Stock Watch – updated 13/Nov/08

Following stock picks are meant for general guidance of investors. They are based on the circumstances prevailing on the date of issue. This is what I would do if I were you at this point of time.

Be careful to use them after 2 months – things may change. There is no guarantee that it will work for every reader or investor. Use it according to your temperament, understanding, risk taking ability and experience. This is normally meant for Cash investors, not for those who want to buy or sell on leveraged basis.

Following format will be used. It will be numbered serially as 08-0nn where 08 is the calendar year followed by serial number. Latest post will figure on the top. The readers may post their comments. They may not be answered by the Author unless he finds compelling reasons to do so. – Anil Selarka
Note: If you want printable version, please download PDF file from side bar in the folder Stock Watch. The file is titled “Stock Watch Oct 08”

Stock	*Tata Tele Services Mah Ltd*			Sector	*Telecom*	Market	India
Link to Financials	Financials on Moneycontrol			Company Web Site	http://www.tataindicom.com/
Symbol	TTML.	Px 08/11/13	20.20	Target ST	32~60*	Target LT	60~120*
Year High	64.95	Year Low	12.50	ST Hold	8m	LT Hold	3 years
Current PE	Negative	% Down Peak	-67.44%	Downside	-12..5%	Upside	20% ST
PE 2009	NA	Div Yield% CMP	Zero	Buy Range	16~21	Sell Range	32~60
Comments	As mentioned in the article, we do not know to what extent TTML will get cash allotment out of the deal for Rs 13000 crores. The earning estimate largely depends on this factor. We therefore gave two scenarios – without cash benefits from parents or with benefits from parent TTS. It was also reported in lat few days that TTML will roll out 3G technology before Mar 2009. It was also reported that Reliance Communication is severely constrained to raise fund to meet its expansion. TTML now has edge over almost all telecom operators. The downside to the stock is now severely restricted. The stock can make major move only if there is reverse split of 4:1 at least.
Stock Behaviour	This is often tricky stock. Sits like a dog most of the times and then suddenly start barking. Being a small value stock, not favorites of foreign fund managers. That is history. Japan stamp may reduce downside. New technology 3G will also help more demand. In short term, NTT has to buy 20% or 38 crores shares from the market which is nearly 30 day’s turnover in normal time. After the expiry of 20% offer, the stock may correct by 10% to 15% at least, if the market remains in state as present
SWAP	One may sell other high value telecom stocks like Bharati, Rcom, Hutch etc and swap into this tiny baby. Please note that this stock will not give run away return in short to medium term. The shares are too many and earnings are still far away. It may improve from July onwards

Stock	Royal Orchid Hotel			Sector	Hotel	Market	India
Symbol	ROHLTD	CMP 08/10/30	42.15	Target ST	81.	Target LT	180
Year High	174.60	Year Low	38.50	ST Hold	9m	LT Hold	24m
Current PE	3.71	% Down Peak	-78%	Downside	15%	Upside	300%
PE 2009	3.50 Est	Div Yield% CMP	14.23%	Buy Range	35~45	Sell Range	81~131
Comments	One of the cheapest hotel stocks with dividend yield of 14%. -40% higher than bank deposits. Less Debt, good presence in Bangalore, Hyderabad, Pune, Mumbai (All info tech centers).Also Goa. Weaker Rupee helps. Trading at 33% discount to Book Value. Most negative already discounted.

Stock	Taj GVK Hotel			Sector		Market	India
Symbol	TAJGVK	CMP 08/10/30	44.95	Target ST	108	Target LT	160
Year High	205	Year Low	40.85	ST Hold	9m	LT Hold	24m
Current PE	3.96	% Down Peak	-80%	Downside	18%	Upside	400%
PE 2009	3.35 Est	Div Yield% CMP	7%	Buy Range	38~45	Sell Range	108~
Comments	This is premier Mid Cap stock with lot of growth. Decent yield of 7% should make you think why not you withdrew bank deposits and invested here. Weak rupee helps, good management. This can shine more than its parents = Indian Hotels

Stock	India Hotels			Sector	Hotel	Market	India
Symbol	INDHOTEL	CMP 08/10/30	45.80	Target ST	92	Target LT	180
Year High	163.80	Year Low	43	ST Hold	9m	LT Hold	24m
Current PE	8.61	% Down Peak	-72%	Downside	15%	Upside	400%
PE 2009	6.85 Est	Div Yield% CMP	4.1%	Buy Range	39~60	Sell Range	92~40
Comments	Best blue chip hotel stock of Taj Group of Hotels with largest revenue base of 1600 crores. Have presence in all metro and tourist cities. Good Dividend yield of 4%, low PE and best management can make this stock highly favorite. It is perhaps life time opportunity to buy at cheap price

New entries will be posted here as and when Ifeel that the markets are down. If I write when the markets are up, there is a possibility that some readers might impulsively make high end entry and get trapped.

Stock	Essar Shipping			Sector	Shipping	Market	India
Symbol	ESSARSHIP	CMP 08/10/29	31.90	Target ST	140	Target LT	360
Year High	252	Year Low	31.65	ST Hold	9m	LT Hold	24m
Current PE	8.57	% Down Peak	-87%	Downside	15%	Upside	800%
PE 2009	2.5	Div Yield% CMP	NIL	Buy Range	28~36	Sell Range	210~310
Comments	This company is uniquely placed, so rise in oil prices will not affect it. It has youngest fleet and also many tankers. Since Essar Oil has come into production with expected revenue of Rs 36000 crores per year, this company will be prime beneficiary for transportation of oil – crude from middle east to India and from India to overseas. Its revenue could grow 4 fold in one year, and its profit will expand 4 times. With equity base very low, this will be the fastest rabbit on Indian stock arena. I would not be surprised, if the EPS reaches even Rs 16 to Rs 20 in less than 12 months. The stock is near 12 months low. It has some of the finest potential. Just grab it when the market opens.

Stock	Essar Oil			Sector	Oil	Market	India
Symbol	EssarOIL	CMP 08/10/29	76	Target ST	180	Target LT	480
Year High	360	Year Low	54	ST Hold	9m	LT Hold	18m
Current PE	8 Est.	% Down Peak	-85%	Downside	20%	Upside	600%
PE 2009	>20 Est	Div Yield% CMP	NiL	Buy Range	61~92	Sell Range	181~310
Comments	This is the fastest growing stock in the Indian stock market. The company has come into production after 4 to 5 years. Its quarterly sales jumped from Rs 562 crores to Rs 9000 crores. For full year it may exceed the sales of Rs 36000 crores. This company is unique in that it is oil producer (like ONGC) and also a refiner (like BPCL, HPCL, MRPL), so its profitability will be higher than SOE Refiners and also MRPL. Its expansion plan will take hold in another 18 months. Since US does not have refining capacity, it may have to lease refiners like Essar and RPL. The potential of this company is simply huge. Yes, there were times when the Essar management wanted to privatize, but then dropped the idea. (After this author’s article on MMB). Even the management took new shares at Rs 200 plus. One may sell any share over Rs 600 and buy this share. The upside potential is simply outstanding. Buy with both hands. Risk of privatization is least now. Credit market is so tough that even the best borrowers do not have line of credit to pursue acquisitions. Do not wait – just grab it now and then buy more if it does come down. When oil prices rise, this stock benefits because it is also a producer. If Oil goes down, Essar as refiner benefits. This will become Index stock in 18 M

Stock	IFCI			Sector	Finance	Market	India
Symbol	IFCI.NS	CMP 08/10/28	16.90	Target ST	39	Target LT	81
Year High	121.20	Year Low	15.40	ST Hold	9 m	LT Hold	18 m
Current PE	1.88	% Down Peak	-87%	Downside	-20%	Upside	400%
PE 2009		Div Yield% CMP	No Div	Buy Range	12~31	Sell Range	39~81
Comments	One of the cheapest finance stocks. Net Worth turned positive after many years. Swap from higher value banks such as SBI, HDFC, BOI, BOB, and UTI. Low P/E, good growth in loan books benefit.

Stock	LIC Hsg Finance			Sector	Finance	Market	India
Symbol	LICHF.NS	CMP 08/10/28	177.75	Target ST	360	Target LT	1,020
Year High	402.90	Year Low	164	ST Hold	9m	LT Hold	24m
Current PE	3.62	% Down Peak	-56%	Downside	-10%	Upside	300%
PE 2009	2.65	Div Yield% CMP	5.61%	Buy Range	140~180	Sell Range	360~480
Comments	If one can not buy this stock, he should retire from the stock market. Current fall in prices is related to problems in Home finance in USA, and other western countries. Indian is not related at all, but the funds are getting out of any housing finance related stocks. This fear is behind the fall. This is one of the finest stocks you can own, better than even IFCI. The company has access to large funds with parent LIC whereas other institutions have to borrow at higher prices, reducing their spread. This stock is better than even HDFC. It will overtake HDFC in 3 years time… Take out your money from deposits or PPPF and invest here. Much safer than others. I would even switch by selling HDFC into this counter. Selling HDFC will get me nearly 8.5 shares of this counter. This will outperform every other sector in Housing Finance sector Swap from SBI, BOI, BOB, LT into this counter immediately

Stock	Bharat Petroleum Corp Ltd.			Sector	Oil/Refin	Market	India
Symbol	BPCL.NS	CMP 08/10/28	272	Target ST	360	Target LT	785
Year High	556	Year Low	206	ST Hold	9m	LT Hold	36m
Current PE	6.21	% Down Peak	-51%	Downside	-30%	Upside	185%
PE 2009	4.53	Div Yield% CMP	1.47%	Buy Range	187~257	Sell Range	360~450
Comments	DO NOT be guided by numbers. They are erratic, following wrong accounting practice. The lower profits mainly due to pending subsidies. GOI issued 8% Bonds but they accounted it as Investment rather than income. It is not BPCL liability. The properties held by company are highly undervalued. EPS in this authors estimate using proper accounting will be well over 120 placing this stock as absolute bargain. The time is coming for lifting of subsidies that may happen after election. On 5 years horizon and expecting normal accounting, the stock trade over 2400 in 5 to 6 years. Expect fat dividend when the company starts using proper accounting. Until such time the stock may remain under pressure. Only Long term investors may touch this stock. Please note that due to improper accounting standard, the company understates profit and may therefore have more downside risk

Stock	Hindustan Petroleum Corp Ltd			Sector		Market	India
Symbol	HPCL.NS	CMP 08/10/28	180	Target ST	360	Target LT	1800
Year High	405	Year Low	164.10	ST Hold	9m	LT Hold	36m
Current PE	5.38	% Down Peak	-56%	Downside	20%	Upside	800%
PE 2009	4.50	Div Yield% CMP		Buy Range	140~187	Sell Range	360 plus
Comments	Same as BPCL, but this company is better. I would personally like to invest into lower value shares, as large cap stocks see the exodus of funds due to crisis.

Stock	Ambuja Cements			Sector	Cement	Market	India
Symbol	Ambujacem	CMP 08/10/28	49.50	Target ST	92	Target LT	180
Year High	161	Year Low	43	ST Hold	9m	LT Hold	36m
Current PE	5.85	% Down Peak	-70%	Downside	-20%	Upside	265%
PE 2009	4.50	Div Yield% CMP	20%	Buy Range	41~60	Sell Range	108~135
Comments	This is one of the finest stock in Cement sector. It could be privatized too at above 100 price. Even the current dividend yield is over 20% on current price, that is, entire capital could be recovered in 5 years from dividend alone. Swap from ACC into this counter. After

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