Thomas Cook:-Good times ahead for shareholders

Scripscan: Thomas Cook (India) Ltd

Cmp:88

Target:105

Return expected:20%

Duration:2-3 months

Story:

Thomas Cook Group plc has announced that it is acquiring up to 74.9% of the issued share capital in Thomas Cook India and 100% of Thomas Cook branded businesses in Egypt, as well as licences for the Thomas Cook brand in a total of 15 Middle East countries. Thomas Cook is purchasing the businesses from Dubai Financial Group LLC for total cash consideration of between €208 million and €249 million.Under the terms of the TCIL transaction, Thomas Cook has agreed through its UK subsidiary to acquire at least 61.8% and up to 74.9% of TCIL's share capital. In a private transaction with DFG Thomas Cook will acquire 54.9% of this for the equivalent of Rs 107 per TCIL share. Under local stock market rules Thomas Cook is tendering to acquire up to a further 20% of TCIL shares in an open offer at rs 107. As a result of this transaction Thomas Cook will acquire between 61.8% and 74.9% of TCIL's share capital, the price of with will range from €173 million to €214 million giving Thomas Cook control of the company.

Conclusion:

In these sort of market environment where returns are very hard to get one can bank upon in thomas cook for some cool capital appreciation.Market is in a panic driven mood and there are strong chances that market even may overlook this news.Fundamentally too the scrip has got robust long term prospects.So enter at present levels for minimum downsides but possible 20%+ returns in the short term.

Market outlook,technical point of view and india growth story

Market short term outlook:-
The markets may plunge further in monday in the morning as credit risk is increasing in the US.On thursday Thornburg Mortgage, a little known lender outside the US, could not meet $28 million margin call from JPMorgan Chase.The stock fell badly,which set off a cat among the financial pigeons, sending the Dow and nasdaq down.Its completely panic selling which has emegerd after a long gap of time.Everybody is rushing to exit stocks to opt them again at lower levels.All said and done valuations have become very attractive and scrip suggested by me on my previous notes offers a brilliant oppurtuinty to buy them at this mouth watering levels.

Technical point of view:-
By closing at 15975 on friday, the Sensex had broken the closing low of 16457 seen on February 11. Though the Sensex is still higher than the intraday level of 15332 seen on January 22, 2007, it is the lowest closing since 20th September 2007. More important than the 15332,the sensex closed below 16100 on friday.It broke the trend line that the Sensex has honoured since 2003.

Banking sector analysis in a nutshell:-
The answering of a question asked in Rajya Sabha on ICICI Bank, the countrys second largest lender, drove home the point that even if you are not dabbling in the US sub-prime debt, you can still be singed, with whats happening with the US economy. Therefore, it is more disturbing. Whats happened with ICICI can happen with other banks too with international exposure. As a result, some of the banks are likely to be painted with tainted brush for some time till they come out clean.Avoid the banking stocks for the moment.

Lets look at how india may shape up in the coming years:-
Global paucity of real investment growth for geo-political reasons will continue to lead to liquidity reflating all asset classes. Thus, capital will continue to seek real growth and entrepreneurship in countries like India. The following secular undercurrents will help India override cyclical pressures.

Domestic natural gas:
Gas supply could increase ~2.5x by '10 and shave off ~$5-10 billion from the import bill.Software exports could fetch ~$9 billion in '08, easing the pressure on current account deficit.The capital account may remain robust with strong FDI, ECBs, and NRI deposits. Complete transformation of India-scape '09+: Initiatives for infrastructure creation are morphing the larger economic environment. There is a build-up in infrastructure with changes in installed capacity, which will not only boost industry's efficiency, but also provide a global scale of operations.

Consumption story:
According to a McKinsey report, household disposable incomes will treble and aggregate consumption will quadruple over the next two decades, making India one of the largest consumer markets in the world. Income growth at 80% will be the biggest consumption driver for India. But companies will have to become more volume-driven to offset competition.

Marginal producers may under-perform in a challenging environment. So, increasing M&A opportunities are likely. The real challenge for India Inc lies in the fact that companies will have to shift from merely managing scalability to managing the global industry environment itself.

So,even while the environment remains challenging in the near term, growth necessitates end of domestic tightening cycle, and secular trends continue to override cyclical concerns.

MR greedy and his reliance power,Rnrl,adlabs,reliance capital etc

Share price of Reliance Power has again gained ground to touch its IPO price. It has happened MAINLY and ONLY due to the liberal bonus issue which can never never be justified.Its a shell company has got nothing,no profits,no sales:god knows how they can simply declare a bonus....Previously i guess it never happened in the history of indian stock markets...If cat sits on chair of Tiger, it dont transform into a real Tiger....

If promoters and merchant bankers (globally renowned who perhaps started condering themselves to be Maa-Baap of Indian investors and also Demi-Gods) had any iota of decency and morality left in them (post infliction of never-before-seen levels of losses on investing public), they should have accepted their collective mistakes that they had done wrong-pricing. Instead,promoter roared back with demand to SEBI for enquiry into fall in R Power share price that "it has been engineered by rivals". Firstly, any shareholder of a company (whether he is an ordinary investor or a deemed rival) has a business right to buy anytime and sell anytime any quantity of shares of any listed entity. There is a saying that 'If you are scared of heat, dont enter the kitchen". If Mr Ambani is afraid of selling by rivals, then pl stop plans of further IPOs and should concentrate his energies in getting his companies delisted from stock exchanges(rather than suggesting long term value to investors). Secondly, he is crying wolf when share price of R Power has come down. What about brazen rise in share price of all his group companies and He never complained that rivals were trying to Buy shares of his companies to dethrone him/hostile take-over? Just have a look:

COMPANY S H A R E P R I C E I N 2007

Low HighReliance Capital 560/ 2925/

Reliance Energy 448/ 2623/

Reliance Capital 560/ 2925/

Adlab 380/ 1940/

RNRL (Rs 5F.V.) 21/ 250/

Had proverbial Third Eye of Lord Shivji had opened which led to such unheard of rise in share prices? Definitely not. There has been hardly any improvement in financial performance of above companies. Rather, above scrips should have been underperformer. Clearly, it was a well organised gameplan to ramp share prices of each listed entity as Group had been planning to raise over 30,000 crs from public in 2008 alone.If share price of R Power had been ruling at 650, IPO of R Infratel would have hit the streets by now. However, 2nd time, God came to the rescue of pitiable state of investors. If Ant was trying to climb the mountain, it has fall sooner or later. SEBI, even if it is willing, may not be able to investigate in brazen manipulation of above companies' share prices as talks do rounds in the market that such manipulations are not possible without collusion of politicians and bureaucrats...

Jaiprakash Associates:-A gem of a star in the infrastructure sector but misunderstood.

Scripscan: Jaiprakash Associates

CMP:246
Target:350
Return expected:40%
Duration:4-6 months

Story:
The company has been hammered in the the past 40 days.From a high of 500 in january the company has cracked by more than 50% and is presently quoting at 240 odd levels.The company is also probably getting in the Ganga Expressway.They have got the Taj Expressway project, which is a very large project and as part of that project, they will get to develop close to 6,250 acres of land, 5 points across this highway that joins Agra and Noida. This is not there in the valuation as of now currently, it is not reflected and but it is something that will evolve over a period of time.According to the sources, Jaiprakash Associates will shift 45% stake in the Taj Expressway project to another company namely JP Infratech.In explanation the company stated that JP Infratech continues to be a 100 per cent subsidiary of the group.There was a need to boost the authorized capital of JP Infratech from Rs 200 crore to Rs 1,000 crore and Jaiprakash Associates subscribed the additional 35 crore shares at Rs 10 each, which represented 55 per cent of the capital.The company also clarified that it would go ahead with the initial public offering of its power subsidiary JP Power.

There lies no confusion at all and Jp associates should quote at a much higher price in the days to come.The company is also planning to double its cement capacity from 7 million tonnes to 14 million tonnes to become one of the largest players in the cement sector.Investors have panciked and exited the company compltely,buy at low sell at high mantra or even but when others are selling and sell when others are buying may work in these case now.Accumulate the counter as much as u can for limited downside but lot of upsides.

Bhagwati Banquets & Hotels Ltd:-The dark horse in the hospitality sector with multibagger potential

Scripscan:Bhagwati Banquets & Hotels Ltd
Cmp:63
Target:100
Duration:4-6 months
Traded in:Nse-Bse

Business contributor:
Bhagwati Banquets derives revenues from three major sources.Presently more than 1/3rd of its revenues comes from the banquet facility, 25% comes from club management and the rest from outdoor catering. The prime is the Banquets Hall facility and the company has also got four halls in Ahmedabad.BHagwati has been doing club management for three major clubs namely Rajpath Club, Karnavati Club, GCAC and the revolving restaurant called Patang".As these are seasonal businesses, if one of the businesses gets affected, the other two businesses can support them.The company has 1,000 people, consisting of 10 master chefs and a catering staff of 650 for Ahmedabad and 45 for Surat.

Company vision:
The company has set a target to set up 5-star hotels in Ahmedabad,Jaipur,Hyderabad,Lucknow and Mumbai in the coming 10-12 years.It is also evaluating several proposals to acquire property for its new hotel at Ahmedabad. These company dreams really big and if it can acheive its desires then Bhagwati banquets can just become one of the scrips to watch out for in the days to come.

A catering player to boost your wealth:You have been invited to a wedding ceremony or a party or say in any occasion and yup our "Bhagwati banquets" is there to satiate all your desires but at an expense.It charges from Rs 350 to Rs 900 a meal and provides personalized service.A minimum order has to be for 300 people (off-season) and 500 in season, resulting in revenue ranging from Rs 1 lakhs--4.5 lakhs on each order.It would be prudent to note that the catering business generates free cash, as it receives payments in cash and obtains credit from its suppliers. Hence, the working capital required is low.What a satisfaction folks-Just consider,You are the owner of the company and your freind has hired your company for all the meal and party arrangements.

5-star hotel at Surat:
The company is setting up a 5-star hotel at Surat with 65,000 square feet (two halls of 32,500 square feet each) a convention and banqueting hall to accommodate at Least 3,000 people at a time for any event.This hotel will have 100 rooms (deluxe, suites and a presidential suite).It will have two large banquet halls, which can be partitioned into smatter halls as required, to accommodate at Least 3,000 people.The hotel will also have a business center with boardroom, conference rooms, world-class spa, pub, discotheque, etc.The hotel is likely to commence operations in FY10.It expects Rs 50 crores in revenue and Rs 15 crs in operating profit from the Surat hotel in the first year of operation.The typical room rate in Ahmedabad is Rs 5,000 per day and average occupancy is 75-80%.Though construction project is already in process but any delay in implementing the Surat project might affect profitability.

Wow,so much,anything else its planning:-
Watch out...........
1)It has already commenced catering services in Mumbai and plans to branch out to other cities like Jaipur,Jodhpur etc.

2)It has futher plans to enter into tie-ups with clubs for providing its services.

3)It plans to serve companies and MNCs, BPO centres, shopping malls, cinema halls, etc. catering for them and providing food packs.

4)The company plans to develop a separate club adjoining the surat hotel,resulting in additional revenues and thus an increase in profits.Facts to comfort:Its global india and companies having unique business models gave tremendous capital appreciation in the last few years.Few of the notable examples being Educomp,aurion pro,mic tech,Opto circuits,country club and many more.Bhagwati is a tremendously agggresive company and it has got a monopolistic business with high operating profit margin ratio.

Very recently, Morgan Stanley Mauritius bought 467,500 shares at Rs 84 a share and The GMO Emerging Illiquid M. bought 271,000 shares at Rs 82 a share of Bhagwati Banquets and Hotels.The company is expected to find many more renowned takers because of its unique and monopolistic business.

Whats most inspiring is the main promoter of the company and the largest stake holder,Mr Narendra somani-one of the finest vision oriented man bought nearly 13 lakh 50 thousand shares of his own company from open market purchases in the last 2-3 quarters.

Conclusion:
In April '07, Bhagwati came out with a public issue of 2.3 crs shares at Rs 40 each, aggregating Rs 92 crs.Simultaneosly equity capital then rose–-from Rs 6.3crs to Rs 29 crs.The issue got decent response and was oversubscribed.The catering service has done well in the past five years. The number of meals supplied per day has jumped from 200/300 in FY03 to 1,500/2,000 in FY07.At the CMP of Rs 63,the stock trades at 8x FY09E EPS of Rs 8.A great business model backed by a very strong and ambitious pedigree,a market leader with hardly any competition,A pure play on indian consumption and growth story,anything else is required to ventitale for inspiring?To me its a great buy at the present levels.

Range Bound moves to continue.........

Sensex Technical View :

Sensex should continue to remain range bound qith 18300-18500 band as resistance on upside and 17200-17500 on the lower side. Traders will have a tough time taking directional calls for some more days. Investors should wait for dips near to 17200-17500 zone to again deploy some cash. Those who played the earlier bounce and pulled back cash can again start looking for dips.

Stocks to watchout for :

Infosys can give a nice move if it sustains above 1600 levels can toucch 1660-1750 on higher side ...

K S Oils looks good for long term as promoter buying is seen for last few months ...

http://www.bseindia.com/Insidetrade.asp

There are whole lot of stocks in the mid caps which look exciting on fundamental basis but investors will need lot of patience as they will take more time . So the strategy should be take only an initial exposure and then wait for a change in trend or reversal or stable mkt conditions as it is better to buy the stock at extreme panic levels when there is a good reversal as currently the holding period seems longer and only patient investors . Till then do ur homework find a good list of stocks with nice fundamentals , good mgmt and do ur research to shortlist a few of them and look for attractive levels.

Grabal alok impex:-The next emperor of the indian textile industry

Scripscan:-Grabal Alok Impex Ltd
Bse code:-532909
CMP:99
Target:200
Duration:9-12 months
Expected return:100%

Introduction:-
Grabal Alok Impex Limited (Grabal Alok), part of the Alok Group, is amongst the largest global manufacturers of embroidered products. Grabal Alok is a well known name in the Indian embroidery market and is mainly an export oriented company.The company has a wide product range within the embroidered fabrics segment which includes edgings, allovers on any base fabrics and embroidery designs which find usage in dresses of African & Arabian Nationals besides Indian sarees and salwar kameez.The company is also a preferred supplier to the key garment & made-ups exporters and has presence in the indian market through wholesalers & retailers.Over the past few years Grabal has established its direct presence in Africa and some EU countries .The company has created it own markets and is also benefiting from its increased participation in international fairs.Much of the companies current production is sold to the big export houses for sale to Gulf, Africa and European countries.

Assitance of Alok industry:-
Grabal Alok has close synergies with Alok Industries which currently has the best processing facilities in the country. Alok is the naturally preferred supplier of fabrics to Grabal. Besides, Grabal sends the unprocessed fabrics to Alok on jobwork basis.Grabal is uniquely placed in the international markets on accounts of its ability to manufacture the Swiss quality (of highest regard) embroidery at Indian prices. Besides the latest technology in embroidery, Grabal is also a beneficiary of the highend processing offered by Alok. The modern processing technology including the soft flow processing made available by Alok, enables Grabal to make the best quality embroidered goods.Essentially, it also has a key focus to expand on the home textiles front,thanks again to its strong pedigree in Alok Industries.The newer additions to the product portfolio serves the dual benefits of diversification as well as higher margins. Grabal certainly will be able to cater to a sizable requirements from Alok in the home textiles segment.

'QS'acquisition:-
During FY 2006, the company through its wholly owned subsidiary Grabal Alok International Ltd.(GAIL.)has taken 20.09% stake in Hamsard 2353 Ltd.,(HS) a UK based retail chain having 207 retail outlets across England,Scotland and Wales.These stores are run under the brand name 'qs'.The stores offer value for money ranges of garments for women, men, children and home ware.The stake has since increased to 75% in HS in FY 2008 at an aggregate cost of GBP 16.37 mn.HS also stands renamed as Grabal Alok (UK) Ltd(Grabal- UK).

The company has adopted a multi pronged strategy to improve the performance of Grabal-UK:
i)Change the sourcing of merchandise from UK and other European countries to India, China and other low cost Asian countries.Grabal-UK has also opened sourcing offices in Mumbai, New Delhi and Tirupur in India and also in Bangladesh China and Sri Lanka.

ii) Enhancing the management band width by inducting professionals to manage the operations.

iii)Refurbishing of the stores and improving brand image.

iv) Introduction of New Products and shift towards a profitable product mix and reduction in expenses.

Locational advantage:-
Grabal alok enjoys a noteworthy locational advantage as its manufacturing facilities are concentrated in the Navi Mumbai and Silvassa region.The raw materials requirements of the company are met from the Vapi - Silvassa textile belt.The export oriented company also gets the benefits of proximity to the ports.

Indian embroidery market:-
Indian embroidery market is growing both on the domestic and the export fronts at an estimated CAGR of 14%. India is expected to be the second largest supplier of embroidered products after China.Embroidery being a labour intensive industry, India has the competitive advantage in terms of skilled and relatively low cost labour - for Grabal Alok Impex Ltd. and most of the Asian manufacturers cost of labor is 5% of sales; for European manufacturers it would be around 30%-40% of the sales.

Prospects:-
The prospects for the domestic market are very promising with a healthy GDP growth, rapidly increasing middle income group accompanied by a rise in aspirations and purchasing power.The per capita textile consumption is expected to increase to 30 meters by 2010 from the present level of about 20 meters. The same should propel humangous growth in domestic textile market to USD 50 bn by 2010 from the present USD 33 bn(CAGR of 9% p.a).

Industry Outlook:-
The Indian textile industry after long time is again being perceived as a sunrise industry, thanks to the removal of quotas in December 2004 and the booming Indian economy.Since removal of quotas, textile manufacturing is continuing to shift from high cost western economies like USA, Europe to low cost Asian countries like China and India. This is resulting in increase in global textile trade which is expected to grow from USD 480 billion in 2005 to USD 650 billion by 2010.It should be also prudent to note that,"India's exports are expected to grow from the present level of USD 19 bn to USD 45 bn by 2010".

Expansion Projects:-
The company possesses amongst the most modern and versatile embroidery facilities consisting of 21 Schiffli machines, 14 Multihead machines and 1 Quilting machine out of its two plants situated at Mahape, Navi Mumbai and Vasona, Silvassa. Over a period, the company has developed goodwill for its superior quality, versatile product range and strong designing capabilities and has created a wide and niche customer base and enjoys an order book position of over 4-5 months.To meet the growing demand for its products and widen its market, the company has undertaken expansion of its embroidery manufacturing capacity in phased manner.
Phase I:-Under the Phase I of expansion project, the company has installed 4 Lasser make Schiffli embroidery machines and 16 Barudan make Multihead machines at its existing unit at Silvassa. This has increased the embroidery manufacturing capacity by 7015 mn stitches p.a. and total capacity to 16263 million stitches p.a. The total cost of project has been funded by a term loan of Rs. 20 crores from State Bank of India under TUFS and balance by internal accruals.

Phase II:-Under Phase II,company is increasing its embroidery manufacturing capacity by 17737 mn stitches p.a. at Silvassa taking the total embroidery capacity to 34000 mn stitches p.a.The company is installing 60 single deck Lasser maker Schiffli embroidery machines and 30 Multi head embroidery machines at an estimated cost of Rs.150 crores. The same is being financed by a term loan of Rs. 115 crores under TUFs and balance by internal accruals.

Entrance of Reliance:-
Few months back sonata investments,a subsidary of reliance capital entered the counter by buying out huge quantities(over 10 lakh shares at a price range 118-131) through numerous bulk deals.It entails tremendous confidence as we all are aware of the brand name of reliance.With reliance looking to magic again with "Vimal",i cant rule more equity participation by the large behemoth.If that happens the company should see itself in a new orbit.Given the strong prospects of the Indian textile industry and the ideal positoning of the company, the future looks extreamly bright.

Risks and the solutions:-

Risk of Competition:
The company is subject to competition both in the domestic and international market.
Solution)The company since inception focused technology, quality, innovation and attaining right size. Today it has a large and loyal customer base in domestic as well as overseas market and enjoys on an average a healthy order book position of 4-5 months.It is also geographically expanding its market reach.

Risk of Currency fluctuation:-
With increasing exports, the company is subjected to adverse fluctuations in the foreign currency.
Solution)The company relies on a combination of external advise through a reputed consultant and in house treasury department to manage the currency risks.

Risk of Interest rate hike:
The company's debt profile is primarily on a floating interest rate and hence vulnerable to interest rate hikes.
Solution)The company's long term borrowings for expansion projects are under Technology Upgradation Fund Scheme, at a concessional rate of interest. The company through suitable financial instruments like Foreign Currency packing credit, CP linked rates etc., reduces the interest cost on the working capital front.

Conclusion:-
The company ranks amongst the large embroidery players in the world.Market diversification, capacity expansions and synergies with Alok to auger well to elevate Grabal's performance over the coming years.Grabal stands tall in terms of efficiency, reduced downtimes and quality besides being the most reputed player in the industry using the most modern machineries.Also the ambitious acquisition of UK retail chain lends an ideal platform for the company to widen its global presence.I expect the company to create considerable value by turning around the performance of Grabal -UK.

Valuation&Recomendation:-
The company has de-risked its business operations over the past few years.The CMP of Rs. 99 discounts the FY09E earnings by 11x.Turnover is expected to bloster to 175-180crs in 09 from 93crs on 07.The company has been overlooked by the retail fraternity just for no reason.Textile sector on a whole never really performed over the last 2 years.But i am talking about a company which is one of the world leaders in its business.I am talking about a scrip which is doing every stuff needed to position itself in the top few league.I am recomending something which has been a institutional favourite backed by a strong pedigree with a great business model.The company has consolidated for a fairly long time in the bourses and now with things looking up,"Maybe the shareholders of grabal alok are here in for gala days".Go for it guys and enrich your lives .