Aashish Tater, Head of Research, Fort Share Broking has pickedEsab India and Phoenix Mills as his multibagger stock ideas for the day.
"Melrose came out with a open offer with 780 pence for the parent Charter Plc which is a holding company for Esab Holding Pvt Ltd which is a parent for Esab India. We have a target of Rs 1,000 if there is an open offer from Melrose. We will definitely ask our investors not to tender into the stocks because roughly we feel that open offer can come somewhere around Rs 550 to 600 depending upon the conditions. But on longer term this stock is a portfolio bet from our side."
"Last time talking about realty we had a long call on Parsvnath and a short call on Unitech and we covered our shorts on Unitech . Now we want to diversify our part of our portfolio into another safe bet which is Phoenix Mills . Every time there is a market correction one should be entering this stock at around at Rs 180-185 and should be looking to exit around Rs 230 and that too only of 50% of what you hold."
Below is the verbatim transcript of his interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video.
On Esab India:
Esab India is a story which we broke out for Elantas Beck where the parent itself is a de-listing candidate. We will not see robust returns like what we saw in Elantas Beck because the free float is available right now is close to 45%.
Recently, Melrose came out with a open offer with 780 pence for the parent Charter Plc which is a holding company for Esab Holding Pvt Ltd which is a parent for this particular company, Esab India. There will be a revised offer from Melrose some where around 930 to 940 pence which is substantially 20-25% premium to their last bid.
It makes a lot of sense for Melrose to acquire this particular asset that Charter owns and they have got potential that will give them higher return on assets. If I look at the annualized equivalent value if at 930 they would be paying close to 7.5-8%. On the other hand ESab India is available at 14.65% in terms of EV. Annualised value if I try to take an arbitrage it takes around 11.5-12% that gives a target of Rs 640.
In terms of fundamentals, even if there is no offer for Charter Plc by Melrose in terms of revision, they would still do an EPS close to Rs 44-45. A company which is going to pay Rs 20 of dividend a parent like Charter which even has got a potential to go to a better parent Melrose I think this stock is a portfolio bet.
At current levels if there is an 20% open offer that means the float from the market would be squeeze totally because the remaining float will be in a very strong hands. Then the story will begin because there will be hardly any float left.
We have a target of Rs 1,000 if there is an open offer from Melrose. We will definitely ask our investors not to tender into the stocks because roughly we feel that open offer can come somewhere around Rs 550 to 600 depending upon the conditions. But on longer term this stock is a portfolio bet from our side.
On Phoenix Mills
Last time talking about realty we had a long call on Parsvnath and a short call on Unitech and we covered our shorts on Unitech. Now we want to diversify our part of our portfolio into another safe bet which is Phoenix Mills.
Looking at this particular patterns in terms of chart the stock has been range bound even in difficult times and finding support at Rs 180 mark and is finding resistance on Rs 230. When I took a call in terms of valuation at Rs 180-185, that is the recommended level to enter into this particular stock.
We felt that its assets actually gives a lot of support for the stock at those levels because it will be available at 0.6-0.7 times to its high street Phoenix. If I take a call for 2012 for Phoenix Mills there will be a lot of re-rentals in terms of free cash flows that will be generated by the company. We would be taking a quarter on quarter call for the stock.
If I take a call I would suggest that every time there is a market correction one should be entering this stock at around at Rs 180-185 and should be looking to exit around Rs 230 and that too only of 50% of what you hold. Why this particular thing would come up because we would like to see how the rentals are shaping up. Analyst who are tracking this there are speculations of 140 lease rentals on conservative side to 190 on the higher side.
They also own the Pune mall where the rental is expected close to Rs 60 per sq feet. Almost 2.5 million sq feet is under development which is expected to commence of only 1.5 will be executable in terms of leasing the rest is salable and car parking area.
The company also owns a hotel which will be operational in the name of Shangri-La, which will be operational sometime in third quarter if not second quarter of 2012 itself. We feel there are lot of assets that the company owns and given the company’s almost debt free it hardly pays an interest of Rs 4-5 crore for the full year. We feel this years free cash flow they would be sitting on zero debt cash. If someone wants to take a contrarian bet into this sector they can also look into Phoenix Mills.
Source : moneycontrol.com
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