After nearly a weak long stand off between the protesting pilots and the management of Jet Airways which led to daily losses to the tune of $2.2 million, Monday was the time of revival with stocks rising by 5.05% during early morning trade. On 14 September, the Jet shares rose by 13 points or 5.05% to trade at 570.40 before settling close to 3% as of 11:40 a.m.
In addition to the returning of pilots to work after the strike, the company has offered as much as 50% in total fares for passengers traveling by economy class across all domestic flights. During the strike, about 250 domestic and international flights got cancelled leading to about 1,00,000 passengers getting stranded at various Airports all over the world.
Under the agreement reached between the pilots and the company board, a consultative body would be constituted which would include 5 pilots in addition to 2 members from the company’s Board of Directors. The purpose of setting up this group is to facilitate constant dialogue between the management of the company and the pilots in future.
Monday, September 14, 2009
BPCL plans to sell stake at Bina Refinery
Bharat Petroleum Corporation Ltd., a government run oil and gas company is looking for private equity investors to sell its stake in Bharat Oman Refinery which was set up in collaboration with Oman Oil Company. The plant in Bina in Madhya Pradesh is a joint venture between the BPCL and Oman Government’s company and has a capacity of producing six million tonnes per annum.
According to newspaper reports, in addition to private equity investors, the company is also looking towards its partner in the venture, Oman Oil Company to buy its 26% stake in the company for a sum of Rs. 1,200 crore. If this goes through, the company would be holding a total of 28% of the total equity from its current 2%.
The Bharat Oman Refinery was set up jointly by BPCL and OOC which invested Rs. 75 crore each. The rest of the funds for the venture came from Rs. 4,000 crore equity and Rs. 6,400 crore debt.
Meanwhile, the stocks of BPCL, which is listed on Bombay Stock Exchange rose by 20.2 points or 3.6% during the day to trade at 580.00. At the time of writing this report, the stocks were trading positive with a gain of 10.20 points or 1.82% at 570.00.
According to newspaper reports, in addition to private equity investors, the company is also looking towards its partner in the venture, Oman Oil Company to buy its 26% stake in the company for a sum of Rs. 1,200 crore. If this goes through, the company would be holding a total of 28% of the total equity from its current 2%.
The Bharat Oman Refinery was set up jointly by BPCL and OOC which invested Rs. 75 crore each. The rest of the funds for the venture came from Rs. 4,000 crore equity and Rs. 6,400 crore debt.
Meanwhile, the stocks of BPCL, which is listed on Bombay Stock Exchange rose by 20.2 points or 3.6% during the day to trade at 580.00. At the time of writing this report, the stocks were trading positive with a gain of 10.20 points or 1.82% at 570.00.
Tuesday, September 8, 2009
Oil India IPO hits markets today
The much awaited Initial Public Offer of 2.64 crore equity shares of face value Rs. 10 by Oil India Ltd., the second largest Oil and Gas Company in India will be open on Monday.
The shares of the company which come at a price band of Rs. 950 and Rs.1050 through 100% book building method is the second such occasion in recent times when a state run firm is going public. Earlier, the Initial Public Offer of shares of National Hydro Power Corporation received overwhelming response from the primary market with the issue getting oversubscribed 23 times. The OIL IPO would close on September 10.
Out of the 2.4 crore equity shares open for purchase, 24.0 lakh have been kept for subscription by the employees of the company who would be issued the share at issue price.
With this IPO, the company plans to raise between Rs. 4,507 crore and Rs. 4,982 crore. Out of this, the government is expected to earn between Rs. 1995 crore and Rs. 2,205 crore. Government would also sell the 10% of its total holdings in the company to several oil and gas majors such as Indian Oil, Bharat Petroleum and Hindustan Petroleum which would effectively bring down the government’s total holding from 98.13% to 78.5%.
The shares of the company which come at a price band of Rs. 950 and Rs.1050 through 100% book building method is the second such occasion in recent times when a state run firm is going public. Earlier, the Initial Public Offer of shares of National Hydro Power Corporation received overwhelming response from the primary market with the issue getting oversubscribed 23 times. The OIL IPO would close on September 10.
Out of the 2.4 crore equity shares open for purchase, 24.0 lakh have been kept for subscription by the employees of the company who would be issued the share at issue price.
With this IPO, the company plans to raise between Rs. 4,507 crore and Rs. 4,982 crore. Out of this, the government is expected to earn between Rs. 1995 crore and Rs. 2,205 crore. Government would also sell the 10% of its total holdings in the company to several oil and gas majors such as Indian Oil, Bharat Petroleum and Hindustan Petroleum which would effectively bring down the government’s total holding from 98.13% to 78.5%.
Sunday, May 10, 2009
I hate missing opportunities like these...
Back in 2007, when I started investing seriously, I began with the process of short-listing small-cap stocks - and one of the stocks I considered was Temptation Foods. However, I finally rejected this idea on liquidity and corporate governance concerns. Well, how I have rued that decision! For the last two years, the company has gone on to make significant brand acquisitions, strengthened its management and operations and the stock has made a journey from 1.5 to 80 to 320 and then down to a minimum of 20 in Mar 2009. It last closed at Rs. 33 Is it time to pick up this stock again?
THE COMPANY:
Temptation Foods is a food processing company with three main brands:
THE FINANCIALS:
Summary of financials over last 3 years in crores:
* Based on quarterly results
Roughly 8.5% EBITDA margins is not so bad nor so great in this FMCG-like sector. But then the revenue growth is impressive and most importantly, zero debt (as per Mar 2008). The market cap as of 29-Apr-2009 was INR 83 cr - a P/E of 1.5 and an EV/EBITDA of 1.1.
THE RISKS:
Like in 2007, corporate governance is still an issue. Another controversy this February - Temptation had, since late 2008, been making disclosures of its increasing stake in another food procession company - Kohinoor Foods. In Feb 2009, SEBI asked the MD to stop making false disclosures. Kohinoor's register showed Temptation as holding only 2.28% of shares. The company, it seems, had pledged 7% of Kohinoor shares with an NBFC who had gone on to sell them. To me, the disclosure is less alarming than the pledging of shares for a company with close to zero debt.
Yes, there are issues with this company - but I would still lean on the long side for this stock. Temptation Foods is an emerging player in a high-growth, nascent industry. The strengths - strong brands, growing industry and export potential - far outweigh the risks at the current price. To discuss more about this stock, goto blogs on fourstocks.com
Monday, April 27, 2009
JP Hydro: Stable returns in an uneasy world?
In our quest for value, we look at stocks with varying risk-reward profiles, from the high-risk, high-return startup to the low-risk Govt bond. Power generation from natural sources (where the fuel does not cost) and power transmission fall on the latter end of this scale. Jai Prakash Hydro-Power Ltd (JPHYDRO) is one of the best assets in this sector, both in terms of asset demarkation (the most prominent asset in the company is a 300 MW commissioned hydro plant) and in terms of leadership (its the only private company with commissioned hydro assets of this scale).
THE BUSINESS: The company commissioned BASPA-II, a 300 MW hydro plant in Himachal Pradesh in the year 2003. 88% of the generated power is sold to HP State Electricity Board (HPSEB) at Rs. 2.74 per unit till 2043 as per PPA (Power Purchase Agreement). 12% is provided to the state for free.
Click here to read full article.Monday, April 20, 2009
Suzlon - Blowing in the wind
A Rs. 8700 cr (USD 1.7bn) market cap wind turbine giant, with Rs. 15,000 cr (USD 3.0 bn) debt on balance sheet is struggling to raise Rs. 200 cr (USD 40 mn) for buying out the minority shareholding of another smaller wind turbine manufacturer in which it already owns 74% equity and 91% voting rights. Having exhausted traditional market fund-raising options, it is now knocking on the doors of obscure hedge funds and private equity players. Does that sound absurd? or does it? Suzlon Energy's troubles today are a result of some ill-timed ambitious expansion plans laid way back in 2005, mixed with some operational disasters in an industry with some very interesting peculiarities.
Wind energy does seem like a very simple business – manufacture turbines, blades and towers and sell them to wind-farm developers and utilities at a decent margin. When Suzlon was growing in India in 2000-2005, it was indeed that simple. The company had the technology to manufacture/source all components for machines upto 1.5MW. As wind energy was new in India, the company was quick to build land banks in wind-intensive states and sell wind farms to industrials interested in owning them. The company made a healthy 20 to 25% EBITDA margin and was further aided by two key factors - debt was cheap and technology requirements were not onerous (as the Indian peninsula is a low-wind regime area as opposed to sites in Europe, US and Australia).
Click here to read full article.
Wind energy does seem like a very simple business – manufacture turbines, blades and towers and sell them to wind-farm developers and utilities at a decent margin. When Suzlon was growing in India in 2000-2005, it was indeed that simple. The company had the technology to manufacture/source all components for machines upto 1.5MW. As wind energy was new in India, the company was quick to build land banks in wind-intensive states and sell wind farms to industrials interested in owning them. The company made a healthy 20 to 25% EBITDA margin and was further aided by two key factors - debt was cheap and technology requirements were not onerous (as the Indian peninsula is a low-wind regime area as opposed to sites in Europe, US and Australia).
Click here to read full article.
De-risking you portfolio in a bear market - II
In part I of this series, we looked at how we can hedge our portfolios using futures. In this part, we explore ways to hedge portfolios using another derivative instrument, options. Firstly, we want to emphasize that we will not provide an introduction on how options work. One can read a good primer at http://www.investopedia.com/university/options/option2.asp.
>HEDGING AGAINST MARKET RISK USING OPTIONS CONTRACTS:
The way to hedge for market risk is to buy put options for a percentage of the notional of the portfolio (how much, is based on one's market view). In India, the most traded and liquid option contracts are on the NIFTY...Click here to read full article.
>HEDGING AGAINST MARKET RISK USING OPTIONS CONTRACTS:
The way to hedge for market risk is to buy put options for a percentage of the notional of the portfolio (how much, is based on one's market view). In India, the most traded and liquid option contracts are on the NIFTY...Click here to read full article.
Saturday, March 28, 2009
Sticking that neck out - 7 predictions for the quarter
My top predictions for Apr-Jun quarter of 2009. Yep, the summer of joy!
Equity markets will soon and suddenly "realize" that it takes a lot more than goodwill to make the Geithner plan work. Someone will have to be poorer; and it definitely is not going to be the private funds bidding for mortgage-backed paper. Treasury will need to do the subsidizing for these private funds to "buy" the paper at inflated rates. Just try explaining that to an already whining US congress! Expect equity markets world-over to see new yearly lows. (That was as easy one, wasn't it?!)
Closer home, the Congress, backed by a host of parties constituting the "secooler alliance" will come back to power. Brace yourselves to watch the "Bow before thee, sonia maatey" circus again.
The Congress will not, however, be the single largest party. The single largest party will be forced to sit in the opposition.
Concerns about India's fiscal deficit - already Central plus State running at 9% of GDP - will lead to a massive sell-off in the Rupee. Expect USDINR to cross 56 this quarter.
Expect to see the steepest yield curve in Indian memory: short-term rates at <2% and 10 year yields at >7%.
With no relief in long-term interest rates, real estate will take another bout of hammering. The market will reflect this by trashing real estate and stocks, notably Ansal Infra, Unitech and Parsvnath.
The South African Rand will be one of the better performing currencies for the quarter - thanks to the IPL. Book your flights now...they will only get more expensive with time!
Equity markets will soon and suddenly "realize" that it takes a lot more than goodwill to make the Geithner plan work. Someone will have to be poorer; and it definitely is not going to be the private funds bidding for mortgage-backed paper. Treasury will need to do the subsidizing for these private funds to "buy" the paper at inflated rates. Just try explaining that to an already whining US congress! Expect equity markets world-over to see new yearly lows. (That was as easy one, wasn't it?!)
Closer home, the Congress, backed by a host of parties constituting the "secooler alliance" will come back to power. Brace yourselves to watch the "Bow before thee, sonia maatey" circus again.
The Congress will not, however, be the single largest party. The single largest party will be forced to sit in the opposition.
Concerns about India's fiscal deficit - already Central plus State running at 9% of GDP - will lead to a massive sell-off in the Rupee. Expect USDINR to cross 56 this quarter.
Expect to see the steepest yield curve in Indian memory: short-term rates at <2% and 10 year yields at >7%.
With no relief in long-term interest rates, real estate will take another bout of hammering. The market will reflect this by trashing real estate and stocks, notably Ansal Infra, Unitech and Parsvnath.
The South African Rand will be one of the better performing currencies for the quarter - thanks to the IPL. Book your flights now...they will only get more expensive with time!
Monday, February 16, 2009
Age of yo-yo economics
Remember the period Jul 2007 to Jul 2008? Oil was rallying to unprecedented heights and many central bankers were still talking about the inflation threat. When Ben Bernanke started cutting rates aggressively, economists were divided on whether the hawkish ECB was doing a better job when compared to a seemingly rattled Fed at countering inflation. Considering the political sensitivity of the topic in India, the RBI was on inflation high-alert.
All this until we learnt a new phrase "Demand Destruction", suddenly commodity prices plummeted and everyone was talking about the serious risk of deflation, Japan and the lost decade.
Today, govts and central banks are tackling the recession in a 2-pronged manner - Govts announcing major stimulus packages and Central banks keeping short-term interest rates low. The aim for central banks to keep short-term interest rates low is a) to make sure inter-bank lending mkt functions smoothly and b) for this to transmit itself in the form of lower long-term bond yields, as most consumer loans (home and auto) & industrial loans...
Click here to read full article.
All this until we learnt a new phrase "Demand Destruction", suddenly commodity prices plummeted and everyone was talking about the serious risk of deflation, Japan and the lost decade.
Today, govts and central banks are tackling the recession in a 2-pronged manner - Govts announcing major stimulus packages and Central banks keeping short-term interest rates low. The aim for central banks to keep short-term interest rates low is a) to make sure inter-bank lending mkt functions smoothly and b) for this to transmit itself in the form of lower long-term bond yields, as most consumer loans (home and auto) & industrial loans...
Click here to read full article.
Friday, February 13, 2009
De-risking your portfolio in a bear market (Part-I)
With the market having sold off by 50% over the last year, long-term investors now face a dilemma of sorts.
On the one hand is the view that valuations are now attractive and this is a great time to pile into the stocks of some of those companies you have been tracking for sometime now. On the other hand is the fear of a prolonged recession and markets remaining depressed (or worse, falling to new lows). Eitherways, you risk feeling like an idiot – “Damn, It was the buying opportunity of a lifetime and I missed out. My portfolio would have doubled in value if I had taken the plunge.” OR “What was I thinking? The whole world, from top hedge fund managers to the shoe-shine boy knew this crisis was getting worse”. At FourStocks, these are the issues we think about...all the time. And here we discuss how, as a serious investor, you can 'de-risk' your portfolio.
The biggest risk during a downturn is the risk of a broad market sell-off in spite of your stocks/companies performing better than their peer group or industry. Despite your good selection of stocks, you could still make a loss on your overall investment. For example, look at companies like BHARTI AIRTEL, L&T, INFOSYS and ONMOBILE. In spite of significantly outperforming their peers and decent income growth yoy, their stock price could not avoid a beating since Jan 2008.
So, what we need to do is remove the 'market risk' from your portfolio and retain only the 'outperformance' of your portfolio over the market. The tools to do this are using derivatives - futures or options. In this 3-part series, we discuss how to hedge portfolios with derivatives. In this article we will discuss the basics of portfolio hedging with futures. The next article will cover portfolio hedging with options and the final article will elaborate on issues like roll-over, rebalancing, taxation, brokerage and on bringing it all together.
Click here to read the first article of the series.
On the one hand is the view that valuations are now attractive and this is a great time to pile into the stocks of some of those companies you have been tracking for sometime now. On the other hand is the fear of a prolonged recession and markets remaining depressed (or worse, falling to new lows). Eitherways, you risk feeling like an idiot – “Damn, It was the buying opportunity of a lifetime and I missed out. My portfolio would have doubled in value if I had taken the plunge.” OR “What was I thinking? The whole world, from top hedge fund managers to the shoe-shine boy knew this crisis was getting worse”. At FourStocks, these are the issues we think about...all the time. And here we discuss how, as a serious investor, you can 'de-risk' your portfolio.
The biggest risk during a downturn is the risk of a broad market sell-off in spite of your stocks/companies performing better than their peer group or industry. Despite your good selection of stocks, you could still make a loss on your overall investment. For example, look at companies like BHARTI AIRTEL, L&T, INFOSYS and ONMOBILE. In spite of significantly outperforming their peers and decent income growth yoy, their stock price could not avoid a beating since Jan 2008.
So, what we need to do is remove the 'market risk' from your portfolio and retain only the 'outperformance' of your portfolio over the market. The tools to do this are using derivatives - futures or options. In this 3-part series, we discuss how to hedge portfolios with derivatives. In this article we will discuss the basics of portfolio hedging with futures. The next article will cover portfolio hedging with options and the final article will elaborate on issues like roll-over, rebalancing, taxation, brokerage and on bringing it all together.
Click here to read the first article of the series.
Tuesday, February 10, 2009
World indices - 2007-09 performance
Considering FII inflow/outflow creates the incremental volumes required to drive markets, its interesting to see how Indian indices' performance compares to other major world indices over last 2 years.
From the numbers below, it looks like Indian indices (NIFTY and SENSEX) lie in the middle of the pack, with the Brazilian Bovespa being the best performer and the FTSE being the worst (in currency adjusted terms)...
Click here to read full analysis and for index performance tables.
From the numbers below, it looks like Indian indices (NIFTY and SENSEX) lie in the middle of the pack, with the Brazilian Bovespa being the best performer and the FTSE being the worst (in currency adjusted terms)...
Click here to read full analysis and for index performance tables.
ANALYST SHORTS MORE PROFITABLE THAN LONGS?
On popular demand we have published the results of our analysis on whether analysts are more accurate when they say SELL as compared to when they say BUY. At fourstocks.com , we have tracked the performance of thirteen analysts (brokerages & banks) starting from Sep 2008.
Here is a summary of the results:
The original post also discusses the implications of these results and our theories on why this bias exists. Read the full post at blogs on fourstocks.com
Here is a summary of the results:
- Of the total 500 picks tracked, 78% are long picks and 22% are short picks.
- While the accuracy of longs is 31%, the accuracy of shorts is 67%. Accuracy is defined as % of picks outperforming (underperforming) the index divided by total number of long (short) picks
- An average short pick outperforms the index (NIFTY) by 9.5% while an average long picks underperforms the index by 9.8%.
- The results are not vastly different if we consider only the best six performing analysts.
- While it is too small a time period to call these results statistically significant (something with reasonable predictive power), it does provide us with a pointer for something we need to look at closely in the future.
The original post also discusses the implications of these results and our theories on why this bias exists. Read the full post at blogs on fourstocks.com
Subscribe to:
Posts (Atom)
