SP Tulsian of sptulsian.com joins CNBC-TV18 to give his outlook of the market today and pick his multi-bagger ideas. He recommends Tulip Star Hotel, which recently won an arbitration at Juhu Centaur. Valuations reveal almost Rs 200 crore market cap and even when taking a very conservative view, the stock could go up to Rs 300 in about 6-12 months, Tulsian says.
His next pick is Xpro India . The company which is into commercial film packaging has shown sharp improvement in its financials, he says. Though topline remained steady, bottomline almost doubled in the previous quarter. The company barely has any debt on books and currently commands a book value of 100. Trading at earnings per share of Rs 10, it is very likely that over a 5-6 month period, the stock could breach Rs 75 level and return an EPS value of Rs 12.
Below is the verbatim transcript. Also watch the accompanying video
Q: You have picked Tulip Star today?
A: If you see the arbitration award which has come in, I would call it in favour of the company and against Siddhivinayak Realties. In fact, Siddhivinayak Realties is a joint venture between Oberoi Realty and the promoters of DB, and they have lost the case against the Tulip Star. The six acre property, that’s Juhu Centaur Hotel, is owned by V Hotels Private Limited. Tulip Star holds 50% stake in V Hotels, which means, effectively, they are having 50% ownership of the Juhu Centaur Hotel. After this arbitration award, they have to refund Rs 73 crore back to the promoters of Siddhivinayak Realties, and now, they will be able to sell this property on fresh terms. If you take the developable area of anywhere between 14-15 lakh square feet and if you go by the valuations of the hotel properties, it should be able to fetch them a good Rs 3000 crore. Now, as per the shareholding pattern, the promoters hold close to about 57% stake in Tulip Star, which 30.4% stake is held by Cox & Kings . 33% belongs to very close associates of the promoters, and so, virtually there is floating stock of a bare 10%. The present marketcap of this company is just Rs 70 crore and if I take a valuation call of about Rs 3,000 crore for the whole hotel, it translates to Rs 1,500 crore being the share of this company. Again, there is only the Rs 21 crore debt, which has come from the associates, friends and corporates, of which, 37 crore has been lent to V Hotels.
A: If you see the arbitration award which has come in, I would call it in favour of the company and against Siddhivinayak Realties. In fact, Siddhivinayak Realties is a joint venture between Oberoi Realty and the promoters of DB, and they have lost the case against the Tulip Star. The six acre property, that’s Juhu Centaur Hotel, is owned by V Hotels Private Limited. Tulip Star holds 50% stake in V Hotels, which means, effectively, they are having 50% ownership of the Juhu Centaur Hotel. After this arbitration award, they have to refund Rs 73 crore back to the promoters of Siddhivinayak Realties, and now, they will be able to sell this property on fresh terms. If you take the developable area of anywhere between 14-15 lakh square feet and if you go by the valuations of the hotel properties, it should be able to fetch them a good Rs 3000 crore. Now, as per the shareholding pattern, the promoters hold close to about 57% stake in Tulip Star, which 30.4% stake is held by Cox & Kings . 33% belongs to very close associates of the promoters, and so, virtually there is floating stock of a bare 10%. The present marketcap of this company is just Rs 70 crore and if I take a valuation call of about Rs 3,000 crore for the whole hotel, it translates to Rs 1,500 crore being the share of this company. Again, there is only the Rs 21 crore debt, which has come from the associates, friends and corporates, of which, 37 crore has been lent to V Hotels.
So, with the debt-free company which has Rs 70 crore market capitalization, even if I apply the same criteria of 15-20% of the net present value which should effectively translates into the valuation of this company, logically this company should get a marketcap of anywhere at least between Rs 200-220 crore. The share has a potential to move to Rs 300 plus, in fact, it works out to about Rs 400 plus, but I am taking a conservative call that it should move to Rs 300. One has to, however, keep a view of 6-12 months on this stock. There is no financial performance, there are no clarity about the ownership. So if you are convinced with this kind of structure and these kind valuations, then one can expect a price of Rs 300 in next 6-12 months time.
Q: Take us through why you are bullish on Xpro India ?
A: I am bullish on the packaging film segment on the whole, whether you talk of Jindal Poly , Polyplex Corporation …
Xpro India is a SK Birla Group company and they are engaged in co-excluded Biaxially-Oriented Polypropylene (BOPP) films, co-excluded cast-film and they also make thermoformed refrigerator liners, which are industrial products used in refrigeration etc. The financial performance of this company reveals there has been sharp improvement in for FY11. Topline grew a bare 10-15%, but the bottomline almost doubled. That is largely on the lines of the financial performance having posted by all the packaging companies. Topline was Rs 300 crore plus, the equity of the company is close to about 11 crore, the present book value is Rs 100 and the company posted an EPS of about Rs 10. In fact, for the past couple of months, we have been seeing that prices of all these packaging films have stabilized, and since this company is more into the commercial products, they have a better profit margin apart from the fact that they have six plant operational, largely in the eastern part.
So if you go by all these financial estimates and marketcap of just Rs 60 crore, there is not much debt in the books of the company, maybe Rs 80-90 crore, of which Rs 40 crore has been availed for working capital. The entire enterprise value of the company works out to close to Rs 100 crore, share is available at a PE multiple of 5 times, price to book is 0.5. I am expecting that maybe in the current year, the company should be able to post an EPS of 12. Taking all this into consideration, there is very limited downside and if someone can keep a view of 6 months, they can expect a price of Rs 75 for the share.
Q: The other midcap you have picked for us is Nile Limited . What attracts you to that name?
A: This is an interesting story. The company is into making lead and lead alloys from waste lead acid batteries and they also make glass lined vessels and pressure vessels. This company, for the last four years, has been at rift with GMM Pfaudler who has a larger presence in glass lined vessels and pressure vessels. They were holding close to about 17% stake along with one associate, and Nile Limited was not transferring those stakes in the name of GMM Pfaudler. Nile has now resolved to this division for about Rs 58 crore. The shareholder consent has already been sorted, the resolution for that has already been moved, the postal ballot and everything. So I am expecting that they will be mobilise about Rs 58 crore, that will help the company to become debt free.
If you see their present operations, they have two plant; one in Hyderabad with capacity of 12,000 tonne per annum, second at Tirupati with 20,000 tonne per annum. The Tirupati plant is catering largely to Amara Raja Batteries because they also have a plant there. Also, Exide result of Q1 has disappointed more due to raw material cost because for any battery maker, 70% of the raw material cost constitutes of the lead.
Going ahead, the margins of the company is going to improve. For FY11, the company posted an EPS of 24, but strangely, EPS of 28 has been posted by the company in Q4 alone. This is because, it was said that probably, they are keeping their results suppressed to fight the stake acquisitions of GMM Pfaudler.
Now, the company’s focus will purely be on lead and lead alloys business which has tremendous potential. I am expecting an EPS of 30 plus. I won’t be surprised to see EPS even moving to 40 for FY12, but one has to keep the conservative estimates at about 30 plus, topline of Rs 300 crore plus. Marketcap of the company is now at Rs 70 crore with promoter equity reasonable at 50%. Taking this into consideration, share though has risen in last couple of days, still has potential to move to about Rs 300 in the next six months. It’s going to be a very consistent performer in the portfolio on a longer scale too, but I am taking a call of Rs 300 in the next six months.
Source:moneycontrol.com
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