CMP 10.69 BSE 16213
Some readers may indeed be intrigued by the Stock that I have chosen to examine in this Post. I mean, price-performance wise it seems to be a dog of a stock; has unwittingly destroyed more long term investor wealth in the past year or two; those of you who still have it in your long term Portfolios still have it there since you perhaps feel 'no point selling it at this stage since I didn't sell it at 35 hoping for a recovery'. There is an air of despondence and resignation over the Stock's performance. Isn't it?!! That exactly is the point; in my book, when the above features characterise any Stock ,it really is the right time to have a close hard look at it from the standpoint of possible long term acquisition.TECHNICALS:
A look at the Life-time Price Charts clearly tells me that this Stock is very close to its life-time low of 10.06 which it touched intraday on 23/11/2012. It has never ever gone into single digits and the lowest it touched even during the 2008 meltdown was at 10.9 intraday on 31/10/2008. More interestingly, in the next one year after 31/10/2008 it gave returns of 385% (touching 53 on 20/10/2009). Of course there were fundamental reasons too for the sharp upmove post 31/10/2008 but the point I am trying to make is that supernormal returns become a reality only when we step out of line and buy when the chips are really down and the end of the World seems to be just round the corner!!! When you hear Analysts, Anchors and their ilk (God bless them all) talk of single-digit penny stock prices for a Stock, even possible bankruptcies etc and gloom is writ large everywhere then it is definitely the time to go out on a limb and buy. Anyway. GVK seems to have bottomed out and I will stick my neck out and say that IT WILL NOT GO INTO SINGLE DIGITS ON A CLOSING BASIS in a hurry. On the upside, there is a resistance at 11.73 and then at 13.4 levels for those interested in a short term punt.
FUNDAMENTALS:
The Company as most of us know is an Infra major with interests in Power, Roads, Coal Assets and of course the stake in the Mumbai and Bangalore International Airports. As far as Corporate performance goes, one hesitates to take too harsh a view given the extremely adverse Rate Regime and environ that the entire Capital Goods/ Infra Sector has been and is up against, but suffices to say that the results for this Company have been the most encouraging out of the triad of GVK, GMR and Lanco. The Company's performance in Q2 FY2012 has been reasonable to good particularlyin the Roads and Power Sector despite being saddled with umpteen macro headwinds ranging from high cost of capital, time overruns, uncertainty about motive Gas availability to plain and simple Clearance delays which have become the hall mark of the current apparatus, as all of us know. The main sore point, of course, is the HUGE Debt on Books to the tune of Rs 7000 cr approx. The ray of hope is the distinct possibility that the Interest Rate regime as well as the Capex Cycle could well be peaking out, which would brighten up things enormously.
To cut a long discourse short, my Call is that the Stock is a BUY at CMP Rs 10.7 and should be held in the long term Portfolio for absolute super-normal returns over the next 18-24 months. Nimble Short to medium term investors could buy at CMP and ride the volatility alongwith the larger Market for targets of 12 and 13.5 thereafter.
-GVK POWER Q2FY2012 RESULTS SEE HERE
-GVK WEBSITE LINK RIGHT HERE
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