Analysts' corner: S Kumars Nationwide

KJMC Research rates S Kumars Nationwide as an "outperformer". The report states that the company has adopted a focused growth strategy and a major revamp in its business model.

Strategic initiatives in key domains like manufacturing, distribution, brands and human capital will enable the company to tap the vast opportunities in the post-MFA regime.

The report believes that the company's aggressive strategy to capture a major presence across the entire textile value chain and a presence in each socio-economic segment would provide a sustained visibility to its revenue model.

There are a host of catalysts, which would improve the tempo of the company's growth and improve the profitability going ahead. Its tie-ups with international brands would increase its presence in the super-premium and luxury segment.

Access to Reid & Taylor's international clients would provide a foothold in international markets. With respected brands and strong domestic and international distribution network, the company is well poised to exploit the opportunities in the post-quota era.

Its retailing thrust would enhance volumes and improve margins, while the home textiles capacity expansion would tap the rising demand in international markets.

The stock trades at 10.2x of FY07E earnings. It is expected to command a better valuation going ahead. The stock would be re-rated as it enhances its visibility in the retail sector.

Sasken Communication

Edelweiss Securities, in its event update on Sasken, states that the company's pending dispute with 3G.com in London Court of International Arbitrators has been held against Sasken.

But, Edelweiss maintains its "value buy" on the company. The company has been directed to pay 3G.com, damages and legal expenses to the tune of $1.6 million. This charge would be written off in the Q3 FY06.

This impacts the profit forecast for Q3 FY06E as well as FY06E. The company is yet to decide about appealing against this judgement. However, it has ruled out the possibility of any other claim for this product in future, as it had only one client for this product.

The company is unlikely to get an insurance claim. The profit forecasts for Q3 FY06E have been revised to Rs 3 crore after taking into account the outcome of the arbitration. Treating this award as an extraordinary item, Edelweiss has revised its FY06E profit from Rs 38.9 crore to Rs 31.9 crore (reduction of 18 per cent). Their FY07E estimates remain unchanged.

Great Eastern Shipping Company

Quantum Securities recommends a "buy" on The Great Eastern Shipping Company. The report states that the company does not receive the premium that a dominant player in the industry deserves.

Besides, the offshore division's relatively lower share in the company's overall performance, strips it from receiving a valuation close to that of its peers.

The two divisions are robbing each other of their value and the report believes that the de-merger would give investors an opportunity to milk the benefits of an appropriate re-rating of two seemingly different businesses.

Barring short-term fluctuations, the long-term outlook on oil prices remains bullish. From $28.89 per barrel in 2003, spot oil prices averaged at $37.76 per barrel in 2004 and have moved up further to $54.23 per barrel in 2005.

Accelerating economic growth, particularly in the Asian countries, will ensure that a strong demand for oil continues. A global GDP of 5.1 per cent in 2004 translated into a 3.1 per cent increase in oil demand. With the global GDP growth likely to be maintained at 4.3 per cent in 2005 and 2006, demand for oil would remain strong.

Against this backdrop, companies operating in the offshore space have been able to place their fleet on higher rates. Thus, the outlook for Great Offshore (GOSL) is positive with robust revenues from the existing fleet and addition of new vessels from 2006 driving value and volume growth.