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Thursday, November 6, 2008

Market outlook&Genus power:-Genus or genius?

The market may extend last two days’ fall that followed an earlier strong rebound tracking weak Asian stocks. Asian stocks fell sharply for a third day as layoffs and corporate profit warnings piled up in the face of a rapidly slowing global economy. Back home, an unexpected rise in inflation pulled the Sensex down nearly 4% on Thursday, 6 November 2008, in a highly choppy trade.The rise in inflation shattered hopes of further interest rate cuts by the Reserve Bank of India. Inflation based on the wholesale price index rose 10.72% in the year through 25 October 2008, higher than previous week’s 10.68% rise.The Indian rupee fell more than half a percent in opening deals on Friday, 7 November 2008, on expectations that losses in overseas markets would lead the stock market to drop and spur foreigners to continue withdrawing their investments. At 9:02IST, the partially convertible rupee was at 47.95/96 per dollar, compared to Thursday's close of 47.66/69 per dollar.South Korea's central bank cut interest rates on Friday for the third time in a month, joining a global wave of monetary easing aimed at shoring up the world economy and calming panicked financial markets. The Bank of England spooked investors on Thursday, 6 November 2008, by slashing its key rate by 1.5%, bringing borrowing costs down to the lowest since the 1950s.US stocks overnight posted their worst two-day slide since October 1987, though S&P 500 futures were mostly unchanged as investors awaited the latest US payroll report due on Friday.US crude oil futures fell to a 1-1/2-year low below $60 a barrel on expectations for a drastic pullback in energy demand.


Scripscan:Genus Power Infra
CMP:110
Traded in:Nse-Bse

Story:Cash stocks listed on the BSE have reached such ridiculously low valuations, that short of business closures most stocks would give positive returns if held over a period of 12 to 18 months. A case in point is the Rs 400 crore electronic meters manufacturer Genus Power Infra, which continues to report strong financials in contrast to which the market is giving them ever-lower valuations. For the first half to September 2008, Genus reported Revenues of Rs 219 crore with after tax profits of Rs 20 crore. On an Equity of Rs 14.7 crore this works out to a non annualised EPS of Rs 13.60.More importantly, being a bidder for GOI and State sponsored power projects the corporate actually reports the highest profits in Q4. In FY08 for instance Genus reported an EPS of roughly Rs 21, in a FY08 earning of Rs 41 per share. Even during FY09, the maximum delivery of orders will take place in the second half of the year, as the order book now stands in excess of Rs 720 crore.Furthermore, Genus has bid for GOI tenders worth Rs 6300 crore and has been adjudged as the lowest cost (L-1) bidder in contracts amounting to Rs 1400 crore. If even a part of these orders flows into Genus, its order book will exceed Rs 1000 crore or nearly 2 years of supplies of Electronic Energy Meters, Power Distribution Management systems, UPS and Invertors.Conservative earning estimates for 2008-09 and 2009-10 are projected at Rs 45.6 and Rs 59.8, respectively. At the current market price the stock trades at 2.4x and 1.8x its FY2009E and FY2010E earnings respectively. Like I said earlier, the current stock valuationseither assume a closure of business operations or some hedge fund has really roiled the stock.Genus Power appears to be a multi-bagger from the current levels.
Source:Maverick

Regards,
ARUN
I can be reached at:arunanalyst@rediffmail.com

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