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Saturday, September 26, 2009

Taj Gvk Hotels & Resorts Ltd and Infotech Enterprises Ltd:Future outlook,analysis,buy/sell,growth prospects

1)Scripscan:Taj Gvk Hotels & Resorts Ltd
Bse code:532390

Story:Taj GVK (TGV) is a joint venture between the Tatas (26% stake held by Indian Hotels) and the GVK Group. Taj GVK currently operates five luxury hotels - three in Hyderabad and one each in Chandigarh and Chennai. In Hyderabad, the company operates the Taj Krishna - its flagship luxury hotel, Taj Residency and Taj Banjara (both business hotels). Taj GVK is a market leader in the hotel industry in Hyderabad and Chandigarh with consolidated room strength of 534 in Hyderabad and 150 in Chandigarh. In Chennai, TGV operates the Taj Mount Road, opened recently on December 22, 2008. The company is expanding its capacity to have an inventory of 1,400 rooms in the next three to four years. Total Promoter holding in TGV is 74.99% and public holding is 15% .Taj GVK has three hotels (one luxury property and two business hotels) in Hyderabad totaling to 529 rooms, which is 50% of the total five-star rooms available in the city. Given the strong position that the city enjoys on the services as well as on the pharmaceutical front, demand will outpace supply in the next three to five years.Taj GVK Chandigarh (149 rooms) is the only five star hotel in Chandigarh. Given this fact, the company retains the pricing power. Taj GVK, which enjoys monopoly positions in Hyderabad and Chandigarh, continues to benefit from the demand supply gap in these cities. With a dominant presence in Hyderabad and strong performance at the Chandigarh property, TGV is well-placed to tap the growth opportunities in the hospitality sector. Going forward, with the emergence of Hyderabad and Chandigarh as key business hubs, demand for new rooms will benefit Taj GVK. At the current market price of Rs 125, Taj GVK's stock is trading at a price to earnings multiple of 9 times its expected FY10 earnings (Rs 14). The dividend yield at current price is also attractive.Considering the company's focused growth strategy and its leadership position in the regions of operations, the stock appears attractive with a medium to long-term perspective. In view of the decent long-term growth prospects. Investors can start accumulating the TGV stock at sub 100 levels and add more on declines for decent returns over the medium-long term.

2)Scripscan:Infotech Enterprises Ltd
Bse code:532175

Story:Indian IT services firms have done reasonably well, when it comes to tapping the $1 trillion IT services and BPO market; but penetration into the $783 billion market for engineering and R&D services remains modest. The good news is that design testing, prototyping, stress-testing and documentation services are increasingly outsourceable. The market for outsourced engineering services is expected to reach $38-50 billion by FY20E, compared with $2 billion now, as per a Nasscom-Booz Allen Hamilton study. As for Infotech, its ED segment is set for a strong growth on the back of a secular demand upswing in aircraft-related engineering services. Infotech is well-positioned to tap this opportunity, by virtue of its growing relationships with Boeing, Airbus and long-standing association with Pratt & Whitney. Infotech has also formed a 50:50 joint venture (JV) with Hindustan Aeronautics (HAL) to offer engineering services to the aerospace sector. The JV would provide growth visibility to Infotech and help it deepen offerings within the aerospace segment, through HAL's strong domain expertise.According to the NASSCOM BAH report on Design Engineering Services, global engineering spend on Hi-tech design services stood at $170 billion in 2004 and is estimated to reach $300 billion by 2020. The potential in Hi-tech industry for offshoring is estimated in excess of $15 billion by 2020. The company is looking at more acquisitions, especially in the automobile space. In August 2008, Infotech signed a contract with US based information service provider IHS Inc., marking its entry into the oil and gas industry. Such initiatives will not only provide new growth levers to the company but also improve its revenue mix in the engineering design segment, which is currently tilted towards aerospace industry.Infotech is an end-to-end service provider in the ED and GIS domains, which are expected to grow at 35% and 25-30%, respectively in FY09 for the company. Infotech has created a niche for itself over the last two decades by building long-term relationship with marquee clients like Pratt & Whitney (P&W), Bombardier, Boeing, Alstom Transport and Hamilton Sundstrand. While this creates an entry barrier for new players, a significant portion of its revenue is annuity-based, which results in a sustainable revenue model. The management is confident of a 30-35% revenue growth in US dollar terms on the back of 80% revenue visibility so far. At Rs 248, the stock trades under 12 times its fy10 earnings of 21rs. These valuations turn further attractive considering the cash on the company's books i.e. Rs 295.44 cr., which is about Rs 56 per share. Continued revenue visibility, stable margin outlook and upsides from acquisitions as well as a huge offset opportunity make Infotech a worthwhile investment proposition at lower levels.

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