Initiating Coverage
Aftek Ltd.
Unfolding the hidden value...
____________
Buy
CMP Rs 70; Target Rs 100
Aftek Ltd, a seasoned player in Software Product Engineering has more than
100 active Intellectual Properties to its credit. Owing to this, Aftek
commands premium in its billing rates and increased revenue per employee
than most Indian IT companies. The non linear model of the company and its
subsidiaries enables the company to beat the 'Rising Rupee' blues most
effectively.
The company's investments into its subsidiaries, Arexera, Seekport and
Digihome transform the company into the league of royalty bearing product
companies. At the current market price of Rs 70, the stock is trading at a
P/E of 6.7x and 4.9x its FY08E and FY09E EPS respectively. Despite strong
fundamentals, the company is valued at 50% discount to its nearest
competitor. Owing to its reclassification as a product company, we believe
that the stock is a strong candidate for re-rating from its existing
average forward P/E of 6.5x - 8x. We have however, been extremely
conservative in our approach for projections. The company's cash reserves
is a huge strength for expansion in future. The company's cash on its
books stands at Rs 33/share. At a P/BV of 1.0, the stock is extensively
undervalued. We have valued the company at mere 7x its FY09E EPS of Rs
14.4 and firmly recommend a BUY with a price target of Rs 100, an upside
of 43% over the CMP.
BigGains !!
Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch format to Traditional
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe
__,_._,___
No comments:
Post a Comment