Tuesday, 14 October 2008

Jet-Kingfisher tie-up could hasten route to profitability

The new alliance between Jet Airways and Kingfisher Airlines is expected to mark a new era of co-operation in the airline services industry especially when it is facing tough time, believes CRISIL.

The alliance seeks to jointly deploy 189 aircraft owned by both carriers on domestic and international routes and cross-sell flight inventories - a move aimed at improving load factors and increasing aircraft utilisation for both the airlines. Further, the alliance would have superior bargaining power with suppliers of fuel, aircrafts, catering services etc. providing benefits of scale leading to cost savings.

Also, measures like common ground handling, cross utilization of flight crew and commonality of training of crew and other technical resources are expected to support operating margins of both carriers.

Ajay D'Souza, Head, CRISIL Research said, "The airlines have taken a co-operative route towards profitability though this innovative alliance in order to optimise the use of each others resources aimed at cost reduction and increased asset utilization without any equity sharing. These extraordinary measures have been necessitated by the current economic environment and stressed financial position of the airlines."

Source: EconomicTimes

Analysts Picks: ICICI Bank

Cmp: Rs 447.10
Target price: 779

Broking house Edelweiss Securities has reiterated a ‘strong buy’ on the stock saying it has corrected 26% vs 18% for Bankex and the general market correction of 16%. “Current prices seem to be completely ignoring value of subsidiary and moreover implying wild assumptions about asset quality (which appears highly improbable),” said Edelweiss in a note to its clients.

“Even if we make a worse case assumption on all the various possible parameters (none of which is probable), the stock offers substantial value at these levels,” the note said. The broking house asserts that book value (BV) of Rs 417 does not take into account any valuations for the subsidiaries. “If we add subsidiary valuations (of Rs 220 per share in FY09E) to the adjusted BV, the fair value will be 50-75% higher than the current price.

This represents a strong return to investors in the short-term itself,” the Edelweiss note said. The broking outfit expects the bank to post 15%+ CAGR in assets with a buoyant corporate investment pipeline and robust retail asset growth. However, says Edelweiss, main risks for ICICI is NPA (non-performing asset) risk due to its low cumulative provisions. “With 65% of retail asset book, it is vulnerable to system-wide deterioration in the quality of retail assets,” said the note.

Source: EconomicTimes

Motilal Oswal maintains 'buy' on TCS for Rs 547

Motilal Oswal Securities has maintained 'buy' on Tata Consultancy Services for a target price of Rs 547. The brokerage believes that the C

itigroup Global Services deal offers TCS long term revenue visibility with an opportunity to enhance margins and build platformbased services for small and mid-sized banks, offering much needed non-linearity to its BPO business. Maintain Buy.

TCS recently announced the acquisition of Citi's stake (96%) in Citigroup Global Services, the India based captive BPO arm of Citibank for an all cash consideration of $505 million including goodwill of $350 million. The agreement includes a contract worth $2.5 billion (take or pay basis) with TCS for providing IT services to Citi over 9.5 years.

The deal is expected to make TCS a strategic vendor for Citi. This will enable additional volumes from Citigroup as well as from any acquired companies in case of a vendor consolidation exercise. Citibank is currently a $150 million plus account for TCS and will increase to $450 million by FY10 post-acquisition.

Source: EconomicTimes

Buy McDowell for target Rs 850: Anand Rathi

McDowell has made a possible double bottom at Rs 700 in past two days. The stock crashed from Rs 1,269 four days before it reached a low o

f Rs 700. Thus, there is a possibility of good pullback with volume, according to Anand Rathi Securities.

The brokerage advises buying in cash around Rs 760-744 levels with stop loss at Rs 850 for the said target.

Source: EconomicTimes

Analysts Picks: Infosys

Cmp: Rs 1,397.05
Target price: Rs 1,825

JP Morgan Research has assigned an ‘overweight’ rating to the stock saying Infosys has reported good 2QFY09 results ahead of consensus. “We have a positive view on the sector, given our belief in secular offshoring trend but do accept that weak guidance would put pressure on Infosys and the sector near-term,” said the research firm in a note to its clients.

According to the research firm, the weak guidance will raise fears about FY10E (estimated) rather than the next couple of quarters as the Indian IT sector might face a lot more pressure in 2009/FY10 from customers. “While consensus numbers might not change for FY09 (due to continued rupee/US$ depreciation), FY10 estimates might be cut.

We believe that any panic sell-off on back of this guidance remains a good entry point,” the note said. FY09 guidance was revised downwards significantly “more than our consensus and expectations,” said the JP Morgan note. “Management cuts its $ revenue/EPS guidance by 5%/5% for FY09 and is now expecting 13-15%/10% revenue/EPS growth in FY09,” the note added.

Source: EconomicTimes

Britain to cut 10,000 public sector jobs

Britain is set to cut nearly 10,000 jobs from its Ministry of Justice as part of a fresh round of budget cuts to battle the tough economic
climate, The Times newspaper said on Tuesday.

The report said the government planned to make 900 million pounds ($1.58 billion) of savings at the department, which was created just 18 months ago. The job losses represent around a tenth of the division's workforce.

The Ministry of Justice could not immediately be reached for comment.

Source: EconomicTimes

Crisis creating huge opportunity for rich Americans

The financial crisis is creating a huge opportunity for rich Americans to transfer wealth to their heirs or others, industry executives said on Monday.

The wealthy use trusts to pass on stocks, mutual funds and physical assets such as real estate. The tax rates for such transfers are linked to interest rates, and the current low rates and deteriorating asset values generally allow more wealth to be transferred tax-free, the executives said.

"With depressed asset values and low interest rates, this is absolutely a wonderful time to consider gift-giving wealth-transfer strategies," Richard Kohan, a partner at PricewaterhouseCoopers' (PWC) private company services practice, told the Reuters Wealth Management Summit.

The North American wealth market is estimated to be the biggest in the world, with assets of $39.2 trillion as of 2007, according to the Boston Consulting Group.

Robert Elliott, senior managing director at New York asset manager Bessemer Trust, said many advisors were until recently telling clients to hold off on wealth transfers on expectations the taxes on such transfers may be repealed. That has changed amid the intensifying credit market turmoil.

Source: EconomicTimes

Gopinath plans offer to buy back Air Deccan

GR Gopinath, vice-chairman of Kingfisher Airlines, is believed to be considering an offer to buy back Air Deccan as he is reportedly unhappy over the alliance Kingfisher has struck with Jet Airways.

Some sources said he might even offer to buy Kingfisher itself at a meeting of the airline board on Wednesday. Some overseas investors are reportedly backing him in this effort.

That, however, is not easily possible. For starters, UB Group chairman Vijay Mallya has 65% share in Kingfisher, making it impossible for anyone to make a bid unless he is willing to sell out. He is not. “I spoke to Capt (Gopinath) out of courtesy about the alliance with Jet. He was in Andamans. He said he was happy with the arrangement (with Jet) and the synergistic benefits,” he said.

“I hold 65% stake in the airline. If there is a so-called bid, we will see it off when it is made,” Mr Mallya told ET. According to the latest stock exchange filings, Mr Gopinath has 5.58% stake, and may control about 9-10% shareholding along with his associates.

Source: EconomicTimes

Frontline stocks likely to lead rally when market rebounds

The market may not be out of the woods yet, but going by anecdotal evidence, this may be a good time to start bottom fishing in frontline stocks. Reason: attractive valuations apart, there is too much pessimism among market participants. Brokers feel that when the recovery starts, it would be the frontline stocks leading the rally.

Though most foreign equity analysts view the recent rebound in equities as unstable recovery, a section of market watchers back home, feel Indian market is very near to bottoming out.

“It is possible that the market may have bottomed out,” said Karvy Stock Broking vice-president Ambareesh Baliga. According to Mr Baliga, the ‘pain’ (referring to the bearish phase) will last for a long time. Though valuations are compelling, most investors are not convinced that now is the time to start lapping up shares, he added.

“We’re advising investors to start buying once the market attains some stability, even if it means key stocks appreciating 10% from current levels. For sure, this is the time to buy large-cap stocks; the rally will begin with large-cap stocks,” Mr Baliga said.

According to a recent Bajaj Capital report, the time is ripe for a strong recovery with Indian equities currently trading at period-low levels. “The way markets have fallen over the past two weeks clearly shows that panic has set in, as even fundamentally strong defensive stocks are being hammered. Even potentially good news or developments such as a CRR cut or removal restrictions on P-Note have been ignored by the markets. Historical evidence states that a bottom is very near when markets start ignoring good news and over-react to even slightly negative news,” the report added.

Analysts maintain that large-cap stocks (key index constituents) are the first to bounce back as most institutional investors prefer large-cap stocks in their portfolios. Large-cap stocks have given phenomenal returns at all times when the market has recovered after bottoming out.

Source: EconomicTimes

DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. The author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and that you confirm the facts on your own before making important investment commitments.