Rcom: Solid Value Emerging @ Rs93 Assets Remain

Reliance Communications: If Rcom is Finished Anil Ambani is as good as Gone. Out and Over....


Caution is Advised : If you feel Anil Ambani is Over No Point Reading. I believe the financial numbers he reports on the stock exchanges.

Not a time to panic atleast..
Market Cap :19,200 Crs
Net Debt :32,000 Crs
Enterprise Value :51,000 Crs

Its His Flagship Company. Flagship Company of the Anil Dhirubhai Ambani Group. No Doubt Higly Leveraged Company but Recent Drop a Excess.

@ Current Price of 93
Anil Ambani's Stake in Company:::::: Rs 13,000 Crs
Mutual Funds @:::::::::::::::::::::::::::::Rs186 Crs
Financial Institutions:::::::::::::::::::::::Rs 50 Crs
Insurance Companies:::::::::::::::::::::::Rs 1529 Crs
Foriengn Investors:::::::::::::::::::::::::: Rs1616 Crs
Bodies Corporate::::::::::::::::::::::::::::::Rs428 Crs

Individual Investors:::::Rs1971 Crs(Highest after ADA) 20.6 lac investors
HNI's:::::::::::::::::::::::::::::::::::::::::::::::Rs161 Crs

U think Anil Ambani does not Have Rs 6000 Crs to buy out the remaining investors.
Just Google his $825 Million Investments with Steven Spielberg.
None of his shares are pledged. He can very well pledge it..
Its not so easy to Buy it out. More frenzy Bad news. He will Continue to buy.. He added 70+lac shares over the last week but that just Rs 70 crs odd. He will buy that what i would have done.

Lets Discuss His Overleveraged Debt For Once...
Net Debt for last 4 quarters.
Q3 2011:::::::Rs 32,447 Crs Adjusted for that : 30,685 Crs
Q2 2011:::::::Rs 29,190 Crs (Payment of Rs 1750 Crs was made for Liabilities in Q2)
Q1 2011 ::;::: Rs 28,481 Crs (Increase due to 3G Liscense fee)
Q4 2010::::::::Rs 19,983 Crs

All people going gung ho Debt and reducing target. Reduce it before Price Action . Cant Justify it post results..Even though many have kept EBIDTA projections the blame the Debt for steep cut in estimates. Utter sorrow for those.

OK Operationally was not a good quarter atall.Minutes of usage fell on a strong quarter. On first glance i got scared seeing the results itself..

On the conferance call heard him talk bout reduction in PCO Minutes to free up spectrum????? They already have so much excess unutilized network.. Tough to digest this fact.Lets see but feel it will be stable around these levels

I have a very good suggestion for Mr Ambani Launch BIG Telecom for GSM (NO HIGH END SUBSRIBERS CHOOSING RCOM).



If Rcom had not bid for 3G Debt would have been lower by 8,500 Crs Minimum)
Was It a Wrong Desicion No
It could not let another competitor Jump Fray and it needed spectrum atleast fors Delhi.

I would love to go on a Debate on this that 2g caused losses on 3G PRICES basis.
1st it was awarded in a wrong way but wake up People

Who was Going to Bid at 3G PRICES. GIVE THE REAL REASON THAT IT WAS A HOGWASH TO BUY AND SELL spectrum TO FORIGN TELCOS WITHOUT EVEN ROLLING SERVICES;for some favoured people which was very well know by each and every person.Please read news papers archives to understand



The stock has fallen to such levels that even if all the following conditions below have been factored in.
1)Anil Ambani Going Down Under.
I keep asking myself what is wrong with the country.
Each and everyone in the Know how of Spectrum knew about the misdoings of former telecom minister A Raja. How the liscenses got awarded. To top it up everyone knew about Reliance's investments in Swan. AND WIPING OF BILLIONS OF DOLLARS OF A COMPANY ON NEWS of BRIBES OF rs 200 crs were paid.. hahahahahahaha LOOK AT THE RATIO..

if real figures come out.each and every stock listed on the stock exchange can be bought with that amount.

One thing i cant understand when the liscenses were awarded BJP did not demand a standstill???????????????????????????????????Atleast when they were being sold? I atleast cant believe PM Dint have a clue. When you have deals worth billions of dollars taking place. We are not United States of America that we dont care for deal values which took place post allotment. It figured as a % of our forex reserves.


Anil Ambani is not the same he Used to be(in terms of power and control)..

However his companies have taken a further beating
On a consesus estimate Rcom is going to earn between 7000-7500 Crs EBIDTA for fy12& FY13..

Take the figure @ 7000 Crs ebita take 3000 crs interest rough estimate(yet to refinance 1.3 billion$) from China awaiting that.
Not taking any taxation figure and limited Capex @ 1000 crs
He will be able to pay close to 5,000 Crs of Debt over 2 years which would bring the net devt to around 26000 cRs It is not easy to understand the exact cost of capital(big -ve) Going to be long but think once from the promoter angle aswell

But thats going to be long time .....................................................

So what Options does he have?????
He will end up selling some assets..Possible
Pros/v/s cons of extra 8500 Crs for 3g
Or a Stake in the company:::::::All likelyhood to his brother for his rollout

But if he sells that will not be below 200 Rs a share(100% from here)
Mukesh Ambani needs his infrastructure... BUT HOW WILL IT BE STRUCTURED????????

Calculate
3G spectrum
2g spectrum
Passive Infrastructure
Flag Telecom
Big dth & Other Rworld stores..the property value

On a conservative basis that would stand @ atleast Rs 200 a share factoring a DEBT OF OVER Rs 30000 cRS .(i.e)@ Enterprise value of 75,000 cRS..

Story is Going to unfold sooner or later.
I feel 2011 is going to be the year.

i Would advise him to demerge his companies and sell a stake in the passive infrastructure biz to Big brother Mukesh Ambani...

His debt would get rationalized and his company would get leaner to taken on his competition in a ruthless manner.


Aditya

Edelweiss: @ 38.5 Holds Great Potential Over the Next 3-5 Years

Edelweiss Capital : Its Like WINE (as it gets older will Taste better)

Price---Rs38.5

Market Cap------Rs 2900 Crs

Whats the logic?

Lets come to all the negatives first.

1)Amazing company came at the peak of the stock market boom. ENJOYED hefty valuations. Ipo money nicely gobbled up.

I will agree with you...See IPO was @ 725-825 and shares were issued @ 825...(adjusted to split @nd bonus = Rs 82.5).... The Price never came....

BUT SEE IF IT PERFORMED?????

I Would like to compare the Profits

2008-----------Rs273 Crs

2009-------Rs186 Crs

2010----------Rs229 Crs

2011Expected--------Rs245-250 Crs

The thing is when the company came with IPO @ Rs82.5(adjusted price)

market cap stood @ 6200 odd Crs with it opening around 120 (adjusted) market cap 9000 crs.

2things to note-edelweiss profits were growing y-oy at a scorching speed and it enjoyed high ROE'S above 20pc, which have since fallen to 10-12pc

Now Y early morning do i write about it?? Because i feel it could very well be the wine 5-10years down the line

1)Edel now derives a huge chunk from Interest income. (Between 50-60crs net interest income from last 4 quarters.

2) It looks that it is trying to shift to a stable alternative with regard to lending..

3)Look at signs for future growth..

Hiring of Bank of America Indian CFO : RINGING FEW MORE BELLS OVER STRONG BANKING BUZZ DOING THE ROUNDS

4)The Insurance rollout; the NBFC plan to disburse 5000 odd crs..

I see a lot of Visibility but will it translate. I feel it would. Even by 50pc execution is done. u count see the stock 3x from here above RS100 in a couple of years.

If it gets a Banking license it would add up close to 1000crs market cap on that day itself.

If India is to grow 8 or 9 or 10% savings will grow and will be channelised in coming few years. It will be among the top beneficiaries of this in coming few years. Its got a great team. Fairly valued @15x in this beaten down market.

A big surprise which no one would have payed heed to Lehman bros 1 cr shares in company have in all likelihood been sold in the December quarter(no disclosures on the exchange thought)

Note to all readers:

I have VESTED interests on the stocks i write on.

Don't invest more than 5pc of your total corpus on any of the stocks

Do your study before investing.

If you believe India will grow 9% BUY the stock..... STAGGER YOUR INVESTMENTS OVER A MONTH...........................................................

One more thing in India it is all about (PE). stocks often move on PE derating and rerating...........

@ current pat of 250 crs traing at 11.6 times. In a good market so called bull market would trade @ 20 PE DIRECTLY YOUR PRICE GOES TO 70.....btw goldman sachs trades @ 12 times that monster cant grow that big but this has low base greater chances of growth if visibility is there for me

for this company has to be good...growth should be there..and atleast main profit of 250crs 3 years down the line...so chances of loosing are less...

A good quality stock.......................Play on India's Financials..

Good Luck Keep Minting.....................................CU SOON WITH ANOTHER DETAILED IDEA

Aditya

Provogue a Compelling Buy @ Rs34 (Adjust it for Demerger)

EDITed: Should be Adjusted for Demerger of Prozone. and Read Latest Updates As of May and July

Why Provogue?--------------Provogue = (Provogue +Prozone)
What am i paying for the company (Rs 34.5) Market Cap of Rs 400 Crs- Debt - Rs 400 Crores

In 2 lines you shall understand the worth of the company

Stanalone Provogue is expected to generate PAT Of Rs 36 crs in 2011 & Rs 40+ crores in 2012.

Now as the Market is corrected the stanadlone PE STANDS AT 10. Where as in a Bull market quotes at a PE Of 20+.

So on a stanalone Basis it is cheap.......SO Are many other companies. What made me write @ 6 am.. There is [PROZONE) Which i have not factored atall.

Let me write a little about PROZONE (as per Deal in Jan 2011 @ 850 ++Crores I.e over Rs 70 a share ). Provogue owns 75% stake in Prozone valued over 650 crores.

The aurangabad Mall is already operational and other are going to operation in Feb/ March 2011 (Q4 2011)

SO let me value it on a worst case basis @ that also comes above 50rs

Calculate a fair value (BEAR CAse )-------Mark faber big BEAR OWNS OVER 10% IN company

Provogue :10x PE fy 2012 ------Rs 35-38 a share

Prozone Value 50 odd % discount to deal ---- Rs 30 a share

That makes it close to Rs 70 a share......

Now same if i reverse to a moderte situation like 6 months down the line

Provogue :15x PE --------- rs 50+ share stanalone

Prozone Value ------------ Rs 40 + a share

Rs 90 + a share

Risks already into the price include instability in the Realestate market but look @ the Prozone model.It is different from resedintial and commercial model.

Strong partners ::::::::Liberty International..........

Very little to loose...@ Rs 34 odd. Strong BUY......... Hold for a year shall double your money if market doest crack. Risk Reward is Favouarble. Its always about the price you pay..

Good Luck............. kEEP mINting..................................CU ALL SOON with another Detailed Idea.

Do share Your views too. Saw so many hits for Inox tooo. Do share your opinion as well...

Aditya

Inox: Great buy @ Rs 50

WHY INOX in the First place?

Inox with 144 screens having a seating capacity of 40,140 is the largest multiplex operator in the country post the acquistion of Fame India. It holds around 50.3% stake in Fame making it a subsidary post the closure of the open offer in January.

Lets Directly come to the Valuations for the company. Is it Cheap or Fairly valued?

Inox Data .................... Im adding the data for its Subsidary Fame too
No of Shares : 6.19 Crs ................. No of Shares : 3.49 Crs
Market Cap : 310 Crs: ................... MCAP @ Rs 55 : 192 Crs
Enterprise Value : 440 Crs ........MCAP @ Rs Reliance Media Open offer : 290 Crs
50.3% Fame Value : 96 Crs ........ Enterprise Value @ Open offer (Apprx): 377 Crs


One more Safety net Owns the Nariman Point Property (easily worth above : Rs 100 cRs)
& the Pune property : all other properties are leased

Let me add Inox added debt to fund this acquistion to fund the deal (Total Debt: 180 crs).

There is value on a standalone basis with sales growing from
2007------- 162 Crs
2008----------217 Crs
2009----------- 228 Crs
2010---------------256 Crs
and will well post sales above Rs 350 Crores for FY 2011.


oN The Margin front thE mArgins have fallen over the period from 34% in 2007 to 15 odd% in 2010. This would increase going forward as economies of scale improve further and could be considering as a bottom.

The company is going to be paying depriciation to the tune of of Rs 18 crores for 2010 hence i value it on an EBIDTA - efecctive EBIDTA of minimum 50 crs for 2010.


I have not written anything on Fame yet which would be consolidated in the numbers going forward. Fame operation performance is pathethic and would gradually improve with Inox in charge.

Now we have the isusue why Inox? Pvr, Cinemax Reliance Media.?

Pvr is the only logical company to think as with regard to the growth and balance sheet strenght is almost similiar. Reliance Media has lot of debt so better to stay away

BUT A BIG BUT (INOX=PVR); Now its is INOX+FAME SO CLEAR WINNER IS INOX

there is going to be alot of Cricket activity going around So you can BUY IT Gradually too. BUT THERE IS value. UP to you decide.


Good Luck keep Minting.............................................................C U ALL AROUND WITH DETAILED IDEAS IN COMING few days....

Do share your veiws...

Aditya

A BIGG Welcome to one and all...

Hi I Have come across various people and most of them have ended up loosing money on the stock market. I shall share my veiws on this new blog i set today on the 8th of February 2011 and try to enable all of you to take a calculated veiw.

I shall update the reasons to buy the same and would try to update it frequently.

Three Important Things to remember while investing.

1)If You are investing please dont get carried away with the markets.(Stick to your purchase prices and set the price target for your purchase)

2)The biggest thing of all dont look @ stock prices. Look at the value of the business. Look at the MARKET CAP (Thats the value you are paying for the company)Most important thing to look at. Please check the Debt and if the Debt is relatively higher value it on Enterprise Value (Market Cap + Debt - Cash).

3)Buy at the Right price. If you buy a great business cheap you can get out at a multiple of 2x or 3x even when the stock is cheap.
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In times of PANIC, GREED this small printout would help for sure.

There was a great article in the Sydney Morning Herald on trading and why most traders lose money. Regular readers know that I focus a lot of time and energy on understanding not only the psychology behind my own trading, but also the psychology of other traders. General Patton once said: “if everyone is thinking the same then someone isn’t thinking”. These words are never more applicable than they are to markets. After all, the name of the game, more often than not, is being in the trade before anyone else expects it. Markets rarely move where the majority of investors expect them to move. The article broke down the reasons for losing into 7 different common emotional mistakes:

1. Emotional bias: the tendency to believe the things that make you feel good and to disregard things that make you feel bad. In trading terms, this means ignoring the bad news and focusing on the good news. It’s called losing objectivity; you don’t recognise when things go wrong because you don’t want to.

This is the primary reason why most traders lose money. I believe it is mostly due to the fact that the majority of investors are generally biased in their thinking. They are trained to believe that buying stocks is the best way to invest in a market. They therefore ignore the other side of trades or other asset classes. This bias generally leads to a permabull perspective (or a permabear perspective for the more pessimistic). The general optimism of most traders (or pessimism) leads to cloudy thinking. Learning to be unbiased and flexible are perhaps the two most important rules to becoming a good trader. Trading one asset class with one directional bias would be like a professional baseball pitcher deciding to throw nothing but fastballs. You have many options and pitches – utilize them all.

2. Expectation bias: the tendency to believe in things that you expect. In financial terms this means not bothering to analyse, test, measure or doubt the conclusion you expect or hope for. It is also known as the law of small numbers – believing in something with little real evidence.

Focusing too much on the macro picture can often lead to this kind of skewed thinking. Peter Schiff is a great example. His macro inflationary theme is likely to be correct over the long-term, but in the near-term he has cost himself and his investors a great deal of money by not being more flexible and being able to adjust to the micro changes in the economy. I expect this current bear market to persist much longer, but that hasn’t stopped me from being bullish at times during the last 18 months. The market is a dynamic system and is constantly changing. Learn to evolve and change with it.

3. The disposition effect: the tendency to cut your profits and let your losses run – the opposite of what a trader should be doing. Making small profits and big losses is a recipe for disaster.

This is almost entirely due to a lack of discipline. All investors should have rules. Have price targets and set stops. Learn to be robotic in your investing style. If you give your emotions the opportunity to get in the way of your trading I can guarantee you they will. Hope is not a strategy when a trade doesn’t go the way you planned. One of the best parts about the stock market is that polygamy is perfectly acceptable. You aren’t married to any single position. Learn to “dump” the losers and move on to the next trade.

4. Loss aversion: the tendency to value the avoidance of loss more highly than the making of gain. Losses impact on you more than gains. Because of this you become more emotional when making losses, the point at which a rational decision would save you the most money.

The math behind stock market losses is unfortunate, but real. A 50% loss requires a staggering 100% gain to break even. This is one of the reasons why my focus is so keenly on risk management and money management. I have never experienced a draw-down of more than 15% in any given quarterly period because my risk management is superb. There are two kinds of volatility in the investment world: upside vol (good vol) and downside vol (bad vol). Finding investment managers with high Sortino ratios, i.e., very little bad vol, is very rare. The moral here is to learn asset allocation and the interconnectedness of non-correlated assets and you can in fact create portfolios that are structured to generate high risk adjusted returns while also being nearly invulnerable to black swans.

5. The sunk-cost fallacy: this is the tendency for our decision-making to be influenced by the size of the loss we have already incurred. The bigger the loss, the more likely we are to persist with a losing trade rather than take the rational decision to cut to a more profitable trade. The size of your loss has no impact on the future share price but a huge impact on your ability to make the right decision.

Position sizing is the most important form of risk management. If you invest your entire portfolio in a handful of high beta stocks you have to be willing to lose an extraordinary amount of money. Regular readers have likely noticed that I have a very patient “lie in the tall grass” investment style. I often wait for fat pitches, but never ever over allocate funds – even when I feel very certain about a trade. I always respect the fact that I can and will be wrong at times. Position sizing ensures that no single position can destroy years of hard work. Learning to allocate capital across a number of assets while creating a black swan proof portfolio is all about position sizing. Nassim Taleb wants you to believe that it’s impossible to avoid black swans (which is true), but black swans don’t have to be destructive as Taleb would have you believe.

6. The bandwagon effect: the tendency to think it must be right because everyone else is doing it – a thought process guaranteed to get you in when it’s obvious and get you out when it’s obvious. Put another way, it has you buying at the top and selling at the bottom.

As I said earlier, when everyone is thinking the same, someone isn’t thinking. Learn to go against the crowd. And when the boat feels like it’s tipping to one side, jump off or consider moving to the other side. And never let anyone tell you cash isn’t a position. If you feel uncertain or uncomfortable pull your portfolio out of the game. Like blackjack, there is no rule that says you have to play every hand. For more sophisticated investors cash can also serve as an alternative asset class via currency markets.

7. Past-price fixation: the tendency to avoid prudent trading decisions by anchoring your thought process to prices that no longer exist. “I’ll sell it if it gets back to $4.” “I’ll buy it if it gets down to $4 again.” We are all guilty. In trend-following trading, if the price goes up, you don’t sell it, you buy it; if it goes down, you don’t buy it, you sell it. The old high has gone, the old low has gone. Don’t wait for them to come back to do the wrong thing.

This goes back to being disciplined. You’re going to lose money. Deal with it. The real goal of trading is to make sure your losers don’t mortally wound your portfolio. Aim for singles and doubles and focus on not striking out. While home runs are exciting and the idea of finding the next Microsoft is grand and all the reality of it is that you’re highly unlikely to do either.


Aditya