COX & KINGS (INDIA) LTD : Accumulate at every Dips !!!

Scrip Code: 533144 / COX&KINGS

CMP:  Rs. 137.20; Buy at current levels.
Short term Target - Rs. 150; Medium to Long term Target – Rs. 170; STOP LOSS – Rs. 126.25; Market Cap: Rs. 1,873.16 Cr; 52 Week High/Low: Rs. 207.30 / Rs. 119.05

Total Shares: 13,65,27,890 shares; Promoters : 8,03,46,760 shares – 58.85 %; Total Public holding : 5,61,81,130 shares – 41.15 %; Book Value: Rs. 80.67; Face Value: Rs. 5.00; EPS: Rs. 4.40; Div: 20.00 % ; P/E: 31.12 times; Ind. P/E: 21.50; EV/EBITDA: 16.84.

Total Debt: 1,158.26 Cr; Enterprise Value: Rs. 3,031.42 Cr.

COX & KINGS INDIA LTD:  Cox & Kings Ltd was incorporated in 1758 and is based in Mumbai, India. The company was formerly known as Cox and Kings (India) Limited and changed its name to Cox & Kings Limited in July 2010. The company was listed on the bourses in December, 2009 and raised Rs. 600 crore through an IPO at a price of Rs. 330/share of face value Rs. 10 (17 x FY10 EPS), in June 2011 the company announced split of shares from Face value of Rs. 10.00 to Rs. 5.00. Cox & Kings Limited operates as a travel and tours company primarily in India, Europe, Australia, the United States, Dubai, Japan, and Singapore. The company offers destination management services; outbound tourism services; leisure and business travel services; education travel services; hotel bookings; car, coach, railway bookings; visas, passport, medical insurance assistance services; camping holidays services; and meetings, conferences, and events services, as well as NRI, trade fairs, and foreign exchange services. The company has presence in over 19 countries with 13 branch offices, 177 agents and 150 franchises. It also offers various leisure holiday packages primarily under the Cox & King, Explore, Edge, Superbreak, CKDMS, Tempo, BenTours, online Bookit, and Djoser brand names; education travel services principally under the PGL, NST, Meininger, EST, and Travelplus brand names; and camping holidays primarily under the Eurocamp, Keycamp, Ecamp, Eurocamp Independent, and Own a Holiday Home brand names. 

Investment Rationale:

Cox & Kings (C&K) is one of the leading and oldest players in the travel & tourism industry that caters to the overall travel needs of Indian and International travelers. C&K has a presence in more than 19 countries besides India through subsidiaries and JVs. This places the company in a unique position among all regional players to offer multiple travel choices and value for products. C&K further plans to expand its network of franchise outlets to 250 by FY13 in India mainly in Tier II and Tier III cities to gain market share. The company provides training, site development, advertisement and marketing support with minimal investment. Higher number of franchises provides C&K an edge over competitors to gain market share and brand recognition. In addition, this also gives it better bargaining power to make bulk bookings, which finally helps company to provide a competitive package to customers, thus attracting more traffic in the long run. Captive destination management services assures C&K of savings in cost in terms of commission and capture the maximum pie of expenditure accrued by customers, right from transportation to sightseeing. The wide network of overseas branches gives the company access to important geographies and markets that help it to gain a strong footing in the offline travel industry. Its global presence also helps to mitigate the seasonality impact faced by the domestic travel and tourism industry. India’s tourism is counter cyclical to the rest of the world as the outbound season is in the first half of the financial year (April-September) whereas the profitability in the second half is taken care of by the overseas subsidiaries and India outbound operations. COX & KINGS had made series of acquisition which is a key route to become leader in tourism Industry. It has done seven acquisitions in the past six years (including HBR), which made C&K an integrated player globally with quality products and services & brings huge business volume on the book on a consolidated basis. This, in turn, increases C&K’s bargaining power with vendors due to its large customer base and global presence. The overseas acquisition created value for the company with healthy growth in revenues (CAGR of 51 % during FY07-11) and operating margins (i.e. at 40 %) during the same period. Recently the company increased stake in its student accommodation brand Meininger Hotels. C&K earlier held 50 % stake & has now increased it by 24 % taking the total holding in Meininger to 74 % at a cost of Rs. 190 Cr, the company will eventually acquire the balance 26 % stake, which is also expected to cost the company around Rs. 190 Cr. 

Year	Company	Country	Amount	Type of Offerings
Mar 2006	Clearmine Ltd	UK	Rs. 15.60 Cr	Destinations management services & inbound Services in Europe.
Sep 2007	Cox & Kings	UK	Rs. 39.00 Cr	Outbound services to upmarket leisure client: Wealthy retirees, Key destination: India, Latin America etc.
Sep 2007	Cox & Kings	Japan	Rs. 2.00 Cr	Travel wholesaler of products & services to other tour operators.
Nov 2008	Tempo Holidays Pty Ltd	Australia	$ 27.00 million	Outbound European & UAE countries.
Apr 2009	East India Travel Company Ltd	USA	$22.00 million	Premium outbound travel package in US.
Jan 2010	MyPlanet, BenTours International	Australia	NA	Specialised Outbound tour operator.
Sep 2011	Holidaybreak Plc	UK	Rs. 2,300 Cr	Education tour operator.

Outlook and Valuation:

Tourism is an important sector of the economy and contributes significantly in the country’s GDP as well as foreign exchange earnings (19 % YOY to Rs. 77,580 Cr). The tourism industry in India is vibrant and is fast becoming a global destination. This is clearly evident from the rise in inbound and outbound tourists by 8.1 % and 12.6 %, respectively between 2005 and 2010. According to World Travel and Tour Council (WTTC), currently the travel and tourism industries directly contributes to about 2 % to India’s GDP which are backed by growth of 8 % CAGR in FTAs and 14 % CAGR in domestic tourism in India over the last five years. Considering the high growth potential, WTTC estimates the size of the Indian tours & travel industry to register growth at a CAGR of 10 % from US$42 billion to US$111 billion by the end of 2020. 

Cox and Kings India net sales have grown to Rs. 500 crore in FY11. Profits have grown to Rs. 129 crore at the end of FY11. The company has maintained its operating profit margin at an average of 40 % for the past five years. The company is focusing on trimming down debt through cash generated from business and minority stake sale in its wholly-owned subsidiary Prometheon Holdings (UK) Ltd, which is believed, would further improve its profitability, going forward. However, continued slowdown in the business of international division and seasonality remains a concern. At the current market price of Rs. 137.20, the stock is trading at a PE of 6.92 x FY13E and 6.26 x FY14E respectively. The company can post Earning per share (EPS) of Rs. 19.80 for FY13E and Rs. 21.90 for FY14E. It is expected that with the company’s surplus scenario is likely to continue for the next three years & will keep its growth story intact for the coming quarters also. One can ‘BUY’ in COX & KINGS (INDIA) LTD with a target price of Rs. 170.00 for Medium to Long term investment.

KEY FINANCIALS	FY11	FY12	FY13E	FY14E
SALES (Rs. Crs)	496.70	837.90	1,961.00	2,093.30
NET PROFIT (Rs. Crs)	129.10	41.60	270.50	298.90
EPS (Rs.)	9.50	3.00	19.80	21.90
PE (x)	14.70	45.60	7.00	6.30
P/BV (x)	1.60	1.60	1.30	1.10
EV/EBITDA (x)	7.70	27.20	5.30	5.00
ROE (%)	10.70	3.50	18.50	17.00
ROCE (%)	10.30	2.40	12.20	12.90

I would buy COX & KINGS (INDIA) LTD with a Short term price target of Rs. 150 & for the 6 month target of Rs. 170. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 126.25 on your every purchase.

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BHARTI INFRATEL LTD : GO FOR LISTING GAINS !!!

Price Band: Rs. 210 - Rs. 240.
Retail Discount : 5.00 % .

Face Value: Rs.10.
Minimum Lot Size: 50 Shares.

Issue opens on: 11th December 2012, Tuesday.

Issue closes on: 14th December 2012, Friday.

Listing Date on: by 24th December 2012.

Total No. of Shares offered: 18,89,00,000  shares or 10.00 %

Employee Reservation: NA.

Net Public Offer: 6,61,15,000 shares.

QIB Book: 9,44,50,000 shares or 50 % of issue.

Non – Institutional Bidders: 2,83,35,000 shares or 15 % of issue.

Retail Book: 6,61,15,000 shares or 35 % of issue.

Equity Shares outstanding prior Issue: 174,24,08,730 shares.

Equity Shares outstanding post Issue: 188,86,42,842 shares.

Total Size of the Issue: Rs. 3,966.90 Crs - Rs. 4,533.60 Cr.

IPO GRADING: 4/5 - CRISIL – Strong Fundamentals.

KEY FINANCIALS (Consolidated)	31 Mar 2010	31 Mar 2011	31 Mar 2012	30 Jun 2012
Total Income (Rs.Cr)	7,038.73	8,508.11	9,452.06	2,416.50
Net Profit (Rs. in Cr)	252.97	551.48	750.73	213.07
Net Profit margin (%)	3.59	6.48	7.94	8.81
EPS (Rs.)	1.519	3.160	4.299	1.220
Net Asset Value (Rs.)	234.60	241.00	250.10	252.80
Net Worth (Rs. Cr)	13,627.57	13,994.92	14,524.21	14,682.39
RoNW (%)	1.90	3.90	5.20	1.50

BHARTI INFRATEL LIMITED: Bharti Infratel was incorporated in 2006 and is based in   Gurgaon, India as a subsidiary of Bharti Airtel ltd, a leading global telecommunications company which currently has operations in 20 countries across Asia and Africa. Bharti Airtel and Bharti Infratel are a part of the Bharti group, one of India’s leading business conglomerates, with business interests in the telecommunications, real estate, insurance and retail sectors pioneered by Sunil Mittal. Bharti Infratel Ltd provides passive telecom infrastructure services. The company owns, deploys, and manages telecom towers and communication structure for telecom operators & wireless service providers. It currently has operation in 18 Indian states. In January 2008, Bharti Airtel transferred its towers to Bharti Infratel through a scheme of arrangement effective as of January 31, 2008. As of June 30, 2012, Bharti Airtel held 86.1 % of the equity share capital of Bharti Infratel, while the remaining 13.9 % was held by certain private equity investors. Bharti Infratel is one of the largest providers of tower and related infrastructure in India, based on the number of towers that Bharti Infratel owns and operates and the number of towers owned or operated by Indus that are represented by Bharti Infratel’s 42 % equity interest in Indus. Bharti Infratel, has more than 33,000 mobile phone masts, also holds a 42 % stake in joint venture with Indus Towers, which is the world’s biggest telecoms tower company, with about 110,000 towers.

Tower companies get their revenue from leasing infrastructure to network operators but they are going through a tough time in India as a Supreme Court order to revoke the regional licenses of eight mobile phone companies in the 15-player market has weighed on demand. Tower sharing in the wireless telecommunications sector and integrated telecommunications networks are relatively recent concepts in India. The success of the model depends on a number of factors including geography, population density in rural and urban areas, financial conditions affecting operators and customer behavioral patterns which are specific to telecommunications industries in different countries, including India. Bharti Infratel’s and Indus’ business model is based on increased sharing of towers by wireless service providers, as the addition of sharing operators at existing towers facilitates better capacity utilisation at relatively low incremental capital expense, enhancing Bharti Infratel’s and Indus’ cost and operational efficiencies. For the three month period ended June 30, 2012, Bharti Infratel had an average sharing factor of 1.82 co-locations per tower, while Indus had an average sharing factor of 1.96 co-locations per tower. Our financial prospects are directly dependent upon the sharing factor of Bharti Infratel’s and Indus’ towers and increasing their co-location rates is a key element of their growth strategy.

DETAILS	FY11	FY12	H1'FY13	FY13
Number of towers	78,442	79,064	80,656	81,088
Tenancy (x)	1.75	1.85	1.90	1.93
Net Sales (Rs. Cr)	8,508	9,452	4,972	9,777
EBITDA	3,128	3,539	1,844	3,677
EBITDA (%)	36.80	37.40	37.10	37.60
Net Profit (Rs. Cr)	551.48	751	460	852
Change Y-o-Y (%)	118.00	36.10	-----	13.40

Out of the Offer of a total of 18,89,00,000 Equity Shares -  3,00,46,400 Equity Shares are being offered by Compassvale; 60,09,280 Equity Shares are being offered by GS Strategic; 36,05,568 Equity Shares are being offered by Anadale; 30,04,640 Equity Shares are being offered by Nomura. The Equity Shares being offered by the Selling Shareholders under the Offer have been held by such Selling Shareholders for a period of more than one year prior to filing of the Draft Red Herring Prospectus with SEBI. Bharti has mandated eight banks for managing the IPO, with Standard Chartered as its lead banker, other banks managing the share sale are Barclays, JPMorgan, Bank of America Merrill Lynch, HSBC, UBS, and Kotak Mahindra and Enam Securities.  
According to me one should look for subscribing Bharti Infratel Ltd IPO as it will be the first listed Telecom Tower company on Indian bourses taking the country at par with world markets. Long term investors should look into subscribing the IPO for good opportunity. Short term investor can subscribe for listing gains.

GITANJALI GEMS : JEWEL FOR EVER !!!

Scrip Code: 532715 / GITANJALI

CMP:  Rs. 453.00; Accumulate at every levels. 

Medium to Long term Target – Rs. 510; STOP LOSS – Rs. 415.00; Market Cap: Rs. 4,170.56 Cr; 52 Week High/Low: Rs. 455.65 / Rs. 250.95

Total Shares: 9,20,65,491 shares; Promoters : 5,43,16,116 shares –59.00 %; Total Public holding : 3,77,49,375 shares – 41.00 %; Book Value: Rs. 275.10; Face Value: Rs. 10.00; EPS: Rs. 28.05; Div: 30.00 % ; P/E: 16.11 times; Ind. P/E: 11.10; EV/EBITDA: 10.53.

Total Debt: 2,056.00 Cr; Enterprise Value: Rs. 6,542.72 Cr.

GITANJALI GEMS LTD:  Gitanjali Gems Ltd was incorporated in 1986 and is based in Mumbai, India. The company was started as a partnership in the year 1966, it was the first group company to engage in cutting & polishing of diamonds in Surat, Gujarat. It came with an IPO in the year 2006 with 1.70 cr shares at the price band of Rs. 170 – Rs. 195. Gitanjali Gems has got two-diamond manufacturing facilities located at Borivali in Mumbai and at the Special Economic Zone in Surat. It has also got a 100 % export oriented unit in SEEPZ Mumbai, which produces gold and platinum studded jewellery. There are also jewellery-manufacturing facilities at MIDC, Andheri, which produces branded jewellery for the retail operations in India. The company has a workforce of over 2300 employees. Company sells its jewellery under the brand - Asmi - Premium work wear collection & has 104 outlets, 2 exclusive stores; Sangini - Entire product range including bridal jewelry; Nakshatra - Entire product range including bridal jewelry available with 374 retailers and 1 franchisee. More franchisees are being added; Gilli - Diamond jewelry at reasonable prices having 256 outlets of which 3 are exclusive stores; Vivvaha - Wedding jewelry; Maya - Gold jewelry for wedding and other similar events; D’Damas - International quality designs combined with Indian values sells through 380 retailers, 2 exclusive outlets, 3 shop-in-malls and 21 franchisees; Hoop - Fashion Silver Jewelry. The Gitanjali Group has acquired Lucera for Rs 25 crores in 2008. In October 2009, the UK-based Brand Finance, valued the four leading brands of the company at Rs.514 crores (Nakshatra), Rs.468 crores (Gili), Rs.309 cr. (D'Damas) and Rs.210 cr. (Asmi), respectively. GGL is not only gearing towards improving sales but is also looking at multiplying the value of these brands by 1.5 to 2 times by 2011-2012. With a manufacturing presence in India, its operations span the globe from the U.S., the U.K., Belgium, Italy, the Middle East, Thailand, South East Asia, and Japan. The company’s retail and distribution network comprised approximately 2,000 outlets, including 200 distributors, 94 exclusive stores, and 63 franchised stores. In December 2010, it acquired 90 % interest in Glantti Italia S.R.L. On March 17, 2011, it acquired 100% stake in N & J Finstocks Private Limited. In July 2011, it incorporated a wholly owned subsidiary Italian Jewels S.r. In August 2011, it incorporated a subsidiary Aston Luxury Group Limited. On December 2, 2011, its subsidiary Aston Luxury Group Ltd., acquired Crown Aim Limited. Gitanjali Gems Ltd is globally compared to Lao Feng Xiang Company Limited, Bulgari Societa per Azioni and Surana Corporation Limited in India.

Investment Rationale:

Gitanjali Gems is $900 million multinational group & one of the largest integrated diamond and jewellery manufacturer and retailer and diamond exporters in India. The demand for diamond and jewellery products are largely depends on higher employment and economic levels, which leave higher disposable income in the hands of the consumers. In downturn consumers can quite easily scale down their consumption of jewellery and diamonds. Gitanjali Gems Ltd has informed that Aston Luxury Group Ltd has acquired 15.3 % stake in Verite Co. Ltd in Japan. This acquisition will provide supply chain synergies to the grou. Verite Co. Ltd is a listed entity on Tokyo Stock Exchange & operates a network of 101 jewellery retail stores in Japan. This stake will also increase the presence of the Gitanjali group in one of the leading diamond jewellery markets of the world. The company launched India’s First unique and innovative Gold & Diamond ATM machines, which is a one stop shop for buying medallions, coins, jewellery etc. Gitanjali opened its first flagship store Stefan Hafner in China. The bouquet of Italian brands is now available in other markets like Russia, Saudi Arabia, the Far East & India. Gitanjali has taken strategic stake of 30 % in the GEMS TV to supply all of its diamond jewellery requirements in Japan. GEMS TV in Japan offers online shopping platform for TV channels in Japan. The Company is also engaged in retailing its diamonds and jewellery. Currently the company markets over 40 brands that are owned and franchised under its retail chain Gitanjali Lifestyle. Gitanjali Gems Ltd allotted 943,396 equity shares of Rs. 10/- each to Bennett Coleman and Company Limited (BCCL), pursuant to conversion of 943,396 warrants held by BCCL in the ratio of 1:1 as agreed upon. Consequent to the aforesaid allotment, the paid up capital of the Company has increased from 91,122,095 equity shares of Rs. 10/- each to 92,065,491 equity shares of Rs. 10/- each.

Gitanjali opens stores at DUBAI - Gitanjali group opened the largest B2B Trade showroom in the Middle East Region at Alms Tower, Dubai-UAE.

GITANJALI JEWELS LLC -
Showroom at Meena Bazaar, Dubai

The store offers extraordinary range of jewellery keeping in with the preferences of international clientele visiting Dubai, the 2,000 sq.ft is poised perfectly to attract Asians with an impressive array of renowned Gitanjali brands. Gitanjali Gems’ net profit jumps to Rs. 151.65 Cr against Rs. 132.24 Cr in the corresponding quarter ending of previous year, an increase of 14.68 %. Revenue for the quarter rose by 24.01 % to Rs. 3928.25 Cr from Rs. 3167.64 Cr, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 16.47 a share during the quarter, registering at 7.52 % increase over previous year period. Profit before interest, depreciation and tax is Rs. 271.25 Cr as against Rs. 221.36 Cr in the corresponding period of the previous year.

Outlook and Valuation:

India possesses world's most competitive gems and jewellery market due to its low cost of production, highly skilled, low-cost and best artisan force for designing and crafting jewellery, along with strong government support in the form of incentives and establishment of Special Economic Zones (SEZs). India is emerging as a huge consumer market for jewellery and other luxury products and thereby appears as a very attractive opportunity for major brands to establish their presence in the Indian market. In fact, the five-day long 29th edition of the Indian International Jewellery Show (IIJS) event organized by GJEPC, witnessed the participation of over 800 companies from India and overseas and received 20,000 pre-registration from national visitors and over 3,000 from international visitors. The event had a congregation of delegations from trade associations across India and from a host of international destinations like Bangladesh, China, Dubai, Hungary, Iran, Japan, Malaysia, Nepal, Poland, Russia, Saudi Arabia, Singapore etc. IIJS displayed the widest range of gems and jewels under the categories of couture, loose diamond, plain gold jewellery, mass produced, allied, machinery and international jewellery and loose diamonds. Gitanjali has increasingly undertaken retail expansion through the organic, inorganic and partnership routes. The retail space is around 1 million sq ft from 65,000 sq ft a year ago. The company has over 3000 Point of sales (POS). Gitanjali occupies nearly 60 % of the India’s entire organized mall space belonging to the jewellery category; it has aggressive retail expansion plans. Gitanjali expects to increase its retail presence to 2 million square feet, primarily in the domestic outlets in the next three years. All this features helps one to get that extra comfort in the stock. The total exports of gem and jewellery from India during April 2012 to September 2012 stood at $1990.24 Cr including that of cut & polished diamonds at $782.47 Cr, gold at $1071.77 Cr & coloured gemstones at $16.71 Cr. The domestic jewellery market is pegged at $1600 Cr - $1800 Cr. The gems & jewellery industry in India registered a growth in its volume of exports from $2,540 Cr in 2009 to $4,636 cr in 2011 an net growth of 82.5 %. In my view Net Sales and PAT of the company are expected to grow at a CAGR of 26 % and 32 % over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 2.98 x for FY13E and 2.42 x for FY14E. The second quarter witnesses a healthy increase in overall sales as well as profitability on account of powerful combination of exciting products, an enhanced store network and robust infrastructural Support system. At the current market price of Rs. 453.00, the stock is trading at a PE of 6.47 x FY13E and 5.10 x FY14E respectively. The company can post Earning per share (EPS) of Rs. 69.98 for FY13E and Rs. 88.68 for FY14E. It is expected that with the company’s surplus scenario is likely to continue for the next three years & will keep its growth story intact for the coming quarters also. One can ‘BUY’ in Gitanjali Gems with a Medium to Long term investment for a price of about Rs. 510.00.

KEY FINANCIALS	FY11	FY12	FY13E	FY14E
SALES (Rs. Crs)	9,456.40	12,498.27	15,997.80	19,037.37
NET PROFIT (Rs. Crs)	354.81	487.25	637.66	808.03
EPS (Rs.)	41.81	53.47	69.98	88.68
PE (x)	9.66	7.56	5.77	4.56
P/BV (x)	1.36	1.19	0.99	0.81
EV/EBITDA (x)	5.44	3.85	2.98	2.42
ROE (%)	14.16	15.79	17.22	17.95
ROCE (%)	12.34	13.95	16.08	17.49

I would buy GITANJALI GEMS with a price target of Rs. 510 for the 6 month target. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 415.00 on your every purchase.

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HAPPY DIWALI & A PROSPEROUS NEW YEAR SAMVAT 2069 !!!

HELLO READER FRIENDS, 

Here's Wishing You n your Family

A VERY HAPPY DIWALI &

   A PROSPEROUS NEW YEAR !!!!

 

We meditate on the Glory of the Creator ; 

Who has created the Universe ; 

Who is worthy of Worship ;

Who is the embodiment of Knowledge and Light ; 

  Who is the remover of all Sin and Ignorance ;

May He enlighten our Intellect.

Gayatri Mantra....

There's always something warm and bright, about this time of the year, when everything has a special glow, and hearts are full of Cheer, that's why this special greetings comes your way, to wish you all a life's best on Diwali and in the coming year too.....

Bhavik Shah

Best Regards,

BHAVIK SHAH 

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