indiabull
20-11-2007, 08:28 AM
FCS Software Solutions Ltd. basically provides customized software solutions to its clients based in US. Its revenue model is segmented into four divisions viz. IT consulting (55%), e-learning & digital consulting (25%), application support (10%) and infrastructure management services (10%). Apart from Sun Microsystems, it is also a Microsoft certified solution provider. As US firms feel more secure in doing legal contracts with a full US entity and in order to service its client more effectively, the company has set up a subsidiary called FCS Software Solutions America Ltd., incorporated in America in 2006. Here in India, the company is increasing its overall capacities by putting up world class development centres at Chandigarh, Dehradun and two new centers in Noida at Sector 73 and Noida Special Economic Zone (SEZ). To summarise, it currently has 32,000 sq. ft. of space with 850 seats and additional 45,500 sq. ft. is under construction that would provide 1125 seats. To fund this expansion, the company is also looking to raise capital through the equity route in the near future. On the flip side, it does not have any protection for the US Dollar fluctuations against the Rupee as it doesn’t provide for any hedging. Hence conservatively, on an estimated OPM of 14% (although it has registered 20% for H1FY08) it can earn a net profit of Rs.20 cr. on a topline of Rs.200 cr. for FY08 on a consolidated basis. This works out to an EPS of Rs.14 on its equity of Rs.14.25 cr. With a promoter holding of 69%, dividend yield of more than 3%, the book value of Rs.64 and P/E ratio of 5, it’s a value buy at current levels.