indiabull
19-09-2008, 07:11 AM
Religare Institutional Research has maintained ‘buy’ on Nagarjuna Construction for a target price of Rs 173. Nagarjuna Construction has cancelled the 2.5 million warrants, that the company had issued in Feb 2007 to A V S R Holdings after receiving an advance of Rs 5.4 crore and which were due for conversion in September 2008 at a price of Rs 217, the promoters will exercise their right not to pay the balance amount. Post this announcement, A V S R Holdings has purchased 693,675 shares from the open market.
Nagarjuna Construction had also issued 9.1 million warrants to the Blackstone group in August 2007 which is due for conversion in March 2009 at a price of Rs 225. This, however, now seems remote as warrant conversion price is at a premium to the current market price of the stock and also because the promoters warrant have got lapsed. According to the company's annual report 2008, the Foreign Investment Promotion Board approval for the aforesaid warrants is still pending.
The warrants issued to A V S R Holdings and Blackstone would have cumulatively infused Rs 250 crore in 2008-09. However, since the warrants have now got lapsed, Religare has assumed that the company will raise this amount through debt. This will increase the company's debt-equity ratio to 0.8x for FY09 and 0.9x for FY10, instead of the earlier estimate of 0.6x
and 0.7x respectively.
Religare’s earnings for 2008-09 and 2009-10 would be impacted negatively by 6 per cent and 7 per cent respectively due to increased borrowings. However, the impact on the adjusted earning per share would be limited to -5 per cent and -2 per cent for 2008-09 and 2009-10 respectively.
Religare expects Nagarjuna Construction to report a net profit of Rs 175 crore in 2008-09 (+8%YoY) and Rs 220 crore (+ 26%YoY) in 2009-10.
At the market price of Rs 112, the stock quotes at a P/E of 14.8x FY09E and 11.7x FY10E. Adjusted for the value of BOT projects (Rs18), Nagarjuna Construction Urban Infra (Rs28) and Real Estate (Rs11), the stock quotes at a P/E of 7.3x FY09E.
Nagarjuna Construction had also issued 9.1 million warrants to the Blackstone group in August 2007 which is due for conversion in March 2009 at a price of Rs 225. This, however, now seems remote as warrant conversion price is at a premium to the current market price of the stock and also because the promoters warrant have got lapsed. According to the company's annual report 2008, the Foreign Investment Promotion Board approval for the aforesaid warrants is still pending.
The warrants issued to A V S R Holdings and Blackstone would have cumulatively infused Rs 250 crore in 2008-09. However, since the warrants have now got lapsed, Religare has assumed that the company will raise this amount through debt. This will increase the company's debt-equity ratio to 0.8x for FY09 and 0.9x for FY10, instead of the earlier estimate of 0.6x
and 0.7x respectively.
Religare’s earnings for 2008-09 and 2009-10 would be impacted negatively by 6 per cent and 7 per cent respectively due to increased borrowings. However, the impact on the adjusted earning per share would be limited to -5 per cent and -2 per cent for 2008-09 and 2009-10 respectively.
Religare expects Nagarjuna Construction to report a net profit of Rs 175 crore in 2008-09 (+8%YoY) and Rs 220 crore (+ 26%YoY) in 2009-10.
At the market price of Rs 112, the stock quotes at a P/E of 14.8x FY09E and 11.7x FY10E. Adjusted for the value of BOT projects (Rs18), Nagarjuna Construction Urban Infra (Rs28) and Real Estate (Rs11), the stock quotes at a P/E of 7.3x FY09E.