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Saturday, August 21, 2010

Country "PEG" Ratio

The PEG ratio (Price to Earnings divided by Growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share (EPS), and the company's expected growth. In general, the P/E ratio is higher for a company with a higher growth rate. Thus using just the P/E ratio would make high-growth companies overvalued relative to others. It is assumed that by dividing the P/E ratio by the earnings growth rate, the resulting ratio is better for comparing companies with different growth rates.

The PEG ratio is used for individual stocks as a valuation measure that factors in growth rates. It is calculated by dividing the company's P/E ratio by its growth rate. Many investors would rather own a company with a high P/E ratio and an even higher growth rate than a company with a low P/E ratio and an even lower growth rate. A PEG ratio of one or less is typically viewed positively.

The PEG ratio is considered to be a convenient approximation. It was popularized by Peter Lynch, who wrote in "One Up on Wall Street" that "The P/E ratio of any company that's fairly priced will equal its growth rate", i.e. a fairly valued company will have its PEG equal to 1.

If we decide to apply the PEG ratio to various countries by dividing estimated GDP growth into the P/E ratio of the country's main stock market index. Many developed countries have low P/E ratios, but they also have low GDP growth, while developing countries may have higher market valuations as well as stronger GDP growth. Investors may find PEG ratios more useful than simple P/E ratios when determining asset allocations for various countries.

Below are the PEG ratios for 22 countries around the world. For each country, we will use the trailing 12-month P/E ratio for the index shown as well as estimated 2010 GDP growth. As shown, Russia and China have the lowest country PEG ratios at 1.86 and 1.90, respectively. Russia has a very low P/E at 8 and decent estimated GDP growth at 4.3%. China, on the other hand, has a rather high P/E ratio at 19.24, but its GDP growth is also very high at 10.10%. The US is right in the middle of the pack with a PEG of 5.07. Mexico rank just above the US with a PEG of 3.85, while Canada ranks just below the US at 5.67.

The US does have the best PEG ratio in the G-7, so US investors looking for developed country exposure might be better offer staying right at home. European countries have exceptionally high PEG ratios because of their mediocre valuations and low growth rates. Australia and Spain both have negative PEGs -- Australia because it has a negative P/E and Spain because it has negative GDP growth.

Friday, August 13, 2010


CMP: Rs.990;
Buy at Rs.950-1000 levels
Traget : Rs. 1130
Market Cap : Rs.318046 cr
52 Week High/Low : Rs.1129/Rs.910.30
Total Shares : 3270714336 shares; Promoters - 1463923343 shares - 44.74%
Book Value : Rs.392.41 ; Face Value - Rs.10; EPS - Rs.53.26;
P/E – 18.56; DIV (%)- 70%
Enterprise Value : Rs.1163.60 per share ; EV/EBITDA – 11.52;
There are the talks of Reliance selling its treasury shares worth Rs.3400 crs. About 4crs of treasury shares.Here are some of its past deals and the at present position of its treasury stocks..

SEP 17 2009 – 1.50 cr shares @Rs.2125 = Rs.3188 cr in value a 0.91% of Stake.
(RIL bought at Rs.158 in year 2002)
JAN 04 2010 – 2.58 cr shares @Rs.1035 = Rs.2675 cr in value a 0.79% of Stake.
JAN 11 2010 – 3.30 cr shares @Rs.1050 = Rs.3465 cr in value a 1.00% of Stake.
A total of 7.38 cr shares @ Rs.9328 cr on an average of Rs.1263.95/share.

Reliance Universal Enterprise holding 5.69 cr shares (1.73%).
Reliance Polyelefins holding 6.12 cr shares (1.86%).
Reliance Chemicals holding 6.22 cr shares (1.89%).
Others holding 80 lakhs shares (.25%).
A total of 18.84 cr shares (5.73%). This also includes 12.05 cr shares or 3.67% held by Petroleum Trust.

At present RELIANCE has 30.89 cr shares (9.4%) of treasury stock including RIL shares held by its Subsidiary firms named above.NOW, at Current Market Price of Rs.1000 RIL’s Treasury stock are worth Rs.30,089 cr.

Wednesday, August 4, 2010


Scrip Code : 532538 / ULTRACEMCO
CMP :  Rs.857.95 ; Buy at Rs.840-850 levels
Traget : Rs. 1087
Market Cap : Rs.10,711.1 cr.
52 Week High/Low : Rs.1163.1/Rs.702.8
Total Shares : 124487079 shares; Promoters - 68193101 shares - 54.78%
Book Value : Rs.370.05 ; Face Value - Rs.10; EPS - Rs.73.76;
Enterprise Value : Rs.989.31 per share ;

UltraTech ‘s results for Q1FY11 net realisation declined 4.9% due to its substantial exposure 33% to southern region which was affected by lower off take and shortage of wagons.
The increase in operating expenditure resulted in 1371 basis points YOY decline in operating margins to 23.5% (37.2%) , Going ahead, UltraTech will benefit from its Samruddhi merger % will not face comparatively lower pricing pressure. Post merger UltraTech will have aggregate capacity of 49 million tonne of cement production.. Ultra Tech’s net sales declined 8.1% YOY because of 3.6% decline in dispatches to 5.12 million tonnes. Power cost increased due to higher open market power purchase & reduced coal supply through linkages.
The incorporated post merger number of UltraTech will be 45.3% CAGR in top line over FY10-12 by higher volumes. At current level the stock is trading at an EV/EBITDA of 6.7 times & EV per tonne of $94 on FY 12 estimates.

At an average target of EV/EBITDA of 7 times Ultra Tech’s fair value comes at Rs.1087.

Samruddhi Cements
Share capital (Eq + Prf) – Rs.85 cr
Share Capital Suspense – Rs.45.84 cr.
Reserves & Surplus – Rs.4452.56 cr.
Total Assets – Rs.8562.49 cr.
Total Liabilities – Rs.5217.73 cr.
Investments (Eq) – Rs.4.43 cr.
Investments (Bonds/Mutual Fund) – Rs. 1234.11 cr.
Turnover – Rs.4290.63 cr.
PBT – Rs.941.99 cr.
PAT – Rs.617.96 cr.

UltraTech Cement
Share capital (Eq + Prf) – Rs.124.49 cr
Reserves & Surplus – Rs.4482.17 cr.
Total Assets – Rs.6673.44 cr.
Total Liabilities – Rs.3736.33 cr.
Investments (Eq) – Rs.21.07 cr.
Investments (Bonds/Mutual Fund) – Rs. 1616.68 cr.
Turnover – Rs.7049.68 cr.
PBT – Rs.1588.16 cr.
PAT – Rs.1093.24 cr.
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