MAKING WEALTH THROUGH MUTUAL FUND ROUTE

HOW TO CREATE WEALTH USING MUTUAL FUND ROUTE

For those of you or your close friends, who may not want to take risk, there is another avenue for slow and steady creation of wealth. You also can resort to the technique suggested below, to create a parallel pension fund for your self or for your children’s education etc. in future.

I have short-listed various equity based mutual funds and I have zeroed in on SBI Magnum Contra Fund. Assuming you have at least 10 years to retire, I suggest all of you to invest in SBI Magnum Contra Fund – Dividend reinvestment option for a period of 7 years. Then stop investing and wait for the remaining period till retirement, say 3-4 years. In the following paragraphs, you will see how your wealth would grow.

Magnum contra is now available at the rate of 36 or so. Invest a sum of Rs.3000.00 p.m. on Systematic Investment Plan – Dividend Reinvestment Option. When the fund declares dividend, the NAV falls down and the dividend amount entitles you to units at ex-NAV prices. Going by the past trend, the NAV is assumed to grow at a conservative level of 10 - 15 percent per annum.

(The table is not coming out very well in the blog. The columns for the table are

i) Year

ii) Amount invested

iii) No. of units allotted

iv) Dividend units

v) Total units

(Readers may view the figures accordingly)

Year Amount No. of Dividend Total
Invested units Units Units

allotted allotted

(approx)
----- -------- ---------- ---------- ------

I 36000.00 1000 -- --
II 36000.00 947 152 2099
III 36000.00 878 260 3237
IV 36000.00 800 400 4437
V 36000.00 765 605 5807
VI 36000.00 692 741 7240
VII 36000.00 620 851 8711
VIII --- -- 911 9622
IX --- -- 1015 10637
X --- -- 1100 11737

So, in a nut shell, you have invested 2,52,000.00 over a period of 7 years and have forgotten it for three more years (total 10 years). At the end of the 10th year you are having approx. 12000 units (give or take a few) and the NAV as per our conservative estimates should be ruling at around 70 at that time. So your corpus would have grown to Rs.8,40,000.00 approx.

At this time, you may give an option to the Mutual Fund to convert your investments into Dividend Payout Option. Assuming the company declares Rs.8.00 per unit as dividend, you will end up in getting about Rs.96000.00 per annum as dividend which will be around Rs.8,000.00 per month on a regular basis. As and when the NAV grows, there will be more dividend and your corpus will also grow.

If you have initial investible surplus of more than 3000.00 per month, say 4000.00 or 5000.00, you may work out the above figures accordingly.

There are few frequently asked questions.

a) If the NAV during investing time is consistently low, Answer, you will be allotted much more units.
b) If the NAV during investing is high, Answer you will be given more dividend and more units.
c) In either of the above cases, the resultant number of units would be more or less the same as projected above.
d) Why Magnum Contra? This fund takes a contrarian view of the market and invests in sectors that are not very much in favour but have a potential to bounce back. Among the various Contra funds, Magnum Contra is the best performing one.

The above method is a sure shot method of wealth creation. In case of privately employed persons, who are wanting to save tax by investing in tax saving instruments, they may apply the above principle and invest in SBI Magnum Taxgain scheme in the same method shown above. Magnum Taxgain gives more dividend but there is no dividend reinvestment option. The dividend is paid out and in the hands of the investor, it works out in the same principle.

Other funds which people may consider for slow and steady creation of wealth are SBI Magnum Multicap Fund, SBI Magnum Global Fund, Franklin India Flexi Cap Fund.

AUTOLINE INDUSTRIES LTD. BSE SCRIP CODE 532797

Autoline Industries Ltd. (BSE: 532797 NSE: AUTOIND ISIN: INE718H01014)

Autoline Industries Ltd. is one of the premier auto ancillary manufacturing companies which is worth investing at the current prices. The stock has the capacity to grow by at least 60-80 percent in one year.
Autoline is one of the prime vendors to various Automobile Companies like, TATA MOTORS LTD. (TELCO), BAJAJ AUTO LTD, KINETIC ENGINEERING LTD, MAHINDRA & MAHINDRA LTD., FIAT (INDIA) PVT. LTD., and WALKER EXHAUST (INDIA) PVT. LTD. (a Subsidiary of Tenneco, a fortune 500 U.S. company). Autoline exports auto parts i.e. brake shoes for Mercedes Benz Trailers to Saudi Arabia, Dubai etc. The future holds promise with negotiations underway with various Detroit based Auto Component Makers for direct exports.

Autoline has grown by leaps and bounds from a single plant, a modest capital and a small staff to a company that can boast of 5 manufacturing units, over 1500 strong human resource and an almost 100 percent growth each year for seven years. Autoline Industries has traversed a growth path at an enviable pace; all thanks to excellent work quality, cost competitiveness, timely deliveries and state-of-the-art Tool Room with latest CAD / CAM facilities. To further enhance design capabilities, Autoline has take a major stake in a design engineering firm making it our subsidiary. With this acquisition, Autoline has the unique capability of Offshore Designing & Manufacturing model (ODM). At Autoline, Autoline are continuously renewing technology and upgrading quality standards, keeping in mind international benchmarks. Considering the rapid growth in the business, the company was in need of additional space and manufacturing capacities. Therefore 3 to 4 expansions had to be taken up in quick succession during last 9 years. Initially Autoline started our operations at Kudalwadi with 10,000 sq. ft. plot area. Then expanded to Chakan with 114,000 sq. ft. Plot area and T-135, MIDC, Bhosari with 53,000 sq. ft. plot area. Further Autoline have now acquired additional Land of 15 Acres (600,000 sq. ft. area approx) in Chakan very near to the existing Factory. Out of the 15 acres land acquired, 7 acres has been utilized to set up a new modern manufacturing facility on a built-up area of 1,60,000 sq. ft. Thus our existing operations of the company are spread at five places (including a wholly owned subsidiary) with good infrastructural facilities. In February 2005 Bhosari Unit got ISO/TS 16949: 2002 certification from TUV (Rh), Germany.

In August 2005 Duke Special Opportunities Fund, Private Equity Investor, invests in company. Autoline acquired as a wholly-owned subsidiary Autolinestern Pressing Pvt. Ltd., a company manufacturing tubular cross members, silencers and Exhaust Systems thus getting into proprietary products. In March 2006 Autoline acquired a 51% stake in Dimensions Engineering Software Services Pvt. Ltd., a company with 40 people into CAD/CAM/CAE & Design Engineering Services making AIL a Concept to Delivery company.

Today, more than 400 products from Autoline fit into a range of SUVs, LCVs , HCVs and passenger cars besides 2 and 3 wheelers. Stringent quality controls and timely deliveries have helped consolidate our position in the market as one of the top 5 vendors of Sheet Metal components for Tata Motors.

Financials

The company has a share capital of 10.37 crores made up of 1.03 crore shares of Rs.10.00 each. Promoters group, FIIs, institutions holdings and bodies corporate hold about 60 percent of the shares and the rest is with the public. Therefore, floating stock and consequently trading volumes are low.

The company has been performing exceedingly well in the past few years. It is also paying dividends. It reported a net profit of about 15 crores in FY 06-07 with eps of 14.5. It came out with excellent June 07 qtr. profits of 3.4 Crores and Sept. Qtr. 07 profits of 4.5 Crores. If the trend continues, the company may end up the whole year 2007-08 with a profit of 18 crores, with an eps of about 17. In general, various companies are trading at more than 15 times forward earnings and if we take into account the eps of FY March 08, the company’s share price should command a valuation of at least 220, where as it now trading at around 156 (very cheap).

The company with a share capital of 10.37 Crores, has reserves (as on Sept. 07) of 98.09 Crores, thus commanding a book value of 104.00

Our earning projections

FY 07-08 Net Profit : 18 Crores EPS 17.47
FY 08-09 Net Profit : 22 Crores EPS 21.35
FY 09-10 Net Profit : 26 Crores EPS 25.24

Presently the share should command a valuation of at least 220 going by the forward earnings. Our share price projections are 240 by April 2008, 320 by April 2009 and 400 by 2010.

The share touched a year’s high of 463 and is now trading near the year’s low levels of 156. In our opinion, the shares can be purchased by conservative investors.

People should use their judgement and invest, because investing in secondary market is risky. Investors who are not ready to rake risks, should follow mutual fund route or go in for safe avenues like Bank deposits etc.

We advise for a minimum tenure of 2 years and there may be ups and downs in the share price in he short to medium term. Our analysis is purely based on fundamental studies of the company.

People with a longer time horizon can consider investment in Autoline Industries shares.

UNICHEM LABORATORIES LTD.

UNICHEM LABORATORIES BSE SCRIP CODE 506690

UNICHEM Laboratories is one of the leading Pharmaceutical companies in India. Unichem is headquartered in Mumbai with five manufacturing locations in Roha (Maharashtra), Goa, Ghaziabad (Uttar Pradesh), Pithampur (Madhya Pradesh) and Baddi (Himachal Pradesh). The Company's facilities enjoy credible certifications: for instance, the Goa plant has been approved by UK MHRA (earlier MCA), MCC (South Africa), WHO (Geneva) and TGA (Australia). The Baddi plant has been approved by UK MHRA and MCC (South Africa). The Company has received ISO 9001:2000 for all its plants and corporate office. Similarly the Company has received ISO 14001:2004 certificates for its formulation plants ( Goa, Ghaziabad and Baddi) and Corporate Office at Mumbai.

As a future-focused initiative. Unichem has expanded its Research and Development facility in Jogeshwari (Mumbai) to spearhead research in Novel Drug Delivery Systems (NDDS) and develop non-infringing routes for the manufacture of products directed at the regulated markets. The Company has also funded a collaborative research with the Indian Institute of Sciences, Bangalore. Unichem's growth strategy is fueled and backed by more than 2400 talented and motivated human resources.

Unichem Pharma is the flagship division of Unichem Laboratories. The division has a diverse portfolio of over 25 brands in the day therapy areas of Pain management, Anti infectives, Anti allergics, Digestives and Nutritionals.

The division has attained leadership in key segments of Cephalosporins and Anti-allergics with brands that have been launched in the past 3 to 4 years. Key among these are Sefdin a brand of Cerfdinir and Lezyncet the leading brand by volumes in the Levocetirizine market.In fact many brands of Unichem Pharma feature amonth the top three brands of the respective segment and three of the brands rank among the top 300 in the Indian pharmaceutical industry

Unichem Specialities is the newest addition to Unichem's many divisions in an endeavour to service more and more customers with quality products and services. Launched in January 2006 , Unichem Specialities has a total field force of 250 people all over India. Their core customers are Orthopaedicians , Surgeons , Gastroenterologists , Physicians , Paediatricians and Intensivists and will reach close to 22,500 doctors all over India

A division of Unichem with the motto of advancing life contributes to major share of total business turnover. The division with its 8 brands has a primary focus in areas of Cardiology with a presence in Tranquilisers and Nutritionals.

Unisearch is today known in the industry for its flagship brands like LOSAR, TRIKA, and TG TOR & CLODREL. The brands have created their own records in respective segments to an extent that LOSAR has now become the No 1 Antihypertensive Brand in the entire country.
Every brand of Unisearch is known with its Brand building activities and strong associations like Monarch Butterfly and TRIKA, Diet Exercise & TG TOR and so on.

A specialty division of Unichem with primary focus in areas of Diabetology and Cardiology.

Launched in July 2004 Unisearch CD with an objective to create and establish itself in a big way in Diabetology segment. All the 11 brands in the division promoted by field strength of 160 representatives are in the growing segments in Cardiology as well as Diabetology.

Unisearch CD is already on its way to establish itself in Diabetology with its brand Metride and in Cardiology with emerging brands like Telsar, Teram.

CNS segment is one of the fastest growing & promising markets. Neu Foreva the division that has been launched with a vision to service the growing needs and demands of this segment is a specialty wing of UNICHEM, which is catering to the field of Neurology and Psychiatry
Within a very short span Neu Foreva has aggressively expanded and strengthened it's roots deeper into the Neuropsychiatry market, presently with 16 brands covering a wide array of Antidepressant, Antipsychotic, Antiepileptic, Tranquilizer, Cerebral Activator, Antiplatelet and Neuropathic pain drugs segments the division has marked it's strong identity with SERTA, C-PRAM S, TRIKA SR as among the top brands in their respective markets.

The team of 145 Sales personnel and skilled managerial force is engrossed to reach the division's goals.

Today, Neu foreva promises a larger share to the total UNICHEM turnover with it's well formulated plans and brand launches.

FINANCIALS

The share capital of the company is 18.02 crores made up of about 3.6 crore shares of Rs.5.00 each. About 48 percent of the shares are held by the promoters’ group and 18 percent is institutional holdings. Several mutual funds are having holdings. The company with share capital of Rs.18.02 has Rs.353.21 crores as reserves. The reserves are grossly undervalued since the company is sitting on huge land bank in Bombay city and other places in India.

The company reported a net profit of 90.1 crores in FY – 2006-07 with eps of about 25 crores. Even taking a conservative P.E. ratio of 10 on the past earnings, the share should command a valuation of 250.00 presently. For the half year Sept. 2007-08 the company has clocked in Net profit of over 46 crores and may end up the full year with a profit of 100 crores, commanding an eps of about 28 for the FY 2007-08. Considering all these, the present stock price of around 190 is very cheap. The company’s shares are trading almost at the year’s low and can be accumulated.

Our earning projections

FY 07-08 Net Profit : 100 Crores EPS 27.77
FY 08-09 Net Profit : 120 Crores EPS 33.00
FY 09-10 Net Profit : 150 Crores EPS 41.00

Presently the share should command a valuation of at least 250 going by the forward earnings. Our share price projections are 320 by April 2008, 380 by April 2009 and 450 by 2010.

With the huge reserves, the company may consider issuing bonus shares also. The last bonus was issued in the year 2004.

Presently Pharma Sector is not in favour with the investors. But things will change in the near future.

People with a longer time horizon can safely invest.

NANDAN EXIM : BSC SCRIP CODE 532641

Nandan Exim (BSE: 532641 NSE: NANDAN ISIN: INE875G01022)

Nandan Exim is a manufacturer and exporter of Denim of superiour quality. The Company belongs to the famous Chiripal Group of Ahmedabad.

Pursuing its ambitious plans of expansion, Chiripal Group laid foundations of an ultra-modern 100% cotton & blended bottomwear fabrics and the most modern & versatile denim manufacturing project called Nandan Exim Limited. Nandan Exim Limited is housed with one of the most sophisticated weaving plants and other facilities to manufacture superior quality gray cotton fabrics, khakhis and denim. The products manufactured by Nandan Exim Limited are primarily intended for sufficing the needs of the leading customers of the country and exports to the developed markets of the West and South East Asia, Europe & America.The plant manufactures 100% cotton piece dyed fabric, blended cotton fabric and denim. We keep on developing products in tune with the fashion and market trends. The company manufactures fabrics of different weaves, dyes, combination of yarns, weights. These products find applications in various outfits and garments. The range of products include denim, twills, stretch, bull denim, broken twills.

The products manufactured at Nandan Exim Limited are primarily marketed in International as well as Domestic market. Within a short span of time, the company has been able to supply its products to renowned national players as well as exporters. The marketing efforts are concentrated towards having a presence among various customer groups in the international arena like the garment manufacturers, importers, distributors, etc. and the ready made garment exporters, renowned brands, distributors & stockists in the national market.

Financials

The company has a share capital of Rs.30.36 crores, comprising of 30.36 crore equity shares of Rs.1.00 each. The promoter group are holding 48.65% of the shares and of the remaining held with public, 18% are held by Corporates. So, in effect, 32% of the shares are with other public.

The net profit for the quarter ended March 2007 took a dip to 1.1 Crores but has shown an increase. For June Qtr. it was 2.3 Crores which was maintained in Sept. Qtr. Going forward, the company may be able to increase the profits on a steady basis, ending up the year 2007-08 at a profit of about 11-12 crores on a conservative basis.

This would translate into roughly 0.40 eps. If the company trades at a forward earning of 15 times, the share should command a valuation of Rs.6.00 presently, whereas the share is available at 3.50 to 4 levels. In our opinion, the share is available very cheap.

The company has substantial expansion plans and proposes to issue 15 crore shares on rights basis at a premium of Rs.2.00 per share. The draft was filed with SEBI and they have since got the approval from SEBI. The company scheduled a Board Meeting on 26.10.2007 for working out the modalities of rights issue viz. Record Date, Lead Managers etc. The outcome will be made known shortly.

Once the rights issue is successfully put through, the company will have a equity capital of about Rs.45 Crores and reserves of about Rs.70 crores (presently 40 crores + share premium amount of Rs.30 Crores).

Presently the textile manufacturing and exporting companies are reeling under the rising rupee problem. Recently, the Hon’ble Finance Minister held a meeting with various exporters’ organizations wherein the problems were discussed at length. Commerce Ministry is also fully seized of the problems. Sooner or later, Government will bring out some package etc. to help the exporters. This will help Nandan Exim too.

Considering all this, we give a clear buy call on Nandan Exim at the current price of Rs.3.80-4.00 with a one year target of Rs.6.00. In 2-3 years, you may see a price of about 8.00 to 10.00.

The anticipated earnings, EPS and PE are not commented upon, as the picture may vary consequent upon the rights issue of shares. This will presently a slightly distorted picture. A good thing is that rights issue will come about in a premium which will shore up the book value.

THEREFORE, NANDAN EXIM CAN BE ENTERED AT THE PRESENT LEVELS FOR A CLEAR HOLD OF ONE YEAR.

FUNDAMENTAL ANALYSIS : PART - 2

My intention of posting the methods of fundamental analysis is that I want every person who reads my posts to become capable of analyzing the Company’s performance on a longer term horizon viz. one or two years earlier and future expectations.

1. If a company is capital intensive, in the initial years it may incur heavy losses but if the products may not entail any huge operational expenses in future, the profitability would keep growing year after year. So, in the first few years of inception, if there are continued losses, the investors should not runaway. In this category, you may see the examples of Bharti Airtel, Noida Toll etc. Once their initial costs are taken care of, the cash registers will keep ringing.

2. If the company has come out of black into red and sustains the profitability, you have to look at the following few ratios : equations etc.

Earning per share (eps) : It is net profit divided by number of equity shares of a company.

P.E. Ratio : It is share price in the market divided by eps

Sales to Net profit ratio : It is the percentage of net profit in relation to Sales. If it is very less, it implies that the company is incurring huge expenses. On a safe side, if this ratio is above 25% on a sustained basis, we can safely enter.

3. After the company has run for several years, it may start declaring dividends and transfer some funds from profits to reserves. So, in the company’s financials, you will hear of a term Book Value. This is made up of Share capital plus reserves divided by number of shares. Higher the book value, stronger is the fundamental health of a company. If the book value is very huge, the company management may decide to convert some of the reserves into capital (called capitalization of reserves) and issue bonus (free) shares to shareholders.

4. For comparing a share price to book value, analysts use a ratio called price to book value ratio. There is no hard and fast yard stick, but if the price is less than book value, and the company is consistently making profits/paying dividends, one can safely accumulate the scrip. If the price is very high as compared to book value, then there is imminent risk and the share price may be rising due to reasons other than fundamental.

5. Market capitalization : It is the number of shares traded multiplied by the outstanding shares. When the promoter’s holding is very heavy and the share price is very less, the market capitilisation will be low. The companies have been categorized into three categories viz. big companies with large market capitalization (large cap), Medium level market capitalization (Midcap) and small level market capitalization (Smallcap). It is a bit unsafe to invest in small cap companies, unless the investor knows the details of the company.

I am sure, by the time I finish posting all my lessons, many readers would be able to do their own analysis and invest. I repeat, my analysis is meant for long term investing. (Further posts will follow).

ALPS INDUSTRIES LTD.

ALPS INDUSTRIES : BSE SCRIP CODE 530715
Alps Industries Ltd. (formerly known as Alps Textiles Ltd.) was promoted by Shri K.K. Agarwal a well known technocrat and industrialist along with his associates in the year 1972. The Company is engaged in the manufacturing and export of home furnishings and selling it's product range of venetian and vertical blinds, drapery rods, and other interior decorative and architectural items under the established brand name of VISTA LEVOLOR. The company is in agreement with Levolor Lorentzen Inc., presently known as Levolor Corporation, one of the leading manufacturer of window coverings in U.S.A., to sell and manufacture in India the line of `Levolor' Products exclusively.

Diversifying Into the range of interior decoratives, the company introduced Aluminium Panels for False Ceiling. AIL has introduced a wide range of home furnishing products using naturally-grown coloured cotton, which has a significant demand in overseas market.

Alps Industries, poineers in window fashions, has introduced laminate wooden floorings under the Vista Floor Fashions brand. The company which has been expanding its horizon in home decor, has also launched another new product – bed co-ordinates under the Vista Home fashions brand. The Company has introduced Mistral, a new drape system under the Vista Levolor brand name. The Company has also launched the construction of a vertical portal on interiors industry. Alps Industries has introduced Le Pashmina branded shawls. It is claimed to be the first time that such branded shawls are being launched in India. The company launched a new portal on interior called www.Improveinteriors.com. The portal reportedly caters to individuals as well as architects, designers and contractors.

Financials

The company has a share capital of 34.5 crores made up of 3.45 crore shares of Rs.10.00 each. Almost 32 percent of the share capital is owned by the promoter group. Institutions hold about 29 percent of which FII holding is 17.5 percent. Leading institutions like Bank of New York, State Bank of India, General Insurance Corpn. of India, Morgan Stanley and some Mutual Funds have substantial holdings in the company.

The company has been performing exceedingly well in the past few years. It came out with excellent Sept. 07 qtr. Numbers which showed a net profit of about 10 crores which is 20 percent growth on YOY.

For the entire year 2006-07, the company declared a net profit of 30 crores, while the profit for H.Y. 2007-08 has already crossed 18 crores. With this trend the company may end up the full year with net profit of well over 38 crores and an eps of over 10.

The company’s share capital is 34.5 crores and reserves are 272 crores, commanding a book value of 88. In due course, the company may be a bonus candidate too.

If we take the general trend of trading at forward earnings, even if the share should trade at a conservative PE vis-a-vis FY 07-08 earnings viz. Rs.10, the share should command a valuation of at least 70.00 by now. Considering this estimate, the share is available at a very cheap rate of Rs.51.00 levels now.

The year’s high was Rs.85.70 and low was Rs.41.90.

Our earning projections
FY 07-08 Net Profit : 38 Crores EPS 10.85
FY 08-09 Net Profit : 47 Crores EPS 13.62
FY 09-10 Net Profit : 60 Crores EPS 17.00

Presently the share should command a valuation of at least 70 going by the forward earnings. Our share price projections are 90 by April 2008, 135 by April 2009 and 180 by 2010.

Presently the share appears to be a bit subdued because people think it is a pure textile play. This is not the case.

ALPS IS A FUNDAMENTALLY STRONG COMPANY.

People with a longer time horizon can safely invest.

HOTEL LEELA VENTURE

HOTEL LEELA VENTURE LTD. BSE SCRIP CODE 500193

We have analysed the company Hotel Leela Venture Ltd. on a fundamental basis and give a buy call with clear hold for 1-2 years. It would be a good idea to home some shares on a longer term basis. Hotel Leela was incorporated in 1981 to set up and operate 5-star hotels. The company has 3 five star hotels at Mumbai, Goa and Bangalore. Mumbai is expected to see an addition of between 9000 and 10000 rooms over the next 5-10 years.

Mumbai is one of the leading financial centers of the World and caters to all kinds of clientele both business and tourists. In the next 5-10 years the company’s bottom line would be contributed largely by Leela Mumbai.

Goa continues to be one of India's most popular beach resorts. It is also one of the best beach resorts of the world. It is an extremely promising market with the highest average length of stay by both foreign and domestic guests. We will see increased profitability from Leela Goa in times to come.

The Leela Palace Kempinski Bangalore, already recognized as one of the best properties in the world, has retained its position as the best performing hotel in the country with high level of occupancy and higher ARR. This hotel enjoys the highest RevPar in the country. In order to capitalize on the increase in demand the Company has recently increased the room capacity from 256 guest room to 352 guest rooms.

EXPANSION PLANS
(a) Construction of The Leela Palace Udaipur' which is strategically located on the lake front is in progress and is expected to be completed in the year 2009.
(b) The Company has acquired land at Adyar Beach, Chennai, Banjara Hills, Hyderabad and Yerwada, Pune for setting up new hotels considering the buoyant business climate and huge demand for hotel rooms. The Company has plans to build IT and Commercial Complexes at Chennai and Pune alongwith the hotels. The construction activity at Chennai for the hotel and commercial complex have since commenced. The work at Hyderabad and Pune would commence after necessary approvals are received. The IT Park and Commercial Complexes are expected to be completed by 2009 and the hotels during the year 2010.
(c) The hotel to be managed by the Company at Gurgaon i.e. The Leela Kempinski, Gurgaon would have approximately 319 guest rooms and 90 service apartments. The said property is being built by the Ambience Group and is expected to be ready for operation by end of 2007.
(d) The Company has recently won a bid for a plot of land admeasuring 3 acres put up by National Buildings Construction Corporation Ltd. (NBCG) at a price of Rs.611.00 crores. The freehold plot is strategically located at Vinay Marg/Africa Avenue. The Company plans to set up a `trophy' hotel at the said plot in the near future.

Subsidiaries: The company has two Subsidiaries viz. Amin Group Hotel Limited (AGHL) and Kovalam Hotels Limited (KHL). The Company and KHL has initiated appropriate steps for amalgamation of KHL with the Company and this is expected to be completed soon.

Financials

The company has a share capital of 74 crores made up of 37 crore shares of Rs.2.00 each. Almost fifty percent of the share capital is owned by the promoters : M/s Leela Scottish Lace group (46%) and remaining by Nair Group.

Among other share holders, LIC, HSBC and Morgan Stanley have considerable holdings in the company.

The company has been performing exceedingly well in the past few years. It came out with excellent Sept. 07 qtr. Numbers which showed an increase of almost 80 percent increase in net profit on YOY basis as compared to Sept. 06.

For the entire year 2006-07, the company declared a net profit of 126 crores, while the profit for H.Y. 2007-08 has already crossed 70 crores. With this trend the company may end up the full year with net profit of well over 150 crores and an eps of over 4 ( for FV Rs.2.00) and more than 20 for (FV 10).

The company has been regularly paying dividends and will continue to do so in future also.

If we take the general trend of trading at forward earnings, the share should at 20 times FY 07-08 earnings viz. Rs.4.00 i.e. P.E. should be at least 80 presently.

Our earning projections
FY 07-08 Net Profit : 150 Crores EPS 4.05
FY 08-09 Net Profit : 190 Crores EPS 5.13
FY 09-10 Net Profit : 260 Crores EPS 7.00

Presently the share should command a valuation of at least 80 going by the forward earnings. Our share price projections are 90 by April 2008, 130 by April 2009 and 180 by 2010.

People with a longer time horizon can safely invest.

KARUR KCP PACKAGING

Karur KCP Packagings BSE: 531363 Industry : Packaging



Karur KCP Packaging is a company engaged in manufacturing all kinds of packaging materials with the latest technology. The company manufactures the following types of packaging materials :
SPECIAL PACKAGING PAPER
When cement manufacturers’ requirements increased for paper bags, the company’s answer was to put a paper mill in Pondicherry to manufacture ESKP.
Set up with an investment in excess of 11.70 million US dollars, in 1996, the unit manufactures a special packaging paper called Extensible Sack Kraft Paper (ESKP) with an international technology called CLUPAC. The unit has surpassed the CLUPAC standards in quality.


Hi-Lights:
Present production capacity is 70 tons per day
Annual turn over is more than 15 million US dollars

PAPER BAGS
Way back in 1986, the company started manufacturing stitched paper bags and then to an innovative and more modern Pasted Paper Bags, with imported ‘Bottomer Machine’ from Japan.
The company has 6 numbers of latest Tuber Machines and 4 numbers of Bottomer Machines for producing fine quality paper bags with minimum manpower.
Hi-Lights:
Present production – 9 million bags per month.
Annual turn over of more than 30 million US dollars expected to reach a turn over of 40 million in next 3 years.



POLY PROPYLENE BAGS
This is one of the units that earned the company its high repute. Located at Mayanur, Karur District, in Tamilnadu and started in 1991, it has excelled in the production of Quality Poly Propylene bags for over a decade. It has 3 Extruders of “Kholsite” make with imported ‘T’ die, of the renowned ‘EDI, USA’ make, as a part of its modern machinery, helping it to achieve high quality levels.
Catering exclusively to the cement companies, this unit has many of the top cement manufactures for its clients.
Hi-Lights:
Present production – 5 million bags per month
Annual turn over of more than 8 million US dollars expected to reach a turn over of 10 million in next 3 years

FIBC DIVISION
The latest addition to the group is the formulation of FIBC division mainly set-up to cater the needs of USA & EUROPEAN market. At present it has capacity to convert 250 Tons of Poly Propylene per month and in next 6 months 300-400 Tons of Poly Propylene per month and in next 6 months 300-400 Tons will be added to this capacity.
The stress on total quality control is visible from the fact the manufacturing and finishing operation is totally dust free and airconditioned
Can manufacture from 500 kgs. to 2500 kgs. capacity bags

OUR FUNDAMENTAL ANALYSIS:

1. The equity is very low and with a high promoter holding, the floating stock is low.

2. The book value is almost 70 as at March 2007 which is a good sign.

3. Profit is in increasing trend and by March 08, we expect a profit of over 11 crores, thereby commanding a year-end EPS of over 11, even 12.

4. Even if the share trades at a modest 12 times future earnings, we can see a price of about 120 by April 2008.

5. The company has a long future and with ever increasing demand for cement, there will be increasing demand for bags, paper bags etc. Other peer group companies are commanding huge valuations.


INDIA CEMENTS, A LEADING CEMENT MANUFACTURER OF SOUTH, IS ALSO A SHARE HOLDER OF KARUR KCP PACKAGINGS.


CONSIDERING ALL THESE, WE GIVE A CALL TO ACCUMULATE.

SPEL SEMICONDUCTOR LTD., CHENNAI

SPEL SEMI CONDUCTORS LTD.
EARLIER KNOWN AS SPIC ELECTRONICS LTD.
BSE SCRIP CODE NO. 517166

SPEL Semiconductor Ltd. is a company belonging to SPIC group of Tamil Nadu. Their other group companies are SPIC (earlier Southern Petro Chemical Industries Ltd.), Tamil Nadu Petroproducts, Manali Petro Chemicals Ltd., Henkel India Ltd., SICAL Logistics, to name a few.
The company was initially called SPIC Electronics but has since been renamed as SPEL Semiconductor Ltd.
SPEL Semiconductor Limited is the leading one-stop turnkey Wafer Sort, IC Assembly & Test subcon facility in India. Established in 1988 and headquartered in Chennai, SPEL had been serving the local market from 1988 to 1994. Having established a track record at home, SPEL turned its attention to the more demanding global market in 1995. It has since been exclusively serving the Silicon Valley and other parts of the world for over 12 years now. SPEL focuses on Lead frame based Packages - both Surface mount & Through hole.
As a specialty, SPEL offers onsite & offshore Test Engineering support to Customers. SPEL ensures better interaction & services to Customers through a Sales & Technical support office based at Santa Clara, USA.
OUR ANALYSIS
SPEL was earlier reeling under regular losses and there were accumulated losses. During the FY 2006-07 the performance of the Company has improved multifold and the entire accumulated losses of the Company have been wiped off during the first half of FY 2006-07. THUS THE COMPANY PRESENTS AN EXCELLENT TURN AROUND STORY. SINCE THE SECOND HALF OF 2006-07, THE COMPANY’S PERFORMANCE HAS IMPROVED SEQUENTIALLY. During the year under review, the Company has been chosen by theglobal Customers for their strategic investments. Management is cashingon this opportunity to rope in more Customers under this plan ofoperation. This will not only ease the Company’s fundingrequirements, but will also make the Customer committed for volumes. During the year under review, Hon. Finance Minister, Mr. P.Chidambaram, inaugurated the Company’s launch of a new Leadless Moldedpackage (LMP). This is a niche package and will generate higher revenueand PAT. This package will go into applications where size, weight,and performance matters and has a good market potential. Towards theend of the year under review the Company has successfully obtained aTerm Loan from IOB to the tune of Rs.17 Crores. The Company has applied to Central Government for formal approval toestablish the Special Economic Zone after getting the StateGovernments approval. The Company is looking at various options ofestablishing SEZ including, collocating some of the outside Companies,whereby optimal benefit and its vision is achieved. SEZ will be arevenue generator to the Company. SEZ will accommodate some of theCompanies who have expertise in high end packages. This will not onlycomplement the Company’s activities but will also address logistics
and eco system part of the industry.

SPEL ICs are used globally in consumer electronic applications (such as
Cell Phones, PDAs & Digital Cameras), Desktop PCs, Notebook Computers
& Automobiles. The company was earlier supplying to Indian markets but
presently, the major buyers are from abroad. As is the case with all export
companies presently, the adverse rupee dollar rate is taking its toll slightly.

The newly installed packages have considerably increased
SPEL`s attractiveness globally. The sustained performance will drive SPEL
to excel due to the strong demand experienced by its existing Customers.
Hence the outlook is bright.Being the First & only semiconductor IC Assembly & Test Company in India,
SPEL has consistently delivered as per its commitments and has hence
been able to move ahead in its growth plan. SPEL is appreciative of the
Government’s efforts toward coming up with the Semiconductor policy, and
hopes that the policy will be made attractive enough to develop the
eco-system within India.The Government’s Semi Conductor policy is very favourable and it is expected
that SPEL will benefit most from it. Besides the above, the company’s
SEZ venture near Chennai will be an added advantage. This will greatly
boost up the profitability in long times to come.

The company has shifted its office from a posh central Chennai location
to the factory premises and it is widely believed that this will result
in substantial cost cutting efforts.

All the above factors show a strong and bright future for SPEL.With an increasing Customer base to its credit, SPEL is surging ahead
speared by an experienced Management, dedicated Employees, excellent
vendor relations and a very good profitability track record.


The company has come out excellent 2nd quarter (Sept. 07) numbers. The net profit has grown by 60% on year on year basis. Once the full year’s profits are out, the EPS for FY 2008 could be well over 2. The present prices have discounted the future EPS considerably and the present valuations are very cheap.
The Operating Profit Margin (OPM) and Net Profit Margin are growing sequentially on QOQ basis. With the increasing trend in all parameters of profitability, the share price will move from the present levels of around to at least 40 by April 2008 (by the time full year’s results are announced).
It is believed that the company is going to place shares with foreign investors within one year. The price is not decided yet, but it is believed that it will be at a premium. This premium will add up to the reserves and consequently the book value and share price will show an appreciation. This factor and the SEZ plans near Chennai will give a further impetus to the share price movement.

We are, therefore, bullish on this stock and give a strong recommendations to purchase the same at the current price of around 23. The share saw a year’s high of 37 and low of less than 20. It is, therefore, almost near the low levels. If the share is held for at least 2 years, we can expect a price levels of at least 60.00.

Presently the share is in T segment which means all transactions should be delivery based. There will be no operator driven movement. The circuit filter level will be 5%. This means all the transactions are showing accumulation. Once the share is moved from T segment to normal transaction cycle, the price will start inching upwards.

MAJOR PLUS POINTS

i) Promoters are holding fairly high level of shares (over 56%). This is considered good.

ii) The company’s products have found increased acceptability the world over.

iii) It is an excellent turn around and growth story.

iv) The company has a subsidiary in USA which is looking after the marketing needs. This takes care of the logistics in export related activities.

v) Rupee has appreciated considerably. At some point of time, dollar will appreciate or the Government will have to intervene to keep the parity rates to favour exporters. This will result in more profits for the Company.

vi) The SEZ, if fully operationalised, will provide an excellent platform for the company to increase its overall economic activity.
OUR OVERALL VIEW In our overall assessment, we find that the positive points outweigh the negative points. Kindly take into account the following article :
So, the share can be accumulated with a clear holding period of 2 years.

ANALYSIS OF NOIDA TOLL

OUR FUNDAMENTAL ANALYSIS

We have been studying Noida Toll for more than one year. The business model is good for the following reasons :
One, the company is owned by IL&FS and the shares in bulk are held by Institutions like Noida, LIC, GIC etc. FIIs are also holding shares in the company. (Kindly go through the share holding pattern above). These companies are no fools. Construction of expressways and operating it on BOT basis is relatively new to India and it gained impetus only during the last 10 years or so. Very shortly, I will not be surprised if some big business house diversifies into this activity. Their subsidiary, DND Flyway, built the expressway and Noida Toll is maintaining the expressway by collecting Toll Tax. One portion of Mayur Vihar Link has opened up for traffic. Another portion will open either in November/ December and once this is done, the Bridge will see more than 1,10,000 vehicles per day.

Two, Noida Toll, as per their announcement to NSE, have completed amalgamation of their subsidiary DND with itself and the accumulated losses of the former will be set off against the reserves and surplus of the parent company. Furthermore, the company will set in place a dividend policy.

Three, the annual profit for FY 06 was just above 2 crores which jumped to more than 11 crores during FY 07 end. The profit for Half year ended September 2007 has already crossed 14 crores and if the similar trend continues, the company may end up FY 08 with a profit of more than 32 crores, because the number of vehicles are increasing day by day and in the immediate future no other expressway is going to come up in this area (Noida to Delhi).

Four, The toll tax charges are indexed to inflation and depending on the rate of inflation the tax rates will certainly increase YOY. It was increased recently and was reflected in First Qtr. 07 results. The increase in Toll Tax has directly resulted in increase in bottom line. Any further increase in Toll Tax will directly result in increased profits since the company has already accounted for major expenses.

The Share price has started after October. Results for Dec. Qtr. will announced by 3rd week of Jan 2008, by which time the second link of Mayur Vihar will be fully operational. We expect a price level of 65 by then.

There was an interview with Mr. Puri, Executive of the Company, who has stated that the Company has a land bank of 200 Acres in Delhi side and about 30 acres in Noida side. They are in touch with Govt. authorities for using the land bank. Conservative estimates valued the land bank at 350 crores as at 2002. Now it may be more than 1200 crores. The company has sought permission to develop the land bank at Noida side with the concerned authorities. It is expected that permission will come about very soon. If the land bank is developed, this will add to the value of the share.

Last, we always hold a positive view about the market and shares. We advise people to have a two year horizon.

OUR ANALYSIS OF SEPTEMBER QUARTER RESULTS

a) The net profit for Sept. 07 Qtr. was 8.18 Crores as compared to 2.15 Crores at Sept. 06. which is almost 400 percent increase.

b) June 07 Qtr. net profit was 6.52 crores, which included an other income component of 4.85 crores which is not directly related to the core competence of the company.

c) The full year ending March 07 net profit was above 11 crores and the Half year 2007-08 (Sept. 07 half year) net profit has already touched 14.70 crores.

d) If the increasing trend of net profit on QOQ sequentials continue, the company should end up with a net profit of at least 36 crores. I am therefore, inclined to estimate the FY 07-08 eps 1.8 - 2.

e) If the same trend continues (it will certainly continue as projected by the company also), the eps for FY 08-09 may be almost 3 which is quite good.

f) FINALLY, MR. PRADEEP PURI, THE C.E.O. HAS HIMSELF ACCUMULATED ABOUT 4,00,000 SHARES OF THE COMPANY.

SUMMARY AND FINAL RECOMMENDATIONS

1. Buy Noida Toll at the current levels. If the prices fall, go on purchasing.

2. Eventually, try to accumulate at least 5000 shares for yourself and your family.

3. Just forget about the shares held in your account.

4. Noida Toll has a 30 years contact with the Government of which only 11 years have elapsed. So, you have another 19 years clearly in your hands. Do not worry, after 30 years, in all probability, the contact will be extended.

5. Please treat this investment as your pension fund.

INVESTMENT BASED ON FUNDAMENTAL ANALYSIS

I advise people to invest based on fundamentals of a company.
i) Look at the type of product which they are producing and selling. What is their core-competence. Core-competence is the core business which the company has embarked upon. The company might have some "other income" during a brief period but for a perfect analysis you have to see how much income accrues from the core-competence. (For eg. in Noida Toll : the core-competence is collection of toll from the Expressway. If they make some profits from other sources, your study could go awry).

ii) Look at the industry on a whole. How many players are there? what is the type of competition the company is facing or will face. If it is a near monopoly and the demand for the products of the company is everlasting, you may safely invest and forget about it. If there is stiff competition from so many players, the performance may stagnate (For eg. Hindustan level facing competition from players like Nirma, Proctor & Gamble etc.)

iii) Look at the Promoters group or Management. Companies belonging to promoters like TATAs are safe. Nowadays companies belonging to Reliance Group are hot cakes.

iv) If a company is manufacturing items which are disposable or consumable, it is preferable to have those than those companies whose products are purchased once in a life time or once in a long time. (For eg. a company manufacturing Colour TV etc. may not go very high because a person who buys Colour TV may not think of buying another TV for next 8-10 years). This is one of the reasons why two wheeler segment now feels saturated.

v) If exports are the means of profit for the company, look at the industry as a whole and what sort of competition they are facing from companies from other countries. For eg. Carpet companies in India are facing stiff competition in European markets from cheaper varieties manufactured in Pakistan, Afghanistan, Iran etc.

vi) Look at the raw materials which the company would have to source from other companies. If the raw materials would have to be sourced from abroad, the supply should not be hindered by any rules or regulations prevailing in that country. (For eg. after the nuclear bomb explosion in Pokhran, America imposed sanction and over 200 companies suffered because of stoppage of essential raw materials and technical know how). It is, therefore, preferable to choose companies which source raw material or technical know indigenously.

vii) The demand for the product should be ever lasting. In this group I may categorise some corporate hospitals, which will never close. They may make losses initially, but with increasing health care awareness, this is one sector which will need a re-rating.