07 November 2012

The Absolute Return Letter - November 2012

"We are now five years into a crisis that just doesn't want to go away. Policy makers continue to throw whatever policy tools they have at the crisis. Meanwhile, investor anxiety about the inflationary implications of such policy moves continues to grow. Hence we re-visit the old inflation vs. deflation discussion we first opened in 2009 and conclude that high inflation is not at all the most likely outcome of this crisis. This doesn't imply, though, that the outcome is good. Far from it.
"

Oil India Ltd Q2FY13 result update ::LKP Research


Q2FY13 Results marginally ahead of estimates
OIL’s Q2FY13 net profit of Rs9.5bn was marginally ahead of our estimate of Rs9.1bn. Net revenues for the quarter stood at Rs24bn (yoy -26.6% qoq +2.9%). OIL’s subsidy burden for the quarter was Rs20.8bn resulting in fall in its net realization to $52.5/bbl (yoy -39.1% qoq -2.5%). Crude oil sales volume declined on annual basis by 2.4% while gas production increased by 0.9%. On a sequential basis, however, gas sales increased by 13% on account of resumption of operations at Numaligarh refinery which witnessed a shutdown during the previous quarter. Operating profit for the quarter of Rs11.5bn was ahead of our estimate of Rs10.7bn while operating profit margin was 47.8%.
We maintain our BUY rating on the stock with a price target of Rs578. At the CMP, the stock is trading at 7.5x and 3.3x FY13e EPS and EBITDA respectively.

Actual v/s Estimates
Y/E, Mar (Rs. m)
Q2FY13
Q1FY13
qoq (%)
Q2FY12
yoy (%)
LKP Estimates
Deviation (%/bps)
Revenue
24,017
23,333
2.9%
32,703
-26.6%
23,304
3.1%
EBITDA
11,472
10,962
4.7%
16,202
-29.2%
10,701
7.2%
EBITDA (%)
47.8%
47.0%
79 bps
49.5%
-178 bps
45.9%
185 bps
PAT
9,546
9,299
2.6%
11,385
-16.2%
9,084
5.1%



LKP Research

FII & DII trading activity on NSE and BSE 07-11-2012

CategoryBuySellNet
ValueValueValue
FII2384.381655.93728.45
DII1115.361312.31-196.95

 


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FII DERIVATIVES STATISTICS FOR 07-Nov-2012

FII DERIVATIVES STATISTICS FOR 07-Nov-2012 
 BUYSELLOPEN INTEREST AT THE END OF THE DAY 
 No. of contractsAmt in CroresNo. of contractsAmt in CroresNo. of contractsAmt in Crores 
INDEX FUTURES442751241.77476991363.8045229711488.85-122.03
INDEX OPTIONS54721115746.1057071816308.42178421951408.32-562.32
STOCK FUTURES409551135.57406881080.60107832529732.4754.97
STOCK OPTIONS445271246.45442101233.93824612339.4212.52
      Total-616.86

 


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Listing of Muthoot Finance Ltd. NCD IV


 
Muthoot Finance Ltd. NCD IV has been listed today in BSE & NSE, please find the BSE listing circular for the same. The CMP according to BSE is also mentioned.
 
Notice No20121105-11Notice Date05 Nov 2012
CategoryCompany relatedSegmentDebt
SubjectListing of Non convertible debentures of Muthoot Finance Limited of face value Rs.1000 each
Content
Trading Members of the Exchange are hereby informed that the under mentioned securities of Muthoot Finance Limited are admitted to dealings on the Exchange with effect from Wednesday, November 7, 2012 in the list of "F GROUP".
Securities:
Muthoot Finance Limited Non Convertible Debentures of face value Rs. 1000 each.
 
Details of Securities
Name of the Company
Muthoot Finance Limited
Face Value/Paid Up Value of Bonds
Rs. 1,000/-
Issue Price
Rs. 1,000/-
Scrip Code
      934869
       934870
       934871  
       934872
      934873
Scrip ID
1150MFL14
1175MFL15
1175MFL17
1200MFL17
0MFL18
Security Description
11.50% Secured, Redeemable, Non-Convertible Debentures - Option I.
11.75% Secured Redeemable, Non-Convertible Debentures - Option II.
11.75% Secured, Redeemable, Non-Convertible Debentures - Option III.
12.00% Secured, Redeemable, Non-Convertible Debentures - Option IV.
Zero Coupon Secured, Redeemable, Non-Convertible Debentures - Option V.
No. of Securities
1,635,021
189,433
425,554
318,118
181,278
*CMP (in Rs.)
NA
NA
1013.99
NA
NA
Distinctive Numbers
 1 to 1635021
 1635022 to 1824454
 1824455 to 2250008
 2250009 to 2568126
 2568127 to 2749404
ISIN
INE414G07209
INE414G07217
INE414G07225
c
INE414G07241
Abbrv. Name
1150MFL14
1175MFL15
1175MFL17
1200MFL17
0MFL18
Coupon
11.5% p. a
11.75% p.a
11.75% p.a. (Payable Monthly)
12.00% p. a
NA
Deemed Date of Allotment
1-Nov-12
Date of Allotment
1-Nov-12
Redemption/Maturity Date
1-Nov-14
1-Nov-15
1-Nov-17
1-Nov-17
1-Nov-18
Tenure
24 Months
36 Months
60 Months
60 Months
72 Months
Redemption Amount per Bond
Rs. 1,000/-
Rs. 1,000/-
Rs. 1,000/-
Rs. 1,000/-
Rs. 2,000/-
First Interest Paymnt Due Date*
1-Apr-13
1-Apr-13
1-Jan-13
1-Apr-13
NA
Interest Payment Due Dates*
1-Apr-13
1-Apr-13
01st day of Every Month till redemption and Last Interest payment on 1-Nov-17
 
1-Apr-13
 
1-Apr-14
1-Apr-14
1-Apr-14
 
1-Nov-14
1-Apr-15
1-Apr-15
 
 
1-Nov-15
1-Apr-16
 
 
 
1-Apr-17
 
 
 
1-Nov-17
 
Credit Rating
CRISIL AA-/Stable
 
AA-/Stable
Rating Agency
CRISIL Limited
 
ICRA Limited
Put/Call Option
None
Market Lot
1 NCD
           
 
*The CMP has been taken today i.e., on 7th November 2012 at around 12:00 P.M.
 
 
Thanks & Regards,
 
RR NCD Team

Central Bank of India Ltd Q2FY13 Result - Team Microsec Research


Gujarat Gas Q3CY12 result update :LKP Research


Strong performance driven by price hikes, volumes remain subdued
GGCL’s net profit of Rs995mn was higher than our estimate of RS737mn mainly on account of higher realizations during the quarter. The company had taken a price hike of 9.6% in the key industrial segment w.e.f. 1st July 2012. However, volumes for the quarter were subdued at 295mmscm (yoy -9.5% qoq +2.1%). Gas cost for the quarter remained constant on a sequential basis at Rs22/scm (yoy +46.7%) as LNG prices softened during the quarter. Consequently gross margin increased by 33.7% sequentially to Rs6.1/scm (yoy +29.5%). GGCL reported its highest ever EBITDA/scm of Rs4.4 (yoy +33.8% qoq +66.4%).
We maintain our SELL rating on the stock with a target price of Rs289. At the CMP, the stock is trading at 14.2x and 9.5x CY13e EPS and EBITDA respectively.

LKP BYTES : Buy Triveni Turbines @Rs55 with a target of Rs80


The story so far ………..
One of the best things Dhruv Sawhney –CMD of Triveni Engineering did was to de-merge the highly profitable steam turbine business into Triveni Turbines Ltd - TTL and we like the highly capital efficient business model of the company because TTL would be a debt-free company this fiscal with negative working capital and can generate an ROI of 70% which would be the highest among its peer group.
The Rs6.5bn TTL is one of the country’s leading industrial steam turbine manufacturer which retained its dominant market share of 54% even during FY’12, a year when its domestic market shrunk by more than 40% and we believe that this business has a sustainable gross margin of 25% and a net margin of 15% going forward.

Do the Derivatives: Iron Condor for range-bound market :: Business Line


Iron condor strategy is best used when markets are expected to be range-bound. It is designed in such a way that there is a high probability of earning at least a small profit. Iron Condor can be created by buying a higher strike out-of-the-money call and selling another even higher strike out-of-the-money call and selling a lower strike out-of-the-money put and buying an even lower strike out-of-the-money put. It should be noted that all the contracts should have same specifications. Since options closer to strike price costs higher therefore there is a net inflow of premium which is also the maximum profit.
This strategy becomes unprofitable if markets move unilaterally in one direction, a simple example will help explain the above strategy.
If Nifty spot is trading at 5,664, we can construct an iron condor strategy by selling 5,700 call with premium of Rs 94.5 and 5,600 put (Rs 52) and buying 5,500 put (Rs 29) and 5,800 call (Rs 51.5). There will be a net inflow of premium which will be equal to Rs 66 (94.5+52-51.5-29). So if market is range bound i.e. it closes between 5,600 and 5,700 then the option which were written will not be exercised (5,700 call and 5,600 put) and options which were bought will remain worthless and thus initial premium (Rs 66) which was collected will be the profit. Now, what will be the outcome if the trader was wrong and the market moves in one direction i.e. it either gains or loses?

Should busy professionals go for active funds? :: Business Line


Are you a busy professional and yet want to manage your own investments? We have observed that many individuals like you spend too much time trying to find investments that generate higher-than-market returns. In this article, we discuss why it may not be worthwhile for you to research and buy active funds (funds that have the mandate to beat the benchmark index). While there is virtue in buying active funds, we discuss below the issues associated with such investing.
One, you need to ensure that the fund’s chosen benchmark is appropriate. Why? You are buying the fund because it can beat its benchmark index. Logically, the fund manager should construct her portfolio from the stocks constituting the benchmark to make for meaningful comparison. Now, validating the benchmark is a time-consuming process. You need to analyse metrics such as the fund’s portfolio beta over the last 5 years.
Two, skilful managers have their share of bad luck and can underperform their benchmark. Likewise, unskilful managers can have a streak of good luck and can outperform their benchmark. You need to separate skill and luck. So, even if you validate the fund’s benchmark, you have to spend considerable time to separate the good active funds from the bad. Do you have the time to do so?
Third, if you invest in a wrong active fund, the fund may significantly underperform its peers. For instance, according to Valueresearchonline.com, the best performing diversified fund over a five-year horizon gave 10.5 per cent annualised return while the worst performing return fetched 6.5 per cent. Are you strong enough not to suffer regret, if the active fund that you buy underperforms its peers?
Fourth, a portfolio’s return in the long-term is primarily driven by its exposure to market risk. That is, close to 80-85 per cent of the returns generated by an active fund will be due to market factors. And you can take cheaper exposure to market factors through an index fund. So, why spend the time and effort in choosing an active fund, especially if you intend holding your investment for the long term?

LKP BYTES : Buy DISHMAN @96 with a target of 160


The story so far ………..
After its IPO in 2004, Dishman Pharmaceuticals took a leap into CRAMS with its $75mn acquisition of the Swiss CMO- Carbogen Amcis in 2006. It consolidated its position by taking over the Vitamin and Chemical business of Solvay in Netherlands and in 2010 set up one of the World's largest High Potency API facility at Bavla in Ahmedabad.
FY'12 performance was impacted due to its aggressive debt raising for huge capex which pushed gearing levels to 0.9x and Dishman reported a net profit of 57crs on revenues of 1125crs. CRAMS form 65% of revenues with Carbogen and Abbott business accounting for over 50% and 15% respectively. The balance 35% share comes from Marketable Molecules and Vitamin D ( Dishman is one of the world's largest producer of Vitamin D3)

Postpone retirement in case of low surplus :: Business Line


I am 35 years old and my monthly income is Rs 40,000. I invest Rs 5,000 a month in mutual funds and Rs 15,000 in a few ULIPs. My monthly expenses are Rs 15,000. In insurance, I save Rs 15,000 a year in a pension plan and the rest in ULIPs. Are my savings enough for retirement? All these investments were started three years back. I have health cover from my employer. I have term insurance cover for Rs 15 lakh. My only dependent is my wife.
I have invested Rs 7 lakh in FD and have Rs 3 lakh in EPF.
My concerns are:
Is it better to buy a flat or construct a house? Since I am in a transferable job, I will let out this property. In my bank I will not get any concession on interest rates.
I am investing in ULIPs and MFs to earn at least 14 per cent return. Is that possible?
I wish to retire at 45. I do not have pension benefits from my employer. How much do I need to accumulate to live comfortably?
— Shiddu