Silver price in preparation for a big rise


Bookmark and Share

Silver may be setting up for a sharp price rise and  though I did not report the recent spike, it is never unexpected. Though silver clearly is a low risk high yielding investment opportunity, before jumping to give a BUY call I would like to see silver close above the $29 level. This breakout has a target  of $31, which is the next immediate resistance level. Once $31 is cleared then all over head resistance would have been taken out and would put Silver  firmly in a bull grip.

The following two charts for the long term and short term clearly enumerate our above stand.

Long term silver is a low risk high yield opportunity with a confirmed uptrend above $31 with a stop loss of $26

Silver price all set for a big rise

Short term silver above $29 is all set to rally to $31

Short term silver is a low risk buying opportunity with a rally target of $31

COMEX inventory reduction favorable for bull case justifying low risk entry

Having examined the charts we now look for supporting evidence to examine the probable causes why silver would rally. Already the physical inventories at the exchanges are declining. Silver inventories during the sharp take down in the price of silver to $26 levels had seen inventories peak. Typically silver prices follow an inverse correlation to these inventories and hence declining inventories is a good sign for an up move.

Geopolitical risks affecting the already acute supply clearly spelling high gains on investments ahead albeit with low risk

Also on the supply side a lot of geo-political events are taking place which could be a set up for the the long term bull market. We already know that silver supplies mainly come from the the Latin American countries-mainly Peru and Mexico. Both these countries have been subject to violence amongst the miners and this could adversely affect supply lines in an already tight silver market.

Further resurgence of nationalization in these countries is also having an untold impact on the investment mood among global silver producers and they are now hesitant to invest in these countries given this uncertainty. Already Pan American Silver has suspended its investments in its flagship project Navidad due to these very fears. Bolivia another major silver mining country is also considering nationalization of one of the reportedly largest undeveloped silver deposits. Cumulatively these countries of Peru, Mexico, Argentina and Bolivia contribute almost 43% of the tiny silver market and can wreak havoc with supply lines.

This combined with the rising global political uncertainty, potential conflagration of the Iran war and the global debt situation creates for a potential gigantic spike in the price of silver. Further with the possibility of gold being included as a Tier 1 asset it is possible that the former glory of silver would also be restored in sentiment to the increased importance to gold.

Considering all the above it is very evident that there exists  extremely low risk and high gain potential for investment in silver and  one may consider buying physical silver with a technical break out above $ 31 and keeping a far stop of $26.

Related reading from around the web

More interesting reading from Winning Trades

Disclaimer: The views expressed in this article are entirely my own and do not reflect the views of my employer. This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither http://winningtrades1.com or myself accepts any liability arising out of the above information/articles.

logo
Vinit Bolinjkar Head of Research, Ventura Securities Ltd
Tel: | Mobile: 0 9730836363

http://winningtrades1.com

http://in.linkedin.com/in/vinitbolinjkar

Bookmark and Share

(function() {
var po = document.createElement(‘script’); po.type = ‘text/javascript’; po.async = true;
po.src = ‘https://apis.google.com/js/plusone.js’;
var s = document.getElementsByTagName(‘script’)[0]; s.parentNode.insertBefore(po, s);
})();

(function() {
var po = document.createElement(‘script’); po.type = ‘text/javascript’; po.async = true;
po.src = ‘https://apis.google.com/js/plusone.js’;
var s = document.getElementsByTagName(‘script’)[0]; s.parentNode.insertBefore(po, s);
})();

Nod from US FDA sets up Claris Life Sciences as a low risk high return stock pick


Bookmark and Share

Claris Life Sciences is a new low risk high returns investment idea on our radar after getting an NOC from the US FDA.  Based on this news the stock was up ~20% today.

It is estimated from unconfirmed sources that the stock has high potential  to achieve an EPS of Rs 30-35 / share during FY13/FY14. This is a sizeable jump from the current Rs 20/share. Based on these expectations the stock is available at a PE of 8x 1 yr forward making it an extremely cheap stocks. Given its business of injectables it can easily get a PE of 12 as new products are launched and market starts recognising its true potential making it a multi bagger idea. However this is only a preliminary analysis based on here say and you are advised to do your own homework before investing in the stock.

Claris Lifesciences is one of the largest sterile injectables pharmaceutical companies in India with five manufacturing facilities spread over a 78-acre campus located in Ahmedabad,India. Claris primarily manufacture and market products across multiple markets, and therapeutic segments. A significant majority of these products are generic drugs that are capable of being directly injected into the human body and are predominantly used in the treatment of critical illnesses.

Its products range across various therapeutic segments, including anaesthesia, critical care, anti-infectives, renal care, infusion therapy, enteral & parenteral nutrition and oncology. We offer injectables in various delivery systems, such as glass and plastic bottles, vials, ampoules, pre-filled syringes and non-PVC/PVC bags.

Keep watching this space http://winningtrades1.com/ for new updates on the new find Claris Life Sciences which is a low risk high yielding investment or you may subscribe to the blog by clicking on the RSS links at top of the page or subscribing for email updates.

More interesting reading from Winning Trades

Disclaimer: The views expressed in this article are entirely my own and do not reflect the views of my employer. This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither http://winningtrades1.com or myself accepts any liability arising out of the above information/articles.

logo
Vinit Bolinjkar Head of Research, Ventura Securities Ltd
Google
Google
Tel: | Mobile: 0 9730836363

http://winningtrades1.com

http://in.linkedin.com/in/vinitbolinjkar

Bookmark and Share

DEN Networks Ltd – multi bagger stock idea for India


Bookmark and Share

Den Networks Ltd is a low risk high yielding investment strategy idea  for the Indian marketsDEN Networks Ltd is a low risk high returns investment idea for the Indian markets and one of the biggest                 beneficiaries of the Digitization policy. With the Government of India (GoI) determinedly implementing the digitization policy, we believe that the turning point for the struggling cable industry has been reached. The cable industry which was characterized by  drastic  “under  reporting” of subscribers by the LCO (last mile operators) had led to substantial revenue losses not only to the  broadcasters  &  MSO’s  (multi system operators) but also the GoI (in the form of lost taxation). With  Digitization  gradually replacing the analog distribution system, the  entire universe of subscribers will now be uniquely recognized leading to a  multifold  jump in the paying subscribers for MSOs. India’s largest MSO – DEN Networks Ltd is expected to benefit the most.

We rate the stock DEN Networks Ltd as a BUY with a  DCF based target of Rs 210 offering scope for a potential gain of ~71% from the current CMP of  Rs 123. Currently the stock is trading at 21x and 17.5x its estimated earnings for FY13 & FY14 respectively. DEN is one of the few profitable MSO with a leading market share of 12% and a subscriber base of 11mn. We expect revenues to grow multifold as the LCOs will no longer be able to under report  the subscriber base. We expect revenues and earnings to reach Rs 1,280.9  crore and  Rs 93.4  crore in FY14 from the current Rs 714.3 and Rs 14.6 crore in FY12 respectively.

Further once digitization is completed by 2016 (latest in our view), the full benefits would start accruing to the bottom line.  We expect the earnings to be amplified significantly with increase in the ARPUs (current Rs 170/month which is expected to be around Rs 225/month as per the FICCI-KPMG study, uptick in subscriber growth (due to near doubling of the TV house holds by 2016).

Cable TV market in India well penetrated but under reported

Despite 76% penetration as of 2011, the 146 mn TV market is “ under reporting” pay TV subscriptions to the extent of 85% of the Rs 18,000 crore market. The under reporting has been primarily due to the unorganised nature of the cable distribution network which has over 1000 MSOs and nearly , hold your breath, 60,000 LCO’s.

As per the existing structure of broadcasting, the content is passed on to the LCO’s by the MSO’s via cable who further distributes  the channels to the consumers.  This results  in the LCO having singular access to the consumer and the analog system ensures  that there  is  no way for  the MSO  to  have a clear understanding on the number of subscribers who  are enjoying its services.

MSOs to wean control off LCOs post digitizatio

With the implementation of the new Digitization Bill, a radical change will take place.  Use of smart technology (Set Top Box equipped  with a Conditional Access Card  at the customers end &  SMS  –  Subscriber Management System) will ensure that all revenue leakages are plugged and gradually control shifts from LCO to MSO. The full impact of which is expected to be felt from 2016 onwards, post complete seeding of the ecosystem with set top boxes (STBs)

Indian cable industry digitization roll out schedule

Once the roll out is complete we would notice a sea change in the way revenue share between the MSO , broadcaster and LCO are calculated. Also post digitization the MSO would be well entrenched as the controller and the role of the LCO would be relegated to more of a collection and servicing agent.

DEN Networks STB seeding forecast

ARPU’s set to expand post complete rollout of digitization

APRU’s have remained suppressed largely due to high competition among the MSO’s and the unorganized nature of the industry. Even during the phased implementation of digitization, we  do not expect a major surge in ARPU’s as MSO’s and DTH operators are on an expansion spree  for  capturing the same target  audience resulting in competitive  pricing. Post  2016 ARPU’s are expected to improve aided by value added  services and introduction of niche content  and increased HD offerings.

Indian Pay TV industry ARPU evolution

Post digitization, DEN’s entire ~11 mn subscriber base (as against the reported number of ~1.4 mn) is expected to start contributing to the revenues. In the interim we expect DEN’s subscription revenues to grow multifold to `853.8 crore by FY14 from `262.34 crore in FY12.

However placement fee is expected to crash

In the analog regime, channel carrying capacity was constrained to 90-100 channels. This led to a scramble amongst broadcasters to have their channels featured by the MSOs and for securing veiwership they had to pay a carriage fee. Further to have a higher sequential ranking, the broadcasters had to pay a placement fee to the MSOs. Although the subscription revenues were not large the MSO made handsome monies from this placement and carriage fees. Carriage and placement fees presently contribute ~50% of the total revenues for the MSO’s.

Post digitization this is expected to come down. However there is no consensus on the same amongst the various industry stake holders. While DEN Networks Ltd. expects this to remain stable, Hathway Cables expects this to crash quite a bit. We have conservatively built in 50% reduction in this amount for DEN Networks.

Carriage fees  which have so far contributed 47% to the consolidated revenues are expected to decline  to  23% going ahead. We have factored a  drop in carriage fees to  `294  crore in FY14 from  `  327.9 crore in FY12. Given the expected multifold increase in subscription revenues, the drop in carriage revenues will have a minimal impact on total revenues Despite this sharp fall revenues are expected to not be impacted severely as subscription revenues are expected to be extremely strong.

Den Networks Ltd carriage revenues fall sharply

Threat from DTH players misplaced; Game is highly tilted in favour of MSOs

Despite having a presence in ~42 mn Households since inception (2003), we do not expect DTH to completely replace the existing analog distribution system. MSO’s being deeply penetrated in the Phase I and Phase II regions will restrict the churn to DTH operators and with accelerated rollout of digitization, we expect the MSO’s to further consolidate their position. MSO’s clearly outperform DTH on various other parameters as enumerated below.

DTH players not a major threat to MSOs.

DEN Networks Ltd truly a multi bagger in the making

Although the full impact of the revenue benefit would be felt FY2015 onward, nevertheless in the interim, the impact on revenue and profitability is expected to be substantial. Post digitization DEN’s  entire ~11 mn subscriber base (as against the reported number of ~1.4 mn)  is expected to start generating revenues.  We expect DEN’s subscription revenue’s to grow multi fold to `853.8 crore by FY14 from `262.34 crore in FY12.

The strong growth in subscription revenues is incumbent upon the fact that the digitization would roll out in a timely manner as per the time table laid out by the Telecom Regulatory Authority of India (TRAI). Knowing fully well how deadlines are scarcely adhered to in India, we have been conservative in the roll out and built in delays in assuming an extended period for the rollout. Incas the roll out were to be done as per plan then the earnings would be brought forward significantly increasing the appreciation potential. However we have not built this into our model and remains an upside risk to our estimates.

Longer term consolidation of the industry to benefit DEN Networks Ltd significantly

As has been the global trend for pay tv, the same is expected to play out in India over the current decade. This will lead to the emergence of a few organized and well capitalized players over the next few years.  Consolidation will also enable MSO’s to have a better bargaining power with broadcasters resulting in improved margins and thus better returns  to the investors.

Global trends indicate that post digitzation the market tends t consolidate

DEN being one of the major players which has grown the inorganic way is best placed to benefit from consolidation.

Post consolidation if international trends were to prevail in India also then we could expect similar improvement in the subscription margins which would improve the profitability and earnings of Indian companies dramamtically.

Margins of global cable operators is indicative of good times for the Indian cable industry in the medium term

Financials to improve sharply over the next two years. After which the growth is to be even steeper

We expect the paying subscriber base to reach 3.9  mn by FY14 from the current 1.4  mn. On the back of the increased paying subscribers revenues are expected  to almost double to  Rs 1,280.9  crore by FY14 from  Rs 714.3  core in FY12, while earnings are expected to leapfrog to  Rs 93.4  crore from  Rs 14.6  crore in FY12 despite higher depreciation from  newly seeded STB’s and interest cost. However the full benefit of digitization will be felt only FY15 onwards.

DEN networks is indeed a low risk high yielding investment opportunity

Valuing DEN  Networks Limited on a single stage DCF basis we recommend a BUY with a price objective of  Rs 210  representing an upside potential of  ~71% from the CMP of Rs 123 over the next 18 months. DEN Networks is truly a low risk high yielding investment opportunity for the Indian markets.

For a better and detailed understanding one can download for free the complete report on DEN Networks.

More interesting reading from Winning Trades

Disclaimer: The views expressed in this article are entirely my own and do not reflect the views of my employer. This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither http://winningtrades1.com or myself accepts any liability arising out of the above information/articles.

logo
Vinit Bolinjkar Head of Research, Ventura Securities Ltd
Google
Google
Tel: | Mobile: 0 9730836363

http://winningtrades1.com

http://in.linkedin.com/in/vinitbolinjkar

Bookmark and Share

Gujarat Mineral Development Corporation – mineral resources stock to power your portfolio


GMDC
Reviewed by Vinit Bolinjkar on August 10, 2012.
Resource mineral stock GMDC to power your portfolio!
So compelling are its fundamentals that we wonder why any one would buy Coal India Ltd, when such a low risk high investment opportunity presents itself!
Rating: Low Risk Buy

GMDC monopoly lignite producer in Gujarat

GMDC powering Gujarat

Bookmark and Share

In line with the low risk high yielding trading  strategies philosophy of this blog, we introduce a new mineral resource  stock GMDC (Gujarat Mineral Development Corporation Ltd). Although it is not a new story however it has been much ignored by the market. So compelling are its fundamentals that we wonder why any one would buy Coal India Ltd, when such a low risk high investment opportunity presents itself!

Continuously improving lignite volumes, price hikes,  traction in the bauxite business and the turnaround of its loss making power business are triggers for an up move in the stock. We expect GMDC’s revenues and earnings to grow at a CAGR of 27.1% and 23.7% to Rs 2636 crore and Rs 745 crore respectively by FY14. Having a virtual monopoly in the lignite business in India’s fastest growing  and one of the most industrialized states of Gujarat, lends long term revenue visibility on assured off take and pricing power.

We rate this stock a core BUY and initiate coverage with a price target of Rs 255 representing an upside of ~32% over the next 15 to 18 months. At the CMP of Rs 193, the stock is trading at 6x and 5x its EV/EBIDTA estimates for FY13 and FY14

GMDC low risk high yileding investment opportunity for the Indian markets

GMDC’s compelling valuations present a low risk buying opportunity

Commencement of lignite production from new mines to ensure strong volume growth

Over the period of 5  years from 2007 to 2012, GMDC’s lignite segment has witnessed a robust production growth of ~7.3% CAGR. Going forward, we expect this segment to grow at a CAGR of 13.5% from FY12-FY14 aided by the commissioning of the new mine  –  Umarsar and healthy production growth from existing mines of Bhavnagar, Raj pardi, Mata-no-Madh and Tadkeshwar mines. This volume growth story is on despite declining production  at its largest mine Panandhro  from 3.6 MT in FY09  to 2.5 MT in FY12.

GMDC lignite production volumes set to rise

GMDC’s rising lignite production trend is encouraging

Approval for increasing production at Mata-no- Madh to ~ 4.8 MT from current 3.5 MT are expected over the next few months and once this mine starts ramping up it should further fuel the growth. To ensure long term growth and reserve addition, GMDC is all set to commission a new mine at Umarsar (24 mt reserves and mining  life of 24  years) by the end of FY13. In addition, two  new mines named Dhedadi and Akirimoto, are expected to commission over the next three years once government approvals come through

Lignite resource base for GMDC

Adequate reserves and reserve life of lignite mines provide long term revenue visibility for GMDC

GMDC is comfortably insulated from any price correction

Given the rapidly increasing demand for energy and the shortage of coal availability,  lignite prices are expected to trend firmly up over the medium term. GMDC  prices lignite at a discount of 15-20% to Indian coal (of equivalent calorific value of 3,600kcal/kg) and in absence of any coal mines in Gujarat, coal transportation costs over a distance of 750 km from the nearest coal mines based in Nasik provides for sufficient head room  to take further price hike in the near future, thereby ensuring profitability.

GMDC’s loss making power business has already turned around

Issues related with the bellow in the boiler at its 250 MW  (Kutch, Gujarat)  lignite based thermal power plant,  has led to a sharp decline in its PLF (40%) leading to lower revenues. Subsequently the recent replacement is working  properly and the plant has achieved a PLF of ~80% which is a huge turnaround. However not wanting too optimistic (the bellow was replaced 19 times in the previous  year! ), we have factored in a PLF of 55% and 69% for FY13 and FY14 respectively which should ensure that the profitability of the power business would be restored latest by FY14. Accordingly, we expect the  revenues of the power segment to grow at a CAGR of 15.1 % to  `  271.0  crore over the forecast period There is an upside risk to our estimates and would be an icing on the cake if the 80% PLF should continue.

Power business is an upside kicker to our estimates

Loss making power business of GMDC on course to profitability

GMDC realizing that power generation is not its core business plans to outsource O&M activity to third party power generators. The company has invited bids for the same and expects to complete the process in the next 5-6 months. The company hopes that this step would help in permanently improving the PLF of the power plant.

Investments in renewable power to enhance generation portfolio of GMDC

GMDC’s  105.5  MW  renewable  power  portfolio includes  the recently commissioned  5 MW  solar power plant at Kutch. It plans to enhance this by 50 MW  per annum taking the capacity to 200.5 MW by 2014 at an investment of ~ Rs 600 crore. We expect the plants to continue to operate at PLFs of 20-22% and boost revenue and profitability.

Bauxite mining and other business to add further value to GMDC

Apart from lignite GMDC also mines other minerals like bauxite, manganese, limestone, multi metal etc. Ramp up in production for bauxite at its Gadhsisa mines should lead to revenues growing at a CAGR of 57.7% to Rs 193  crore over the forecast period. The  other businesses are at an emerging stage and expected to take considerable time to prosper.

GMDC’s valuations are compelling

At the CMP of Rs 193, GMDC is trading at 5.9x and 4.8x its estimated EV/ EBIDTA for FY13 and FY14, respectively. We initiate coverage on GMDC as a BUY with a Price Objective of ` 255 (6.5x FY14 EV/EBIDTA) over a period of 18 months. Considering
the increasing production, adequate reserves life of its mines and pricing power, we expect GMDC to continue to register robust growth. The bauxite mining business is also witnessing good growth and the JV with Nalco for setting up an alumina plant and
aluminum smelter project, augurs well in terms of long term revenue visibility. However, we have not factored any business revenue from this JV in our earning model.

GMDC revenue growth and profitability projections are at reduced risk and provide high return potential

Healthy revenue and profitability growth augurs well for GMDC

GMDC EV/EBIDTA valuation charts seem to suggest low downside risk

GMDC is trending well above its mean valuation of the last 10 years

This blogpost is a review of the equity research report on GMDC prepared by Ventura Securities Ltd. Incidently I am also head the Equity Research at Ventura. For a detailed description and to aid you in better evaluating GMDC as a low risk high yielding investment proposition, we encourage you to read the indepth report.

More interesting reading from Winning Trades

Disclaimer: The views expressed in this article are entirely my own and do not reflect the views of my employer. This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither http://winningtrades1.com or myself accepts any liability arising out of the above information/articles.

logo
Vinit Bolinjkar Head of Research, Ventura Securities Ltd
Google
Google
Tel: | Mobile: 0 9730836363

http://winningtrades1.com

http://in.linkedin.com/in/vinitbolinjkar

Bookmark and Share