises of the last global equity market boom • Led by rising consumption and a high investment rate • Twelfth largest equity market in the world • In the past 10 years, it has delivered returns at a CAGR of 14.9%
Some Statistics
Size and growth make India a compelling asset.
Consumption set to explode
India transitioning to a large economy
India is fast catching up with the bigger economies of the world due to the higher growth rates. The Indian economy will be one of the biggest among developed and developing countries, nearing that of Canada in the coming years.
Source: Based on recent data from Bloomberg
Economy Review
• • • • • • • • • • India is a secular growth story facing a temporary slowdown and some short-term pressures. Stable Consumption demand Robust Investment demand Crude Oil & Steel spike are resulting in higher inflation, interest rates, BOP, Fiscal deficit & lower INR. Margin pressure on corporates on account of increasing commodity prices Rise in political uncertainty These problems are temporary on one hand and not insurmountable on the other. Real estate is facing large slowdown (actually very positive for long term growth) After a moderation in FY09, growth rates may accelerate from FY10 onwards. Globally too, equity portrays a gloomy scenario and the Indian picture is only a reflection of a bigger global problem.
• India’s vulnerability to oil
Equity Markets are forward looking, hence most probably have bottomed out
Investment in Current Market Scenarios
• There are two ways of investing in a bear market – By Buying on dips and selling on rallies and – By buying stocks with strong fundamentals for the long term. It ideally rewards investors who adopt the latter strategy.
• However, few strategies promulgated :– – Short term investors stay away from markets to near medium term – Long term investment horizon always pays – Prefer high dividend yield and low beta stocks – Stay in defensive and non-cyclical sectors
Sensex reverts to attractive P/E’s
Source: CLSA Asia-Pac Markets
Portfolio Summary
•70% equity •5% Cash in liquid funds •25% FMP (Lotus India FMP - 375 Days Series XVII)
Aban Offshore
(BSE: 523204 | NSE: ABAN | ISIN: INE421A01028)
CMP - INR 2306.20 Target - INR 2900
Financials • Operating profit margin increased by 310 basis points to 56.5% on the back of greater operating efficiencies and improved realisations. • The top line grew to Rs2,021.1 crore in FY2008 from Rs718.7 crore in FY2007. • Adjusting net translation loss of Rs194.4 crore for FY2008 on account of adverse exchange rate movements, the net profit of the company stood at Rs317.4 crore in FY2008 Future • Main Demand drivers are sustained increase in oil prices, pressure to accrue new reserves, viability of marginal fields. • Benefiting from increased oil exploration and production activities globally • The resulting robust demand environment is leading to firm day rates for the company’s assets. • In addition to re-pricing of its assets at higher day rates of USD 550,000 to 600,000 • The company is also benefiting from the efforts taken to substantially ramp up the asset base through organic and inorganic initiatives. • Expected stable business with long term contracts • At the current market price the stock trades at 7.1x FY2009 and 5.2x FY2010 estimated earnings.
Entertainment Network India
(BSE: 532700 | NSE: ENIL | ISIN: INE265F01028)
CMP Target
-INR 290.40 -INR 633
•
•
•
•
•
• •
ENIL is a play on two of the fastest growing segments in Indian media: radio and out-of-home advertising. Leading private FM radio operator in India (operates under the brand Radio Mirchi ), with 32 city licenses and marketing tie-ups with 10 radio stations. Rapidly emerging as a key player in the out-of-home advertising industry with contract wins for Mumbai and Delhi airports, Mumbai bus shelters, Delhi metro stations and billboards in the two metros. Businesses (radio, outdoor advertising and events) are city-centric, enabling the company to extract maximum synergies by leveraging its sales networks across divisions. Well-positioned to secure additional funding given the solid financial standing of its promoter group, Bennett, Coleman & Co. Limited Management has a strong track record of execution Trading at an FY2009E P/E of 42x and EV/EBITDA of 15.8x. ENIL reported FY2008 net profit below expectations: loss of Rs171mn (Bloomberg consensus: + Rs54mn)
Cairn India Ltd
(BSE: 532792 | NSE: CAIRN | ISIN: INE910H01017)
CMP Target
- INR 221.65 - INR 374
•Cairn India has a Scottish heritage. Cairn Energy PLC, a UK based crude oil and natural gas E&P company, spun off its India assets into Cairn India Ltd (CIL) in 2006. •Largest producing oil field in the Indian private sector and has pioneered the use of cutting-edge technology to extend production life, with interest in 15 blocks in India, has two processing plants, 11 platforms, 200km of sub-sea pipelines and operations spanning the Indian continent. •Cairn India sells its oil to four major refineries across India and its gas to both public and private buyers. Future •Resource potential to support plateau production of 175,000 bopd from Mangala,Bhagyam and Aishwariya (MBA) fields in Rajasthan •First oil from Mangala on schedule for H2 2009 •Rajasthan growing resource base with long term growth potential •MBA potential plateau gross production ? 175,000 bopd •Enhanced Oil Recovery (EOR) for MBA : potential for plateau extension and enhancement •Pipeline construction commenced •Shifting of delivery point from Barmer to Gujarat coast approved •Already scouting for growth opportunities to invest its strong cashflows from CY10. It is looking to leverage its expertise in exploration (either through auction rounds or farm in opportunities) in the region, project execution in upstream development, etc •Trading at a multiple of 16.6X 2009E & 3.12010E
Larsen & Toubro Ltd
• Larsen & Toubro (L&T), the largest engineering and construction (E&C) company in India, is a direct beneficiary of the strong domestic infrastructure development and industrial capital expenditure (capex) booms. • The international business is expected to emerge as one of the key drivers going forward with immense opportunities from the Gulf Corporation Council markets. • There lies innumerable opportunities in the new verticals in which the company is entering, namely ship building, defence, railways, thermal and nuclear power. •The company is likely to maintain its margins going forward despite rising costs on the back of rising operational efficiencies, larger ticket-size and more complex nature of orders, better raw material sourcing and integration, and higher contribution of its new businesses which carry higher margins. • Its current order book of Rs58,200 crore provides strong visibility to its future earnings, key argument for our bullish view. • We expect the order inflows to continue owing to ongoing capex wave and asset creation drive in Hydrocarbon and Infrastructure segments. We expect the revenue visibility i.e. order backlog to revenue ratio to remain intact at 2.1X-2.2X in FY2008-10E period. •The core business of L&T is valued at 25x FY2010E earnings, or Rs3,038 per share, while the subsidiaries are valued at Rs1,006 per share of L&T. At the current levels, the stock is trading at 18.9x its FY2010E consolidated earnings. Strong order book, good execution skills and good track record and inherent value in subsidiaries make this stock fundamentally strong and must in every portfolio.
Mercator lines Ltd
• Mercator Lines Ltd. is the second largest private sector shipping company in India MLL increased its tonnage from nearly 1.98 million DWT to 2.45 million DWT. Showing an increase of 23%. Current MLL Fleet Size – 29 vessels ,70% of vessels on chartered basis and 30 % on Spot basis. Average fleet age of tanker would be around 14-15 years, while average age of dry bulk carriers will be 2 years. MLL has recently forayed into offshore business and reaping the benefits of the boom in the offshore segment. Placed an order for construction of a new offshore jack up rig at a cost of Rs. 810 crore with Keppel, which is on a 3 year long term charter contract. 92600 USD per day starting from March 2009. Operating profit rose to Rs. 587.3 crore from rs. 322.92 crore, Year on year growth of 99%. Net Profit rose to Rs. 327.6 crore from 134.9 crore in Q4 FY 08, a growth of 142% year on year.
•
• • •
• •
Finally,
In the last 20 years,
we’ve seen …. - Wars, terrorism, droughts & floods, - At least two major financial scandals, - Assassination of 2 prime ministers, - At least 3 recessionary periods, - 10 different governments, and - Sept 11th , Pokharan blasts etc., Yet, GDP has grown nearly 15% p.a. and the Sensex by 19% p.a. Indian equity markets have undergone significant change in the past decade or two and is expected to continue with the changes in sector compositions
doc_654081366.ppt