Sunday, February 7, 2010

Satish Betadpur's under Rs 50 stock picks

City Union Bank:

This is a small bank in Chennai that lends to SME segment and they give working capital loans to the SME segment. They have just finished their fund raising, so they have very high capital adequacy ratio, Tier I is 13% and valuations are very attractive at the price to book of 1.2, very high ROE (Return On Equity) and no NPA (Non-Performing Assets). So this is a clean bank that is right now geared up for growth. As credit off take is going to pick up, we are all expecting that to happen this quarter and this year, the bank should show tremendous earnings growth. So this is a very good bank, clean bank to pick up and own for the long term.

On Hilton Metal Forging:

This is a stock that was listed in 2007. They listed it at Rs 70 at that point. Today, it is at Rs 22. This is a stock that is geared towards oil and gas and petrochemical industry. They make pipe fittings and flanges for other industry. So as oil and gas and petrochemicals start growing, this stock will start doing well. They fell through hard times in the last couple of years after listing because the economy went weak and oil and gas industry also fell under hard times as oil prices fell. If you look at this stock, they can do a Rs 4 EPS (earnings per share) in 2011 very easily, that is a very conservative estimate. So at that price you are getting this stock at a P/E of 5-6. So it is a small cap name, good fundamentals and attractive valuations. So I think it is a good clean story, no management issues and stuff like that, so this is a story about this stock.

On Himatsingka

This again is a complete turnaround story. They did what most companies in India did in 2007, which was go by brands around the world and expand aggressively and then the recession hit, 2008-2009 has been tough years for them. Now, they are coming out of all of this and capacity utilization for their bed and linen factory is almost at 100%. They have also built captive power plants, so that will help improve margins. Their order book is very strong and they are high in bed linen silk manufacturer. So its a turnaround story that has come down from a Rs 140 level to now Rs 42-43. This can again easily have an earnings of about Rs 5 in 2011, so you are getting it less than 10 P/E at this point so again a clean, long term investment story.

On Gammon Infra

Today, I think it has correcting a little, so for long term investor it is a good opportunities to buy. This is a company that is in the best sectors of infrastructure. We like infrastructure as it is and within infrastructure, they are in roads and ports. They are consolidating, they are holding in ports. Valuation again is pretty reasonable because by 2011, we can easily see them do Rs 2 EPS, this is conservative EPS estimates and at that level you are getting it at under around 10-12 times earnings. There is plenty of headroom for investors. If you do get it for a lower level definitely buy it, even today’s level it is very attractive for buying. I think this can easily hit Rs 30 very easily in the next few months or at the best in a year.

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