Jan 2008 - May 2006 revisited

May 2006 Revisited

Boy! Its been quite some action on the Dalal Street in the past couple of days. It brought back memories of my first correction May 2006 and this correction has been a mirror copy of the action in May 06, only that all the action has been played out in a much narrower time span.

We plunged from a height of 21K+ to depths of 15.5K and today we have closed at 17.2K levels. I had expected a 2007 closing level of around 16.5K [ Link]. However the bull run beat me up fair and square and we ended the year close to 20K levels. The valuations had run ahead of the fundamentals and a correction was due, the Reliance Power IPO and the US recession fears only precipitated what was surely overdue.

So what did I learn from this correction?

There is an old saying - When everyone starts talking about the market its time to get out of the market. Reliance Power IPO came and everybody was talking about the stock markets. It should have been a signal to any seasoned investor to get out. However, not many heeded with greed taking precedence over safety. This is my lesson learned from this correction.

How was Jan 2008 different from May 2006 for me?

May 2006 saw me lose almost 30% of my invested capital and the entire profits. I had to take recourse to borrowed money to shore up my positions. Jan 2008 has been much kinder to me and spared me just by taking away my unbooked profits. May be two years in the markets has improved my stock picking or perhaps its just been that my long term investments have saved me.

2008- The Year Ahead

Now that the corrections have finally tested the levels of 16.5K which is what I felt should have been the 2007 year end levels, I feel its time now to take a fresh guard for the year ahead. The sensex stocks are expected to post an EPS of around 1100 rupees for the current financial year. This is a healthy 30% increase from the expectations of an earnings of close to 810 for the year gone by. This strong earning growth is what should save the Indian stock market bulls run even in this year. ( Please note that there has been some changes in the composition of Index stocks over the last year which would have lead to further increase the earnings estimate compared to the last year).

If we manage to close at around 20 times the FY08-09 earning expectation, we should close at around 22-22.5K. From the present levels of 17.2K, this represents a healthy return of nearly 30%.

So what are you waiting for ? The present correction is a God-sent opportunity to do some value buying. Would the US economy go in a recession? I don't feel so. The Fed rate cuts should do enough to kick start the US economy again. And if indeed we go into a recession, then nothing is going to save us - even not investing in the stock is not going to help us! So if indeed we have to go down, why not go down all guns blazing?

It might be a tough year but remember some great long term investments are made when there is panic in the market.

All the best for the year 2008!

Consolidated Finvestment Limited

CMP :103

Consolidated Finvest & Holdings Ltd has informed BSE that the Board of Directors of the Company at its meeting held on January 03, 2008, has considered and approved de-merger of its business of investments in group Companies (Business Holding division) in to a new Company i.e. Jindal India Finvest & Holdings Ltd (JIFHL) and amalgamation of Jindal India Powertech (JIPL) with Consolidated Finvest & Holdings Ltd.

The salient features of proposed scheme of Arrangement and Amalgamation is under:

1. Appointed Date for the scheme of Arrangement and Amalgamation is April 01, 2008.

2. De-merger of Business Holding Division in to new Company i.e. Jindal India Finvest & Holdings Ltd (JIFHL) to be listed at National Stock Exchange of India Ltd & Bombay Stock Exchange Ltd.

3. Issue of one equity share as fully paid of Jindal India Finvest & Holdings Ltd for every one equity share of Consolidated Finvest & Holdings Ltd (CFHL) to the existing shareholders of CFHL.

4. Amalgamation of Jindal India Powertech (JIPL) with Consolidated Finvest & Holdings Ltd.

5. Issue of one equity share of CFHL as fully paid up to the equity share holders of JIPL for every one fully paid up equity share held by them and to issue one CFHL partly paid up equity share of same value for every one partly paid equity share held in the capital of JIPL.

6. Alteration in the Main Objects of Consolidated Finvest & Holdings Ltd.

7. Change of name of Jindal India Finvest & Holdings Ltd to Consolidated Finvest & Holding Ltd and change of name of Consolidated Finvest & Holdings Ltd to Jindal India Powertech Ltd.

The valuation of the holding company itself happened to be around 450 rupees per share way back in 2005: Refer Article

The fresh share of Jindal India Powertech Ltd. is going to be an added bonus !

Panoramic Universal - Great Expansion Plans

CMP: 120

"Panoramic Universal Ltd is poised to make a splash in the Indian hotel industry. The flagship company of the Panoramic group plans to acquire 20 properties in the country over the next three years as part of a total investment of Rs 1,000 crore in the hospitality sector. "

This was what the Hindubusiness Line had to say almost an year ago about the company.
HinduBusinessLine Article

Nearly an year down the line, the financial performance of the company has grown better and better, however the stock price has lagged behind probably because of huge exposure to the US markets.

Panoramic Universal Ltd is the flagship company of the Panoramic Group. The group has business interests in Hotels and Information Technology. Panoramic Universal owns and operates five hotels in the US, one in New Zealand and three hotels in India at Goa, Shirdi and Malvan, i.e.

* Holiday Inn, Hudson, Ohio, USA 239 rooms USD 6.5 mn
* The Georgian Resort, New York, USA 164 rooms USD 7.5 mn
* Quality Inn, New York, USA 142 rooms 4.25 mn
* Comfort Inn, North Carolina, USA 126 rooms USD 3.95 mn
* United Inn, North Carolina, USA 125 rooms USD 2.8 mn
* Sai Motels, New Zealand 22 rooms USD 3.5 mn
* Hotel Sai Sahavas, Shirdi, India 46 rooms USD 2 mn
* Graciano Cottages, Goa, India 22 rooms, USD 1 mn
* Hotel Sagar Kinara, Malvan, India 16 rooms USD 0.75 mn

The value of the above mentioned Hotels turns out to be nearly Rs 85 per share.

Add to it, the company plans to invest nearly 1000 crores by 2009 in the hospitality sector, which turns out to be nearly 750 rupees per share. Add to this the IT segment of the company which contributed an EPS of nearly Rs 5 per share last year.

Following is the Annual Report of the company: Annual Report 06-07,
The company has been posting good results consistently with a good divident record.

In 3-4 years, the stock has the potential to give atleast 5-6 times returns.