“Don't ever lose your cash boys"

The excerpt below is from Jesse Livermore World's Greatest StockTrader by Richard Smitten, published by John Wiley & Sons, Inc. One day Livermore called his two sons into the library at “Ever-more” on Long Island. He sat behind the massive desk and the twoboys sat down in front of him. He leaned forward and took a wadof cash out of his pocket. He peeled off ten one dollar bills. He did this twice, then folded the bills and handed each boy a pack of ten ones.The boys sat looking at him, each holding their money. “Boys, always carry your money folded and in your left pocket. Go ahead do it. You can keep the money.”

The boys did as they were told and put the folded money in their left pockets. “You see, pickpockets always go for a person's wallet,which is usually in the back pocket. Or they will come up behind you and go for your right front pocket, because most people are right handed. You all right with this so far, boys?” he asked. The boys nodded.He continued. “All right, that's why you keep your paper money folded in your left pocket. See, if a pickpocket gets into your left pocket, and he gets that close to your balls, you're going to know about it.” The boys looked at each other.

Their father continued. “Don't ever lose your cash boys—that's the moral of this story. Keep it close to your balls, and don't let anyone near it.”

 


India Infoline, in a recently published research report recommended buying of Indian Bank with a 9-month target price of Rs223 . It cites number of reasons to support it's recommendation.
Indian Bank differentiates itself from other public banks
Indian Bank having a major presence in southern India witnessed a loan CAGR of 22.7% over FY08-12. In the aforementioned period, the bank delivered superior RoAs (average 1.55% over FY08-12) underpinned by robust NIM (average 3.5%), lean operating structure and sanguine asset quality. Operating efficiency was driven by reduction in headcount, improving employee age pyramid and calibrated branch expansion. Asset quality though has deteriorated in recent quarters; however, displayed stress has been lower than peers.
After having shed majority of the short term corporate loans, Indian Bank’s loan growth is expected to accelerate H2 FY13 onwards. NIM would likely stabilize near 3.2% with the impact of lending rate cuts being offset by improvement in deposit franchise, more productive deployment of excess liquidity and re-pricing of term deposits. With the bank having no or low exposure to some publicly known stressed companies, slippages are less likely to surprise negatively in coming quarters. Even if PCR is sustained at the extant prudential level of 70%+, credit cost is estimated to be manageable. Therefore, RoA of the bank would likely settle at 1.2% over FY13-14; much better than projected sub-1% delivery for a host of PSU Banks. Another important differentiator for Indian Bank is its robust capitalization (Tier-1 capital at 11.8%) and higher government stake (80%).
Valuation attractive both on relative and absolute basis
On YTD basis, Indian Bank has substantially underperformed peers and the Bankex. Consequently, it is one of the cheapest stocks amongst PSBs with valuation at 0.68x FY14 P/adj.BV. On absolute basis too, valuation is alluring in the light of impressive RoA/RoE delivery (average 1.2%/18% respectively). Based on 1-yr rolling fwd P/adj.BV, valuation is at 30% discount to 5-year mean. Amid improving appetite for mid-sized PSU banks, Indian Bank is our preferred bet. In our view, choosing a bank with relatively resilient earnings profile and robust capitalization is important. Indian Bank with stronger NIMs, higher PCR and sturdy capitalization provides much better comfort. Initiate coverage with a BUY recommendation and 9-month target price of Rs223.
Though the reasons explained above are impressive, we advice caution and a small  exposure. Previous experience showed that politicians played a major role in ruining this bank and even now this risk is relevant as the election nears...... 


WWW.INVESTCHIPS.COM This post is written by R.John Christy for www.investchips.com.

REC Tax Free Bond - Product Note

REC Tax Free Bond Public Issue - Product Note.pdf Download this file

REC  is  a Navratna status Central Public  Sector  Enterprise under Ministry of Power.

Issuer Rural Electrification Corporation
Credit Rating AAA - by CRISIL, CARE, ICRA & FITCH
Instrument Tax free Secured Redeemable Non-convertible Bonds
Face value of each bond Rs. 1,000
Minimum application To be decided
Trading Proposed to be listed on BSE and NSE, Trading only in Demat Form
Lock in period Nil
Taxability Interest –Tax free; Short term/long term Capital Gains on transfer –Taxed at applicable rates
Tenor 10 years and/or 15 years
Coupon To be decided
Interest on application money To be decided
Mode of Allotment Demat (NSDL and CDSL)
Details of Depositary and beneficiary account of applicant.
MOA, AOA and Power ofAttorney or relevant resolution or authority in case of companies, 
corporate bodies, registered societies, MFs, Insurance Companies etc.



Please find attached a short product note on REC for marketing the REC Tax free bond issues ..

 

The issue is likely to open on 3rd December.

 



India Infoline Recommendation for Diwali 2012

 

CompanySectorMarket Cap (Rs bn)CMP (Rs)Target (Rs)
Dr. Reddy'sPharma3001,7691,980
GCPLFMCG236692792
ICICI BankBanking1,2211,0591,340
IPCAPharma54428492
Karur Vysya BankBanking64469530
Mahindra SatyamIT127108129
NBCCReal Estate17142198
Radico KhaitanBreweries17127145
Swaraj EnginesAuto Ancillary5431548

 

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