RJ Once Again... Best is Yet to Come

Friends,

The Big Bull rakesh Jhujhunwala has once again repeated his wordings..... The Best is yet to come.... and that very true... 8 months back he told that there will be Multi decade Bull run yet to come... and once again he said the same things... he is maintaining on his views about long term bullishness of india markets....

For my readers....I am pasting the exact excerpts oh his internew with ET

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At 18000 plus, how would you characterise the market?

Bullish. One with opportunity, with attended risk. Rather than looking at the market levels, we should look at the Indian economy and I see no reason why India's growth will be reversed. Of course, there are attended risks internationally. So overall, the picture is good.

But are the low hanging fruits being plucked?

It depends on what kind of time period you are looking at. If you are looking at 3 to 5 years, there is tremendous opportunity and I do not think even the low fruits have been really hanged because you have seen good news stories coming out every year. The fact that people are feeling difficult and they feel there are no news stories and markets will refuse to go down, is a healthy sign.

How would you describe the market earnings? They surprised us or are we in 2007 when it was a power of liquidity which took markets up?

I do not understand this liquidity and all. Markets go up not because there is abundance of buyers, but because there is a lack of sellers. So markets always go up because there are more buyers than sellers or they go down because there are more sellers than buyers.

So I do not understand all this liquidity because I do not know on what basis you can create fair value and then you can say it is overvalued and it is undervalued. After all, it is the way you see it. So I do not know whether we are in somewhere like 2005, 2006 or 2007.

Do you think we are in that stage of disbelief because retail participation is low? If you look at futures and options open interest also, that is not high by any yardstick.

I do not know about the future interest, future positions and all. But I know one thing, I do not think there is retail participation at all and there is a lot of money waiting on the sidelines. Socially people are not participating in the markets. There is a fair amount of disbelief.

What is Rakesh Jhunjhunwala, the trader, thinking?

Trading is momentum and the markets - although the Nifty and some of these heavyweights are not doing well - are gaining gradually. But they are gaining. So I am a bull at the moment.

Let's say for the next 3 to 6 months, does the directional call for a trader has to have a long bias or a short bias?

I can tell you one thing that there are no directional calls for 3 to 6 months. Directional calls in trading can change overnight, but as circumstances play out today, markets are going up. It is wholly your trade challenger or right now the person who feels that the market is at a turning point will be a bear today.

What is the possibility that we can make a new high in this financial year itself?

I will read the probability high.

Can we make a new high and stay beyond that mark, which is 21000?

I do not know if we can make a new high. I personally think we can, but even if we do not make a new high, I know one thing that direction of the market is upwards and with a good range. Although the international scenario is unknown, my personal opinion for the next 3 to 9 months is that I do not see any adverse thing happening.

Why do you say that?

Because I feel the point where this growth is really going to slow down is still 9 to 12 months away.

Do you think all the problems have been pushed under the carpet and they will not surface up for another 6 to 12 months?

I want to say one thing. Is it a crisis in the system or is it a crisis of the system? So it is not that the world has not borne sub par growth, we will bear it. The world is not going to fall as long as there is confidence in governments and in banking institutions and the financial system.

I do not know if world is going to turn upside down and I do not see India going at less than 8-8.5-9% and if we take the scene on infrastructure and other reform, I do not think world can go at 1.5 and India can grow at 12.

The fact that we are at a 3-year high, Chinese markets are marching towards a new 52-week low. There is a disconnect there. In 2007-2008, the story was different. All markets were going up together and all markets were coming down together. Can this disconnect really last?

It is lasting.

Do you think it is here to stay?

If the Indian economy performs and with what Manish said that day that with the underexposure of equity in India, I see no reason for Indian markets to go down.

On a personal side, you have just turned 50. So how will Rakesh Jhunjhunwala in his 50 be different from Rakesh Jhunjhunwala in his 40s?

Rakesh Jhunjhunwala is going to live more for himself now. I reflected a lot, I thought a lot on my 50th birthday. It has been one of the most important birthdays in my life, not in terms of celebration but in terms of retrospect. I want to know what I enjoy. I want to give more time to my children, my family, to my health.

What Else is remaining now?????????

Some More Stocks.....

Friends,

Today i am writing about some stocks which are not known to only few.... these stocks dont have fat balance sheets and/OR dont have too much business revenues but everyone is linked with a story.....


this is not a buy call.... you have to take your own call..... couple of weeks back i have mentioned such a list and out of which AK Capital & VIP has almost doubled from those levels... so its upto you on which you have to take a call......


Every stock mentioned below should be studied.... must go through bseindie website for more details... read each and every announcement and try to find out why i am writing this stock here....

1)Facor Alloys
2)Trend Electronics(Highly undervalued, Old name was Videocon Communications)
3)Maithan Alloys
4)Compucom Soft ( Can be a Dark Horse)
5)Ganesh Polytex (Into a niche area of bottle/pet recycling)
6)Cronimet Alloys (Mining Play, Debt Free)
7)Ashtvinayak
8)Stone India

I will come back with details on each of these above mentioned stocks.....

PLEASE NOTE... this is not a buy call ..... everyone has to decide his own....

Surya Amba Spinning Mills.. CMP: 69...

Friends,

I have written in my previous blogs that education sector is going to flourish in time to come............ there will be a huge spending and investment over education sector in decade to come... in fact things have started to come out in education space... many websites for e-learning, smart classes modules etc etc....

Many big houses are trying to take-up stake in education services companies...

Now FIRST TIME i am saying that textile sector will start showing tremendous growth once again.... in 1990s it was one of most favorite sector.... though i not seen that era by my eyes but i have read stories about textile sector performance in those days...

Surya Amba Spinning Mills is going great now... It can prove to be a Dark Horse in this space....

MarketCap : 15.5 Crores........... Sales in Q1 2010: 27 crores...... EPS for this quarter is 6.... If this performance can be repeated then Surya Amba Spinning Mills can be a true multibagger from hereon also........ Think of EPS:21 for full 2010..... now estimate the price after one year yourself..........

Why i am very interested in this stock is due to its equity....Just 2.2 Crores... It is a very tiny equity... i love to see this..... very less number of stocks..... when profit will be shares among this small equity, it will reflect exponentially in share price...... thats the benefit of small equity.....

63% of shares are in strong hands.... Promoters are very experienced and good in management....they are very much experienced in this business line.....

Shares of this company has listed on 3-September-2009........Shares of Suryaamba opened at Rs 31 and surged to a high of Rs 41 within first few minutes of trade on the BSE. The company listed 22.28 lakh shares on the bourse. Earlier in 2007, the manufacturer and exporter of polyester Suryalata Spinning Mill (SSML) had demerged its yarn division into Suryaamba Spinning Mills Ltd....

Actually it has got demerged from suryalata spinning mills....

Suryaamba Spinning Mills Limited was incorporated on 5th May, 2007 to take over the spun off unit situated at Nayakund, Ramtek, Nagpur is being Managed by Managing Director Sri Virender Kumar Agarwal. Sri Virender Kumar Agarwal has experience of more than 15 years as Director in Suryalata Spinning Mills limited, in this line of activity.

Its clientele list is very long...Highly renowned clients like EXSA (U.K.) Ltd., Eurovistaa Trading Co. Ltd., Reliance India Ltd. and many others ....


There are many many other textiles companies which can give you exponential returns but those were already recommended by others... so i would not like to mention them here.... if anybody want to know then i can be reached at my email ID......

Till Now, nobody has come up with a detailed report on Surya Amba Spinning Mills.... This is a first call ever on this company....

Before investing one has to decide his/her own and should consult others before investing...

Three U's ...UB Engineering, UFlex & UTV

Friends,

UB Engineering has already doubled at Rs216 from where i recommended..... conservative investor may sell 50% of their holding and should hold remaining 50% as free stocks..... it is a great pleasure to see the free stocks value swelling

There are a lot of expansion plans going forward in uflex... this can prove to be a real multibagger from here also.... i have written down on this stock in past also...

UTV Software has come out with superb result for this quarter..... there is a 11 page pdf file about the earnings on bseindia.com

Here is the link:
http://www.bseindia.com/stockinfo/anndet.aspx?newsid=4b5e033f-3d1b-4db7-9de1-01aee77ede4c

One has to download it and has to read it very carefully..... they have target fo 65% growth in revenues and doubling their PAT(Profit after tax) in FY2011.... i have found something very interesting about UTV Softwares... I am pasting the exact excerpts here(in BLUE COLOR)...

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Over the last 8 quarters we have been steadily investing and growing our businesses: a. Motion Pictures; b. Broadcasting and TV Content; c. Games Content and New Media.

We are pleased to report that we feel good and confident about FY11. Just for record consolidated annual revenues for FY10 were placed at Rs 682 crore, EBITDA at Rs 68 crore and PAT at Rs 50 crore. As against the FY10 performance, the on-going FY11 should see Revenues exceed Rs 1200 crore, a growth of 65 per cent yoy, and EBITDA margins of 16-18 per cent. On a conservative basis profit should exceed Rs 100 crore, with no planned or perceived Equity dilution during the year.

At a much later stage, and when valuations are wealth accretive to existing shareholders UTV will mull listing separately the Boradcasting entity, and/or raise upto Rs 750 crore through a QIP. But as stated earlier, the management does not consider current value of the company as being reflective of it’s inner strength and growth potential and so no placement are perceived anytime soon.

Outlook FY11

A.Motion Pictures

FY11 will have the best slate of movies till date, with the year starting very well with “Rajneeti”.

The two key factors instrumental in shaping a positive outlook are-cost model has achieved optimal and sustainable levels for growth; an internal mandate has been created to pre-sell/Sell all Satellite TV rights on an outright basis for a limited number of years, Audio/Music/ Home Video Rights cover 50 per cent of the costs of producing a new movie and to that extent the movie model has been de-risked.

While Rajneeti is likely to fetch UTV upward of Rs 80 crore, “I Hate Love Stories” will bring in roughly Rs 38 crore. These two will be followed up with “Peepli Live”, “Udaan”, “Guzarish”, “No One Killed Jessica”, “Pan Singh Tomar”, “Chillar Party”, “We Are Family”, “Saat Khoon Maaf”, “Tees Maar Khan”, and “Delhi Belly”.

Pre-sale of TV and Music rights for some of the forthcoming movies have brought in Rs 80 crore, while for FY11 Movies will fetch over Rs 450 crore with an EBITDA of Rs 180 crore.

B. Broadcasting & TV Content

The small screen business comprises 4 channels, TV content production in 6 languages for different broadcasters including Sun TV and a Dubbing Division.

-UTV Bindass is a success with the 15-24 age group.

-UTV Action-Top channel targeted at the young male population.

-UTV World- is a Power brand reaching out to the HNIs, and will compete with established Movie channels like Star Movies and HBO.

-UTV Movies-is a GEC channel with a mix of Ad and Subscription Revenue and a growing reach in the overseas markets.

The programmes being aired on SUN TV, Star Plus, Imagine and Sony are likely to reap in growth rates ranging from 40 per cent to 200 per cent.

On Annualised basis, this segment will bring in Rs 220 crore in Revenues during FY11. Combined, the Broadcast and TV Content will bring in Rs 380 crore for FY11.

C. Games and New Media

UTV Mobile Games is the only online subscription games platform with Games On Demand and has tie-ups for game channels on DTH in India. With a highly cost efficient studio in Vashi-this division is poised to capture opportunities for 3G and 4G in India. IndiaGames should report Rs 50 crore in Revenues and bring in EBITDA margins of 10-15 per cent.

Online Games-With a creative studio in Austin, Texas and a strong backend outsourcing in Beijing, China-the Online Games entity will have 4 games on the floor-the first will be released in August 2010 called Mytheon. This division should bring in Rs 40 crore in Revenues for FY11 with operating margins of 15 per cent.

Console Games-business has a growing publishing business. 5 IPs are ready for launch during FY11 on multiple platforms like PS3, Xbox360 and PCs. This too should bring in Rs 40 crore during FY11 with an EBITDA margin of 20 per cent.

New Media-is still in the nurturing stage.

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I have some good reports about UFlex that contains each and every expansion plan..... I cant upload those reports here... If anyone wants them then i can be reached at my email ID.....

Keep and eye on Pennar Industries as well.....

Also, KP Capital is going great... reached 493 levels............. Enjoy....

The Era of Microfinance....SKS Microfinance

Friends, I Simply cant stop myself on the HOT TOPIC these days... and that is Microfinance.... What microfinance means.. It means lending very small money to needy people on a high interest rates..... this field is catching up in india now..... I have written many times that i am very very bullish on the Education space , likewise on Microfinance too......

There are few listed companies of Microfinance... One such company related to microfinance is SE Investment and it has already become a multibagger.......

I am pasting the exact article from capitalmarket.com on SKS Microfinance.... Read it carefully...

SKS Microfinance, promoted by Dr. Vikram Akula, was originally founded as Swayam Krishi Sangam or SKS Society in 1997 and functioned as a non-governmental organization (NGO) that provided microfinance in Andhra Pradesh. SKS Society transferred its business and operations to SKS Microfinance as a newly incorporated private limited company in India in 2003. SKS Microfinance is the largest Microfinance Institution (MFI) in India in terms of total value of loans outstanding, number of borrowers (called members) and number of branches.

SKS Microfinance is a non-deposit taking non-banking finance company (NBFC-ND), registered with and regulated by the Reserve Bank of India (RBI). It is engaged in providing microfinance services to individuals from poor segments of rural India.

The company’s core business is providing small loans exclusively to poor women predominantly located in rural areas in India. These loans are provided to such members essentially for use in their small businesses or other income generating activities and not for personal consumption.

The Company utilizes a village centered, group lending model to provide unsecured loans to its members. This model ensures credit discipline through mutual support and peer pressure within the group to ensure that individual members are prudent in conducting their financial affairs and are prompt in repaying their loans. Failure by an individual member to make timely loan payments will prevent other group members from being able to borrow from it in the future; therefore the group typically make the payment on behalf of a defaulting member or, in the case of willful default, use peer pressure to encourage the delinquent member to make timely payments, effectively providing an informal joint guarantee on the member’s loan.

The company also uses its distribution channel to provide other services and goods that it founds that its members need. For instance, it also distributes and administers life insurance policy products for its members and has pilot programs to provide loans to its members to purchase select consumer products that increase their productivity.

The company is coming with an IPO to raise around Rs 1427 crore at the lower band of Rs 850 per share (Rs 633 crore from fresh issue) and Rs 1654 crore at the upper band of Rs 985 per share (Rs 733 crore from fresh issue) consisting of a fresh issue of 7,445,323 equity shares and an offer for sale of 9,346,256 equity shares by Sequoia Capital India II LLC, SKS Mutual Benefit Trust - Narayankhed, SKS Mutual Benefit Trust - Jogipet, SKS Mutual Benefit Trust - Medak, SKS Mutual Benefit Trust - Sadasivapet, SKS Mutual Benefit Trust - Sangareddy, Kismet Microfinance and Mauritius Unitus Corporation.

The company intends to utilize the net proceeds to augment its capital base to meet its future capital requirements arising out of growth in the business and to achieve the benefits of listing on the stock exchanges.

Strengths

Huge gap in Microfinance demand and supply: According to the 2008 Inverting the Pyramid Report by Intellecap, an independent industry research firm, the total estimated demand for micro-credit in India was approximately Rs. 2,39,935 crore with estimated total loan disbursements at approximately Rs. 20,072 crore.

As of March 31, 2010, the company had 2,029 branches in 19 states across India with no state accounting for more than 28.8% of its outstanding loan portfolio.

Capital adequacy ratio as of March 2010 stands at comfortable 28.3% compared to the EBI mandated minimum of 12% as of March 2010 and 15% as of March 2011.

Gross NPA and Net NPA are just 0.33% and 0.16% respectively at the end of FY’10.

The company lends to micro enterprises who earn returns in the range of 29% to 246% mainly due to use of family labours, low infrastructure costs and no taxes or legal costs. This helps SKS Microfinance to charge higher interest rate from its customers.

Weaknesses

Currently there is no interest rate cap on the lending by the microfinance institutions. MFIs typically charge high interest rate to its customers ranging between 26% to as high as 31%. There is risk perception that regulator may pitch in and put a cap on interest rate charged and regulate the sector. As the costs and risks in this business are also high, any unreasonable cap will severely impair the business prospects.

Microfinance as a business is still in the evolution stage.

Due to the unsecured nature of advances and very low income earning capacity of the borrowers with little savings, the default risk in this business is high.

Natural calamities like floods etc, political instability, social strife in certain areas can severely impair the borrowers’ ability to pay and lead to mass defaults in particular areas/states.

Due to the nature of operations, large amount of cash is handled with attendant risks of theft, fraud, misappropriation, violent crimes against its employees etc.

Microfinance has been traditionally met through informal sources including non-government organizations, or NGOs; cooperatives; community-based development institutions like Self Help Groups, or SHGs, and credit unions. Better flow of funds to these institutions, or more involvement of banks in direct financing of small borrowers or government sponsored schemes for facilitating flow of funds at lower cost to the poor segments of the society can pose stiff competition to the company as it charges comparatively high interest rates.

Valuation

SKS Microfinance’s EPS for FY’10 on post-issue equity works out to Rs 24.3. At the price band of Rs 850 to Rs 985 (without considering discount of Rs 50 to retail Investors) P/E works out to 35.0 to 40.5 times. Considering discount of Rs 50 to retail investors P/E works out at 32.9-38.5.

Post-issue Book Value comes out to Rs 218 and Rs 232 at issue price of Rs 850 and Rs 985 respectively (and also considering discount of Rs 50 to retail investor for 30% of issue size). P/BV at both the bands works out to be 3.9 and 4.2 times, respectively.

Pre-issue Book Value is Rs 147.3. P/BV at lower band of Rs 850 works out to be Rs 5.8 while at higher band of Rs 985 works out at Rs 6.7.

The only comparable listed entity in microfinance is SE Investments with sales of Rs 88.36 crore and net profit of Rs 26.34 crore in FY’10 almost one-tenth of size of SKS Microfinance. It is currently trading at P/BV of 3.4. These valuations are extremely high considering the valuations at which banks and other NBFCs are traded. However, Gross revenue of the SKS Microfinance has grown at a CAGR of 176% in last 4 years ended March 2010 while net profit has grown at a CAGR of 223% over the same period. The high asking valuations are based on this high growth rates. However these growth rates are in a stage where the segment is just evolving and can not be sustained over a medium-to-long term.

My Comments....

Issue seems to be be overvalued if you compare it with banks and its other peers... but this is what market is going to believe....... Issue Price is high keeping in mind its recent exponential growth.... and it ia a long term play from here itself..... this company is the market leader in its space... absolutly no comparison in size and business turnover.... It has strong retrn ratio's and superior asset quality.....

Many Other companies are going in Microfinance business..... I know many companies in this space... but readers has to find out by themselves.... According to me SKS finance is a good long term bet.....