This action might not be possible to undo. Are you sure you want to continue?
ALPHA STRATEGY : LONG PFC – SHORT REC
Strategy Buy PFC and sell REC on a rupee-neutral basis in anticipation of pair reaching to the target price ratio of 1.075. The currently price ratio is at 0.978 We recommend booking part profits at a ratio of 1.026, keeping a stop loss of 0.919. Fundamental View: Long PFC: Long PFC: Disbursement growth momentum continues and at the current run-rate of INR 75-80 bn per quarter would easily beat the guidance provided earlier. Margin: PFC has reported close to 4.1% margin in last quarter and expects the same to continue with positive upside The company has unhedged forex borrowings; with rupee appreciation should result in MTM profit of INR 600 mn in Q2 Short REC: The near trigger in stock price for REC has been increase in FII limit from 20% to 35%. However, in PFC still the float is only 10%.
October 22, 2010 Yogesh Radke +91-22-6620 3199 email@example.com Mehul Patel +91-22-4063 5556 Mehul.firstname.lastname@example.org
Margin: REC has seen margins improving from 4% in Q4FY10 to 4.6% in Q2FY10 and expect it to consolidate at these levels with negative bias. REC has access to capital gain exemption bond the benefit of which with new Direct tax Code will go away.
The traction is disbursements for REC is expected to be relatively lower compared to PFC. Valuation: Given the loan growth estimate of 28% CAGR over FY10-12 stock is trading close to 2.5x PB Vs PFC with similar operating matrix is trading close to 2.35x PB. PFC has approached RBI for infrastructure finance company status and funding access and advantage will be equal for both of them post this. Management has also indicated that it will tap capital markets in the early next year which would add to ~INR 20 in book value which will leads to further upside in valuation. Moreover FII window would be effectively utilized post this fund raising.
Edelweiss Research is also available on Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset. Edelweiss Securities Limited 1
PFC has underperformed REC as REC is up by 22% where as PFC is up by 14%.Pair Strategy:Mean Divergence Statistical View: Over the past 60 days.00 1.924 9-Jul-10 23-Jul-10 6-Aug-10 20-Aug-10 2-Apr-10 16-Apr-10 30-Apr-10 5-Feb-10 11-Jun-10 25-Jun-10 3-Sep-10 19-Feb-10 19-Mar-10 14-May-10 28-May-10 17-Sep-10 5-Mar-10 1-Oct-10 15-Oct-10 (4. As a result the basket is trading near (1.00 1. 60 Day Z-Stat P rice Ratio P FC/RECLTD P R 60 Day M ean PFC / RECLTD 3.00 1.00) 0.974 (3.00) 0.124 2.00) Edelweiss Securities Limited 2 .00) (2.024 Z-Score (1.074 Price Ratio 1.0) standard deviations below its 60 day mean price ratio.
00 406.479 0.00 854.622 Close Price 1.00 1.00 358.Pair Strategy:Mean Divergence Closed Trades No of Days trade open 26 28 16 9 7 4 3 ALPHA Strategy Update Start Date/ Closing Strategy Date Long LICHSGFIN 23-Jun-10 Short HDFC 28-Jun-10 21-Jun-10 Long ALBK 28-Jun-10 Short OBC 5-Jul-10 Long M&M 25-Jul-10 Short MARUTI 12-May-10 Long ITC Short HUL 24-Nov-08 Long Axis Bank Short Bank of India 18-Nov-08 Long AXIS BANK 21-Nov-08 Short HDFC BANK 17-Mar-09 Long HDFC BANK Short HDFC Entry Price 1.2% -6.10% 2.223.95 845.5% 16.00 244.00 1.00 832.342 0.00 404.00 263.0% 32.5% 11.5% 0.53 0.00 332.479 0.50 249.0% (0.114 1.00 Entry Ratio 0.00 1.1% 4.00 1.18 1.008.00 629.04) (0.3% 4.0% 7.00 612.0% Status Closed Closed Closed Closed Closed Closed Closed Edelweiss Securities Limited 3 .38 0.0% 0.0% 19.00 273.00 232.00 188.00 437.0% 22.51 1.0% 10.5% 16.00 Close 0.0% 7.372.950.0% 5.05) (0.26% -6.00 163.419.00 2.491 0.5% -12.109.00) -3.00 236.952.9% 15.1% 11.586 Max Return Return Max Gain loss on on GEP* on AD# on GEP* GEP* 10.410.0% 11.434 1.00 2.664 0.00 459.00 912.0% -0.845 0.
edelresearch. This report is not directed or intended for distribution to.com This document has been prepared by Edelweiss Securities Limited (Edelweiss). country or other jurisdiction. The investment discussed or views expressed may not be suitable for all investors. directors. Nariman Point. The information given in this document is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. The disclosures of interest statements incorporated in this document are provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. employees. Email: research@edelcap. This information is strictly confidential and is being furnished to you solely for your information. Edelweiss reserves the right to make modifications and alterations to this statement as may be required from time to time.com Pair Strategy:Mean Divergence Vikas Khemani Nischal Maheshwari Head Head Institutional Equities Research vikas. Edelweiss is under no obligation to update or keep the information current. Edelweiss or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Thomson First Call. or use by. The distribution of this document in certain jurisdictions may be restricted by law. copied. Edelweiss Securities Limited 4 . Copyright 2009 Edelweiss Research (Edelweiss Securities Ltd). have long or short positions in. However. This information is subject to change without any prior notice. deflation or not?) Edelweiss Style Analysis: What's hot Enhanced Nifty: Nifty with an edge 01-Oct-10 01-Mar-10 13-Oct-10 Access the entire repository of Edelweiss Research on www. persons reporting to analysts and their family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. publication. Our research analysts and sales persons provide important input into our investment banking activities. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities.khemani@edelcap.Edelweiss Securities Limited. Buy back. of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as advisor or lender/borrower to such company (ies) or have other potential conflict of interest with respect to any recommendation and related information and opinions. special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. and employees may: (a) from time to time. portfolio management and brokerage group. any person or entity who is a citizen or resident of or located in any locality. officers.com +91 22 2286 4206 +91 22 6623 3411 Alternative Research Regular Products Daily Market Outlook (DMO) Earnings Style Analysis (ESA) Edelweiss Corporate Action Tracker (e CAT) Edelweiss Technical Reflection (ETR) Enhanced Nifty (e Nifty) hEDGE Insider Trades Pair Strategy Rollovers Analysis Factor Analyser (FA) Special Situation Products ADS Conversion Alpha Trades Buy Back Delisting De-Merger Directional (Long / Short) Merger Open Offer Option Trading Restructuring (Value Unlocking) Rights Arbitrage Secondary Offerings Spread Trade Date 15-Jul-09 Special Report Master Moves (Opportunities from Open offer. This document does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Edelweiss. All rights reserved Edelweiss Research is also available on Bloomberg EDEL <GO>. The user assumes the entire risk of any use made of this information. state. should inform themselves about and observe. Neither Edelweiss nor any of its affiliates. Board: (91-22) 2286 4400. Nevertheless. any such restrictions. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. group companies. in whole or in part. regulation or which would subject Edelweiss and affiliates/ group companies to any registration or licensing requirements within such jurisdiction. indirect. but we do not represent that it is accurate or complete and it should not be relied on as such. Express Towers. availability or use would be contrary to law. integrated investment banking. directly or indirectly related to specific recommendations or views expressed in this report. where such distribution.maheshwari@edelcap. We and our affiliates. 14th Floor. Past performance is not necessarily a guide to future performance. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published. and should consult his own advisors to determine the merits and risks of such investment. and no part of his or her compensation was. and buy or sell the securities thereof. and persons in whose possession this document comes. Edelweiss is committed to providing independent and transparent recommendation to its client and would be happy to provide any information in response to specific client queries.com nischal. directors. delisting) Date 30-Sep-10 06-Sep-10 15-Oct-10 Monthly Report Rollover Analysis hEDGE: The alternative insights monthly FA: Factor Analyser Edelweiss Fund Insight – EFI 24-Sep-10 Edelweiss Vital Insights (US stares at a million dollar question. The information contained herein is from publicly available data or other sources believed to be reliable. Analyst holding in the stock: Yes. Mumbai – 400 021. Edelweiss Securities Limited generally prohibits its analysts. for any purpose. Reuters and Factset. its holding company and associate companies are a full service. Each recipient of this document should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved). is or will be. agents or representatives shall be liable for any damages whether direct. group companies.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.