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2 stocks to bet on next 2 quarters: Rajesh Agarwal

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by April 24, 2017 General

In a chat with ET Now, Rajesh Agarwal, AUM Capital , says Mecator Lines and Sun TV are the two stocks that could be wealth creating ideas.

Edited excerpts:

What is the first stock on your radar?

The stock which we would like to recommend today is Mercator Lines. This company is a well diversified company having interest in coal trading and mining, shipping, dredging and oil and gas exploration. It is the second largest dredging company in India after the government owned Dredging Corporation with a fleet of nine dredgers and they are planning to add some more in the next two to three years. They had some problem with their Singapore venture which they have divested and reduced their debt by around Rs 221 crore in the last financial year and they are further planning to reduce the debt by around Rs 900 crore in the next two-three years.

Their shipping business is doing well with the Baltic Price Index starting to rise again and we think it is just the beginning because it has fallen from a high of 11,000 odd levels to 300 odd levels and now it has again started moving up and that is going to benefit the entire shipping industry. Coal prices are also stable which bodes well for this company. On the valuation front also, it is trading at highly discount to its other peer group companies and numbers too on the December quarter we have seen a smart turnaround in the numbers and we expect this to be continued in the next some few quarters.

Sun TV is another one that you continue to like even after the recent run up. Why do you continue to think this is a long term bet and one can still buy at the current market price?

Sun TV is basically a big media house with a whole lot of interests in television software, broadcasting and production. They have radio businesses of their own. They are doing well in the south Indian market because it is one of the largest markets in India. They have recently tied up YuppTV to launch their operations around 10 channels in North Africa and UAE. Recently the government has given permission to Arasu that is TN government’s channel, cable TV operations to go for digital and that is going to be a big benefit for Sun TV.

As far as operations are concerned, there were regulatory hangover on this company but since promoters have been acquitted by Supreme Court that overhang is also not there. On valuation front, it is trading at a huge discount to the other media companies. It is trading at almost 25 times FY18 earnings that we feel that it is a huge discount to other media companies in the peer group hence we recommend this as a buy with a target of Rs 1080 in the next six to nine months.

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