On Gold - Ashwath Damodaran

Find a lengthy article from Ashwath Damodaran, Professor of Finance at
Stern NYU. If people are not willing to pour themselves through the
whole article, just jump to the conclusion.

http://www.vccircle.com/byinvitation/2013/04/22/golden-rule-thoughts-gold-investment

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FII & DII trading activity on NSE, BSE and MCX-SX 25-04-2013

Category		Buy	Sell	Net
		Value	Value	Value
FII		6226.62	4776.92	1449.7
DII		1054.58	2324.01	-1269.43

 

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India Consumer “Short term blip to provide entry in long term opportunity" :: Prabhudas Lilladher

FMCG – Remains a safe haven despite slower growth
• CNX FMCG Index outperformed NIFTY by 22% in the past 12 months and 5% in one month, as flight to safety
continues amidst negative news flows from interest rate sensitive's
• Durable demand slows down: Discretionary segments showing lower demand; Cars sales have declined by
6.7% in FY13 (6% growth in FY12); two wheeler sales up by 3% in FY13 (12% in FY12); durables sales growth
has also slowed down
• Staples demand: volume growth has slowed down, more so in discretionary segments like processed foods
and premium personal care
• Jewellery and accessories: lower growth led by pressure on consumer wallet, decline in Gold prices like to
boost the jewellery demand
• Rural Demand: Medium-term outlook in rural demand remains strong led by higher agri prices and 46%
increase in allocation for rural spending (Rs800b) in run upto elections
• Input Costs: Input costs favourable for PFAD, Tio2 and copra; sugar and wheat prices are off their highs.
• Competition: Competitive activity is rising as HUL and Reckitt have been engaged in ad wars. Segments like
detergents, soaps, oral care and skin care are witnessing higher advertising and sales promotion
• Food Services: QSRs likely to remain under pressure in the near term; Service tax to impact sales in times of
tighter consumer wallet
• Positively inclined towards companies with strong pricing power or with benign input costs
• Large Cap Picks: ITC, HUL
• Mid Cap Picks: Titan Inds, Britannia and Pidilite

Jet Airways (JET.BO) Etihad Airways to Acquire 24% Stake in Jet Airways  Citi Research

Jet Airways (JET.BO)
Etihad Airways to Acquire 24% Stake in Jet Airways
 Etihad Airways to invest ~US$380m in Jet Airways — to purchase 24% stake (post
money), at a ~32% premium to CMP. Jet has approved the issuance of 27.26m shares
to Etihad Airways at a premium of Rs744.74/sh. Etihad’s investments in Jet Airways will
total ~US$600m, which includes US$70m paid for Jet’s slots at Heathrow and another
US$150m for a majority equity stake in Jet’s frequent flyer programme ‘Jet Privilege’
(pending approvals, to be completed over the next 6 months).
 A textbook transaction for Etihad — Acquiring minority stakes in airlines is
somewhat consistent with Etihad's philosophy – over the past few years it has acquired
stakes in: Aer Lingus (2.99%), Air Berlin (29.2%), Virgin Australia (9%). These stakes
typically foster a closer working relationship – code sharing, joint marketing initiatives –
and appear to be part of Etihad's strategy to augment its international presence.
 Critical for Jet on several fronts — A) Liquidity and solvency - Cash infusion of
~US$450m gives Jet the leeway to pay down high cost debt – we factor in interest cost
savings of ~Rs1.9bn pa, as Jet repays ~US$300-400m of high cost debt. B) Capital
structure – The cash infusion effectively recapitalizes Jet; D/E falls to ~4x. Interest
coverage ratio forecast to rise to 1.8x in FY14 (1.2x in FY13). The perception of Jet’s credit
quality should improve, given Etihad’s backing. C) Strategically – this deal could alter the
complexion of Jet’s international business: i) If Jet were to hub at Abu Dhabi instead of
Brussels (our conjecture), it could effectively utilize its 777 fleet to fly point to point services
to the United States, a critical market from which Jet has almost withdrawn from given cost
pressures. ii) Jet could uplift fuel for its int'l long-haul operations at Abu Dhabi, reducing fuel
costs. iii) Both carriers have the flexibility to continue with existing code sharing agreements.
 New TP of Rs766 — is based on 8.5x Sept 14E EV/EBITDAR (roll forward from Sept
2013) and is based on post money estimates. EPS increase reflects interest cost savings.
We haven’t forecast cash infusion for the Jet Privilege transaction. Nor do we forecast
any synergy benefits with Etihad (fuel cost savings, cost savings by shifting hub from
Brussels to Abu Dhabi, etc). For detailed forecasts, see our note on 7 Aug'12 Jet Airways
(JET.BO) - Upgrade to Buy: Not Yet a 747, But a 545 Key risks: Delays in the transaction.

Why rents may head up ::Business Line