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Tuesday, September 29, 2009

Provogue India Ltd and MTNL:Future growth prospects and outlook

1)Scripscan:Provogue India Ltd

Story:Mumbai-based retailer, Provogue, has proposed to buy back five million shares at a maximum price of Rs 100 per share. The company has allocated an amount of Rs 50 crore for the same. This represents about 4.3% of the current outstanding equity.The current buyback comes at a time when the stock has taken a beating on the bourses. It is precisely for instilling investor confidence that the management announced a buyback. It believes that this move will help to enhance shareholder value and increase the earnings per share. As the equity base will come down, percentage shareholding of retail investors will go up further. Going ahead, at the time of value unlocking of business, it would have a positive effect. Moreover, as rentals have come down and employee costs are low, the retail sector seems to be in a strong grip.Currently, the company has about 127 standalone stores and a little over 120 shop-in-shop stores. Going ahead, it targets to open 50 more stores in the next two years. It is also present in the value retail format through its two Promart malls. The company will continue to focus on expanding this format in the western parts of the country.Its one of the best bet among the retail sector.Buy at declines.

2)Scripscan:Mahanagar Telephone Nigam Ltd

Story:MTNL continues to lose out to more efficient private operators and higher wages impact margins. While fundamental reasons for owning MTNL are few, cash per share of Rs 53, continued positive free cash flow, and a stable dividend yield of 4% provide some downside support for the stock. MTNL continues to lose market share to the more efficiently run and more customer-centric private operators in both the wireline and wireless segments. Moreover, the core wireline business is still under pressure as wireless tariffs are falling consistently. MTNL''s wireline and wireless revenues are to keep falling. Broadband remains the only growth driver, but its small base provides limited upside to revenues.A big brokerage house has cut its FY10E/FY11E revenue by 15%/13% and FY10E/FY11E EBITDA by 60%/37%. EBITDA margins are also affected by higher employee costs following the pay commission increase. The EPS estimates are cut by 72%/25%.I expect a revenue decline of 5% and a 4% EPS CAGR over FY09-11.A hold as of now,as a merger with bsnl can change the scenario completely.

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