Rights issue lifts Karur Vysya Bank

Rights issue lifts Karur Vysya Bank. Karur Vysya Bank climbed 6.35%, to Rs 294.10, after the bank filed a draft letter with Sebi for an attractively priced rights issue. A total of 13,641 shares were traded on the BSE.

According to the draft letter sent to the Sebi on Wednesday, Karur Vysya Bank has proposed a rights issue of 1.79 crore equity shares to raise Rs 125 crore. The bank proposes to issue around 1.79 crore equity shares of Rs 10 each, for cash at a premium of Rs 60 per share, aggregating Rs 125.99 crore on a right basis for every two equity share held (1:2).

The issue price of Rs 70 is a huge discount to the current market price of Rs 294.10. The stock has spurted recently. From a low of Rs 496.20 on 10 May, it rose 18.7% in a short while, to Rs 589.45 on 16 May. At the current market price of Rs 294.10, Karur Vysya Bank is trading at 3.44 times its Q1 June 2006 annualized EPS of Rs 85.38. The bank had recently declared a bonus issue of 1:1.

Karur Vysya Bank (KVB) launched new products such as the 90 Plus 24-month term deposit scheme, open to individuals up to 65 years of age, offering 8% interest on minimum deposit of Rs 25,000, and comes with a bundle of offerings such as free accident insurance cover of up to Rs 1 lakh each, for accidental death, permanent/partial disablement and permanent/total disablement and hospitalisation up to Rs 20,000. As part of the KVB Students Savings Account for persons 13 years old and above, the bank will provide account-holders a free Visa debit card with access to the bank's ATMs. Karur Vysya Bank has 239 branches in the country. The bank, which currently has a wide presence in Tamil Nadu, plans to extend its presence in the western and northern states. The bank's focus is on retail and small and medium enterprises segment. Karur Vysya Bank had registered a net profit growth of 2%, to Rs 38.38 crore (Rs 37.62 crore). Net income rose 26.70%, to Rs 218.24 crore (Rs 172.30 crore).

Sensex hits 12,000 for the first time since 18 May 2006

Sensex hits 12,000 for the first time since 18 May 2006. Sensex came off the higher level soon after striking 12,000 in mid-afternoon trade.

At 14:38 IST the Sensex was up 76 points, on 11,970. The Sensex also struck a high of 12,002.94 at 14:27 IST, a gain of over 100 points for the day.

This is the first time since 18 May 2006, that the barometer index has scaled 12,000.

Recently, the BSE Sensex came within striking distance of 12,000 twice – the first time on 6 September 2006, and later on 11 September 2006.

The BSE benchmark has witnessed a steady and sustained rise since late July 2006, but a major correction had eroded 368 points in a single trading session on 11 September, to end on 11,550.69. It has, however, bounced back from that low in the past three days.

It is the banking, auto and software shares which have led the Sensex's spiral over the past few days.

A sharp fall in oil price from a record high of $78 a barrel hit in mid-July 2006, has been a key driver of the Sensex's spiral recently. The fall in global crude oil price eased worries about inflation and interest rates, boosting the bourses. Oil is India's biggest import and falling prices should help alleviate inflation pressures

The next major trigger for global markets is the US Federal Reserve meeting on 20 September. Analysts expect it to hold rates steady, when it meets but they would watch an accompanying statement for clues on the outlook.

For the domestic bourses, the next major trigger is Q2 September 2006 results. The results will start trickling in from early October 2006. Market men expect strong Q2 results from India Inc.

India's long-term growth drivers are a favourable demography (large share of young population), robust domestic consumption and acceleration in infrastructure creation.

Indian equity valuations remain higher compared to their emerging market peers because of the premium attached due to a decent-to-strong earnings growth of the Indian corporate sector. The Sensex currently trades at a PE multiple of about 20.5, based on its trailing 12-month June 2006 earnings.

Unitech jumped 5%, to Rs 270 on sustained buying.

Unitech jumped 5%, to Rs 270 on sustained buying. As many as 10.8 lakh shares changed hands in the counter on BSE. The scrip has firmed up since the past few days. From a low of Rs 192.25 on 1 September 2006, it has risen 40.4%, to current Rs 270.

The stock witnessed wild swings over recent months after the scrip went ex-bonus and ex-split. From Rs 169.50 on 23 June, the stock surged to Rs 289.50. It tumbled to Rs 164.85 on 24 July. The stock moved between Rs 192 to Rs 228 during late July 2006 to late August 2006.

Over the past one year, the scrip has been a multi-bag for investors, having risen from Rs 10.32 on 13 September 2005 (price adjusted for bonus and stock split) to current Rs 270.

The company recently rewarded shareholders with a liberal 12:1 bonus, and also effected a stock-split from the face value of Rs 10 each, to Rs 2 each.

Unitech derives a large proportion of its revenue from real-estate development and construction, which include residential as well as commercial buildings. Unitech's stronghold is the north zone, especially Delhi, Noida and Gurgaon.

In May this year, Unitech bagged a huge Rs 1,583 crore real estate development deal at Expressway, Noida.

Unitech is getting into hospitality in a major way with the development of 15 hotel properties in 5 years.

For Q1 June 2006, Unitech reported 829.7%, surge in net profit to Rs 67.59 crore, on 88.9% growth in revenue to Rs 267.76 crore.

 

Src: capitalmarket

An Outperformer rating and a price target of Rs.150/-

Himatsingka with an Outperformer rating and a price target of Rs.150/-

Investment Positives

-  Himatsingka Seide Ltd. (HSL) is the second largest silk fabric exporter from India. Following its foray into bed linen segment, its capacity is slated to increase from 2.2 mn meters to 22.2 mn meters by FY09.

-  The expansion would help HSL to increase its sales from Rs 1,620 mn currently to Rs 6,000 mn by FY09.

-  Expansion and increase in retail stores from the present 11 to 20 by FY10 would lead to robust growth in sales & profit from the retail segment. The stores presently cater to the domestic market, but HSL
has taken concrete steps to unleash the brand in the international market.

-  Operating margins for the core business is expected to improve from the present 34.3% to 41% by FY08 (an increase of 670 bps) owing to stabilizing raw material prices, strong order book position and saving
in power cost .

-  HSL raised $60mn through a GDR issue in December 2005 to finance its acquisition plan. The management plans to acquire one or two home textile brands in the US/EU markets. We believe that with these acquisitions HSL would become a strong global textile player.

Concerns

-  Lower earnings growth of the key business coupled with low return ratios on account of higher idle cash holdings remains a key concern for the company.

Valuations

-  At its current price of Rs 125, the stock is quoting at P/E of 21x and 12x its FY07E and FY08E and at an EV/EBITDA of 11.5x and 6.3x respectively.  Employing a DCF-based valuation technique; the fair value of the stock is derived at Rs 150.