(CMP: Rs. 172.35) Buy Target Price: Rs 260 (nishit@managementfunda.com) ________________________________________

Company Profile:

• Phoenix Mills Ltd. (PML) began operations as a textile manufacturing company in 1905, on 17.3 acres of land in Lower Parel, Mumbai. • In 1987, the company entered Mumbai’s real estate market through development of High Street [...]]]> March 06, 2011

(CMP: Rs. 172.35)
Buy
Target Price: Rs 260
(nishit@managementfunda.com)
________________________________________

Company Profile:

• Phoenix Mills Ltd. (PML) began operations as a textile manufacturing company in 1905, on 17.3 acres of land in Lower Parel, Mumbai.
• In 1987, the company entered Mumbai’s real estate market through development of High Street Phoenix (HSP) on the textile mill property in Lower Parel (involving development of ~3 msf [million square feet] of retail, entertainment, commercial and residential space).
• Besides HSP, the company is developing 4 market cities in Kurla (Mumbai), Bangalore, Chennai and Pune. Moreover, the company has ventured into hospitality business through its subsidiary – Phoenix Hospitality – that is currently developing five hotels across five cities.
• In 2008, PML acquired 40% stake (currently 33% pre-IPO) in Entertainment World Developers (EWDPL), operating under Treasure Island Brand in tier II cities. PML has also acquired 73% stake in Big Apple Real Estate (BARE) that develops malls under the brand name ‘Phoenix United’ across North India.

Q3 FY11 Updates:

• During the quarter, PML registered 49.32% growth in its net income over Q3 FY10 to Rs. 45.07 crores
• De-leveraging helped the company reduce its interest burden which resulted into stunning 133.28% jump in its profit after tax to Rs. 23.77 crores from Rs. 10.19 crores in Q3 FY10.
• Earnings Per Share (EPS) of PML in this quarter stood at Rs. 1.64 compared to Rs. 1.53 in Q2 FY11 (increase of 7.1%).

Palladium’s rental to HSP will increase:
• PML average rentals for HSP increased to Rs166-170psf in 9MFY11, 20% higher than the FY10.
• Going ahead with renewal of 0.15 msf in FY11 we expect average rental income to increase to Rs175-180 psf. Estimated rental income will be in the range of Rs. 200-220 crores for FY12.

Three Market City projects to be operational in Q4 FY11 & One in Q1 FY12:
• Market City projects at Kurla, Bangalore and Pune are in the final stages of completion and would generate rentals from Q1 FY12 onwards. The one in Chennai will be generating rentals from Q2 FY12.
• Leasing status for Market City Projects is expected to improve further before they become operational. PML has increased its stake in the Bangalore project (to 32.7% from 28.1% earlier) and Pune project (to 58.5% from 50% earlier). Both stakes increases are value-accretive.

Three residential & the hotel projects to be launched in FY12:
• PML expects to launch two Bangalore & one Chennai residential projects in late Q4FY11 (or early FY12). This will help the company generate cash flows. This launch will also help it enhance its brand value in the Bangalore market.
• The hotel project in Lower Parel of 410 keys (+23 service apartments) which will be operated by Shangri-La is expected to be launched in Q1 FY12.

Outlook and Conclusion:
• At the current market price of Rs. 172.35, the stock is trading at 20.8 x FY11E and 12 x FY12E respectively.
• Price to Book Value of the stock is expected to be at 1.4 x and 1.3 x respectively for FY11E and FY12E.

I expect that the company will generate substantial cash flows & keep its growth story in the coming quarters also. I recommend ‘BUY’ in this particular scrip with a target price of Rs. 260 for Medium to Long term investment.

(Disclaimer: As per SEBI requirements it is stated that, the writer and/or individuals thereof may have positions in securities referred herein and may make purchases or sale while report is in circulation.)

27th February, 2011                                                                                                                           (nishit@managementfunda.com)

Introduction:

• Gold & Silver prices have been going up for a while now. Gold has appreciated 29.3% from Rs 16,220 a year earlier to Rs 21,038 on Saturday. On Saturday, Silver closed at an all time high of Rs [...]]]>

27th February, 2011                                                                                                                           (nishit@managementfunda.com)

Introduction:

• Gold & Silver prices have been going up for a while now. Gold has appreciated 29.3% from Rs 16,220 a year earlier to Rs 21,038 on Saturday. On Saturday, Silver closed at an all time high of Rs 50,250. In last one year, silver has given return of 92.34% in rupee terms & 86% in dollar terms, clearly out-performing the gold.

What is causing this surge!!!

Surge in Gold:
• Economic uncertainty of the developed nations (US & EU countries) has never been this high, fuelled after the recession of 2008. The resulting effect of this is directly linked to credibility of the global currency ($=US dollar).

• According to IMF, US spends $3 for every $1 earned and this cannot last long. To cover up this enormous debt position, support the growth & liquidity in the market and avoid double dip, US has an easy way out-PRINT MORE DOLLARS (Quantitative Easing 2- $600 billion).

• The dollars are printed without backing of any tangible asset. Consequently, it leads to easy availability of cheap dollars (low or no interest rate) resulting in devaluation of dollar. In this scenario, world is losing its long term faith on dollar, it wants something that is credible and rare (limited).

• Precious metals predominantly Gold & Silver are the most tangible and liquid asset to possess. Indian central bank-Reserve Bank of India (RBI) purchased 200 metric tons of gold from IMF in Oct’09 for $6.7 billion in a move to diversify its foreign exchange reserve.

• India continues to the largest consumer and importer of gold worldwide. Indian households are estimated to own 15,000 tons of gold. But Chinese are not far behind, according to the World Gold Council, gold demand in China has risen by 26% in the last one decade. In the 30 months between Jan’08 and June’10 alone, private households bought more gold (1057 tons) than the central bank reports in its entire gold reserves (1054 tons).

Surge in Silver:

• China has turned net importer:
In 2005, China exported 100 million ounces of silver (one troy ounce = 31.1 grams). In 2010, five years down the line, the country has turned into a net importer, importing 122.6 million ounces, which is around 14% of global production. India, imported 1200 tons of silver in 2010, up 20% from the previous year.

• Supply demand mismatch:
The Silver Institute, reports supply of silver in 2009 was 519 million ounces. It is equivavelent to 2% increase per year the entire decade. Silver demand in 2009 stood at 889 million ounces and the difference between demand & supply was met out of scrap sales which are 19% of silver demand. This is not sustainable.

• No recycling of silver:
Silver is used in very small amounts as industrial metal. Given this it is not easy to recycle silver & also it is not monetary feasible to recycle at current rates. Experts say recycling of silver will be monetarily feasible if silver rises $50 per ounce (currently it quotes around $32- $33 per ounce). Given these reasons, increase in sale of scrap is not very easy.

Conclusion:

It is very predictable as history tells us equities will beat gold & silver in the next decade. But it’s a sunshine asset class to hedge an individual’s portfolio against the volatility and risk-return ratio of stock markets.
One thing is certain bullion is a definite asset class that provides a comfortable degree of safety of capital at the same time decent return in the times wide spread economic uncertainty.

Moral: Park a portion of your capital in Gold & Silver. You won’t regret.

Royal Orchid Hotels Ltd. (Stock Analysis) Dated 20th Feb, 11 Review

During the week, Sensex tumbled from 18,211 to 17,700 while ROHL corrected from Rs 63.7 to Rs 61.25. I continue to maintain ‘BUY’ on the stock and can be accumulated for the investment horizon of 18-24 months.

(CMP: Rs 63.7) Buy Target Price: Rs 110 (nishit@managementfunda.com) ________________________________________

Company Profile:

• Royal Orchid Hotels Ltd. is an India-based company. Royal Orchid engages in the operation and management of hotels/holiday resorts, as well as the provision of related services in India. The company operates 15 business & leisure hotels in 7 [...]]]> February 20, 2011

(CMP: Rs 63.7)
Buy
Target Price: Rs 110
(nishit@managementfunda.com)
________________________________________

Company Profile:

• Royal Orchid Hotels Ltd. is an India-based company. Royal Orchid engages in the operation and management of hotels/holiday resorts, as well as the provision of related services in India. The company operates 15 business & leisure hotels in 7 destinations.
• The Royal Orchid Hotels are amongst India’s fastest growing hotels. The group achieved remarkable position in the hospitality industry and now operates more than 15 hotels across Bangalore, Mysore, Pune, Jaipur, Goa and Hyderabad.
• The Company’s hotel properties include Hotel Royal Orchid, Royal Orchid Central, Royal Orchid Resorts and Ramada in Bangalore, Royal Orchid Metropole and Royal Orchid Brindavan, heritage properties in Mysore, Royal Orchid Central, Pune, Jaipur, and Royal Orchid Galaxy Resorts, Goa.
• The Company’s subsidiaries include Icon Hospitality Private Limited, Maruti Comforts and Inn Private Limited, Royal Orchid Hyderabad Private Limited, AB Holdings Private Limited, Royal Orchid Jaipur Private Limited and Royal Orchid South Private Limited.

Q3 FY11 Updates:

• Royal Orchid Hotels Ltd. (ROHL) showed substantial rise in its bottom-line and top-line due its unique business model & aggressive expansion.
• ROHL registered 23.2% rise in its sales in Q3 FY11 to Rs 24.85 crores from Rs 20.17 crores in Q3 FY10.
• During the same period, ROHL saw stunning 55.71% growth in its net profit to Rs 3.27 crores from Rs 2.10 crores in Q3 FY10.

Aggressive Expansion:

• ROHL have eight hotels opening up this year. Currently company has 1,500 rooms in pipeline coming up in next two years of which majority will open in this year before December.
• Company currently has 15 operational hotels which will scale up to 22-23 hotels by December of this year. The required funds (in tune of Rs 150 crores) for the same are raised by the company.

Low Debt Volumes:

• The company is having a low debt volume of leads to the debt equity ratio of 0.69x in FY10 which is very low as compare to its peers. Low debt gives an advantage to the company to raise funds for its expansion plans.
• ROHL is planning its first corporate bond issue to finance new hotels in the cities of Mumbai and Hyderabad.

Unique Business Model:

• Royal Orchid Group of Hotels has grown immensely in the last few years despite the recessionary trends of market and striving to emerge as one of the larger hotel chains in the country.
• The hotels of the Company are situated across the major markets in India giving it an advantage of adequately balanced representation. With the new hotels of the Company coming up in Hyderabad, Jaipur, Shimoga, Hospet, Mussoorie, Mumbai, Delhi & Shimla the group is poised for a substantial growth in near future.

Outlook and Conclusion:

• At the current market price of Rs 63.7, the stock is trading at 11.17x FY11E and 8.41x FY12E respectively. Price to Book Value of the stock is 0.87 & relatively cheap compared to peers.

With the improvement in industry trend & positive outlook of the company’s future, I initiate ‘BUY’ with a long term investment horizon with the price target of Rs 110.

(Disclaimer: As per SEBI requirements it is stated that, the writer and/or individuals thereof may have positions in securities referred herein and may make purchases or sale while report is in circulation.)
Axis Bank (Stock Analysis) Dated 31st Jan’11 Review
• The volatility in markets has caused huge swings in the stock. While Axis Bank made a low of Rs 1,149 it has bounced back to Rs 1,293 which is 3.5% above the call price.
Venus Remedies Ltd. (Stock Analysis) Dated 6th Feb’11 Review
• While the Sensex has bounced back from 18,008 to 18,211, Venus Remedies Ltd. touched 52-week low of Rs 195 & closed at Rs 215 on 18th Feb. I continue to maintain ‘BUY’ on the counter as it has potential of huge upside from these levels.

Buy Target Price: Rs 310 (nishit@managementfunda.com)

Company Profile:

Dated : 31/01-2011

(CMP: Rs. 1,251)

Buy

Target Price: Rs 1,610

(nishit@managementfunda.com)

Axis Bank has reported excellent set of numbers with net profit up by 36% y-o-y at Rs 891 crore which is higher than market expectations. NII grew 28% y-o-y and 7% q-o-q driven by robust loan growth and sequential margin improvement. Net interest [...]]]>

Dated : 31/01-2011

(CMP: Rs. 1,251)

Buy

Target Price: Rs 1,610

(nishit@managementfunda.com)

Axis Bank has reported excellent set of numbers with net profit up by 36% y-o-y at Rs 891 crore which is higher than market expectations. NII grew 28% y-o-y and 7% q-o-q driven by robust loan growth and sequential margin improvement. Net interest margin expanded 13bps to 3.81% on the back of de-growth in term deposits, strong CASA growth, hike in PLR & base rates and strong traction in high yield retail loans. Non-interest income increased 16% y-o-y and 11% q-o-q driven by healthy fee income growth and higher trading gains. Advances growth accelerated to 46% y-o-y and 12% q-o-q, while deposits de-grew sequentially by 1%, resulting into sharp jump in CD ratio from 70% in Q2FY11 to 79% in Q3FY11. CASA ratio remained at healthy level of 42% reflecting underlying growth momentum. Asset quality held well during the quarter as gross NPA and Net NPA stood at 1.1% and 0.29% respectively.

High growth in Loan Book: Advances grew 46% y-o-y and 12% q-o-q driven by retail, agri and corporate loans. Improving economic environment, revival in industry credit demand and infrastructure development were key underlying growth drivers for corporate credit growth. Retail banking including retail assets saw strong traction during quarter. CD ratio sharply moved up from 70% in Q2FY11 to 79% in Q3FY11, although average CD ratio improved only 100bps to 73% in Q3FY11. Advances growth is likely to moderate from 45% y-o-y to 28-30% y-o-y due to run down of short term loans from the book and higher base effect.

NII beats the estimates: NII came at Rs 1,733 crore against our estimate of Rs 1,670 crore. Growth in net interest income has been driven by sequential margin expansion, loan volume growth of 12% q-o-q and higher growth in retail assets especially in personal loan segment. It is expected that net interest margin to be moderated by ~15-20 bps in Q4FY11 due to higher deposit mobilization and translation of higher cost of deposit. However, we expect net interest margin to be maintained at ~3.50% to 3.60% in medium term.

Fee Income (Non-interest Income) Rises: Fee income contributed 84% of total non-interest income, which grew 21% y-o-y. Corporate banking, fee income from treasury and retail distribution were major drivers for fee income growth. Trading gain came at Rs134 crore against Rs108 crore in Q2FY11, up 24.3% q-o-q.

Valuation & Outlook: Reported earnings are above estimates driven by core operating performance and healthy trading gains. The bank performed strongly well on most of the operating parameters during the quarter. I continue to believe Axis Bank to maintain its quality liability franchise, superior return ratios, healthy fee income growth, and stable asset quality in medium term. At Rs.1,253, the stock is trading at 2.4xFY12 adjusted book and 12.1 xFY12 earnings. I believe current correction in the stock offers attractive entry point for medium term perspective with a price target of Rs.1,610.

(Disclaimer: As per SEBI requirements it is stated that, the writer and/or individuals thereof may have positions in securities referred herein and may make purchases or sale while report is in circulation.)

Argentina had been having a see saw economy ever since the beginning of 20th century. It was the 4th largest economy in early 1915, fell down drastically in late 70s & 80s and then again recovered to become 56th economy in 1996. It suffered its first [...]]]> Argentina Economic Crash – 2001

Argentina had been having a see saw economy ever since the beginning of 20^th century. It was the 4^th largest economy in early 1915, fell down drastically in late 70s & 80s and then again recovered to become 56^th economy in 1996. It suffered its first crash in 1929 during American Stock Market Crash. It recovered from there to become 15^th largest economy only to suffer yet another crash in 1970s and 1980s. In 1980, the inflation was as high as 5000%. In a matter 22 years, ie between 1970 and 1992, money got devalued by 10 billion. Yes! 10 billion pesos were reduced to a single peso.

Economic reforms of reforms launched in 1991 reduced inflation from 2300% in 1991 to just 1% in next few years. However, the recovery was short lived. Some wrong currency policies of Govt and economic crisis in countries like Mexico, Brazil and Russia, triggered another economic crisis in 2001.

In 1991, a currency stabilization regime established a currency board, which pegged the Argentine peso to the dollar on a 1-to-1 basis. Inflation was virtually eliminated. Foreign investment returned. GDP growth was strong in the early 1990s, but unemployment increased as a result of extensive structural reforms. Argentina finally seemed to have a handle on its chronic economic problems. However, external events in the late 1990s buffeted the Argentine economy:

• 1995: Mexico
• 1997: East Asia
• 1998: Russia
• 1999: Brazil

Because of its long history of economic instability, every economic crisis in the Third World, particularly in Latin America, caused investors to pull out of Argentina, creating a self-fulfilling prophesy. It was investors’ hair-trigger reaction to crises elsewhere that caused Argentina’s instability, thus the adverse effects of these crises were greater in Argentina than in most other new-growth economies. Another reason for this enhanced vulnerability is that Argentina stood alone with its fixed-exchange-rate policy, whereas the floating currencies of its neighbours depreciated. By 2001, the peso was significantly overvalued, in no small part due to the dollar itself having become overvalued. The devaluation of the Brazilian real had a particularly large effect. It reduced demand from Argentina’s largest trading partner, and businesses began to move from Argentina to Brazil in search of lower production costs. As the credibility of the peso at its pegged value declined, and the government had to expend huge sums to support the currency, which in turn necessitated more borrowing. Under these conditions, interest rates that were already high rose even higher, and as both debt and interest rates rose, the ability of the government to service its debt became increasingly in doubt. Argentina continued to keep the peso pegged to the dollar by external borrowings.

The buzzards came home to roost in December 2001. The nation rapidly descended into an unprecedented chaos. As economic activity shuddered to a virtual halt, governments resigned and were hastily replaced amid sporadic rioting. The following month, when Eduardo Duhalde (the fifth person to hold the presidency in two weeks) unpegged the peso in January 2002, the peso crashed hard, losing more than 70% of its value and inflation rising  to 41% though it was still far far better than the expectations of four digit hyper inflation experienced in late 80s decades. But inflation had fallen back to 3.2% by 2003.

So, we know now what agony was the country saved from by the much maligned and ever pouting Mr PV Narsimha Rao, who displayed the rare courage to stand up against the economically blind political class of the country (including his own party men) in appointing Mr Man Mohan Singh as Finance Minister; and the practical economist Mr Man Mohan Singh himself, whose economic prescriptions to cure the ills of the economy were as effective as any measures ever were any where in the world in its modern history.

Mexican Economic Crisis

Mexican Economic trouble of 1994 was not a ‘Crash’ but a Crisis as it lasted just 10 months and the melt down was not as spectacular as in Argentina. This crisis was also triggered by wrong currency policies of the govt. In Dec 1994, Mexican Peso fell from the pegged rate of 3.3 peso to a dollar to 7.7 peso.

Though the crisis was triggered by; first: the devaluation of currency in December 1994 and second: floatation of currency soon after; the seeds were sown earlier.

Mexico had a fixed exchange rate of 3.3 peso to a dollar. In 1994, as the general election drew near, the incumbent govt went into a spending blitz (politicians are same every where). As a result, current account deficit ballooned to a record of 7%. In order to fund the spending, the govt issued bonds repayable in dollars. High current account deficit and fixed exchange rate led to over valuation of Peso by approximately 20%. Some investors were alarmed; other smelled the opportunity; and together they quickly encashed the bonds in dollars. Foreign exchange reserves fell drastically. Declining reserves necessitated devaluation of currency. However, political compulsions did not allow this simple but hard prescription till the incumbent govt lasted.

Next Govt which took over power in Dec 1994, devalued the currency to 4 pesos to dollar. That did not prove adequate and within days peso was allowed full float which led to crashing of peso to 7.2 pesos to a dollar.

Mexico’s immediate neighbour, USA, intervened immediately by first buying pesos from open market and then arranging a loan of US$ 50 billion. The currency then stabilized first at 6 pesos to a dollar and thereafter gradually declining over next two years to 7.7 dollars before beginning a regular recovery. Mexico repaid all loans by 1997.

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