Fw: Investor's Eye: Update - Max India, Telecom; MF - Sharekhan's top SIP fund picks

 

Investor's Eye [June 21, 2011]  Sharekhan www.sharekhan.com

Summary of Content STOCK UPDATE Max India  Cluster: Emerging Star Recommendation: Buy Price target: Rs234 Current market price: Rs173 Stake buy-out supports our valuation for Max Healthcare  Max India has decided to buy out 16.37% stake in its subsidiary, Max Healthcare, for Rs140 crore (at Rs29.4 per share). After the stake purchase Max India's stake in Max Healthcare will increase to around 91.84% while the remaining stake will be held by International Finance Corporation (3.1%) and overseas corporate bodies. Based on the proposed deal, the valuation of the Max Healthcare would be around Rs855 crore, which is slightly higher than our estimated value of Rs780 crore for the company.  Further, according to media reports Max India is planning to rope in a strategic partner to pick up a significant minority stake in the healthcare arm at a considerable premium. Even after considering some premium for the strategic stake we believe the proposed deal could result in further upside to our assigned valuation for Max India's healthcare business. We maintain our Buy rating on the stock with a sum-of-the-parts (SOTP) based price target of Rs234. SECTOR UPDATE Telecommunications  May net additions down 14.2% MoM, Idea reports steepest fall In May 2011 the all-India GSM operators (excluding Reliance Communications [Rel Com] and Tata Teleservices [Tata Tele]) added 9.53 million SIM cards, taking the overall base to approximately 590 million from 581 million in April this year. That is approximately a 1.6% increase over the April number. We believe that the overall weakness in the April net additions to a certain extent speaks of the moderating trend in the subscriber addition with the mobile penetration level remaining high (the all-India wireless penetration as on April stood at 69.2%, as per the TRAI). MUTUAL GAINS Sharekhan's top SIP fund picks We have identified the best equity scheme for SIP investment based on three parameters: Minimum corpus as indicated by at least 10% of the average category-corpus, the past performance as indicated by one, three and five year returns and risk returns ratios namely Sharpe, Information and Sortino.  Sharpe indicates risk-adjusted returns, giving the returns earned in excess of the risk-free rate for each unit of the risk taken. The Sharpe ratio is also indicative of the consistency of the returns as it takes into account the volatility in the returns as measured by the standard deviation.  Information ratio is one of the most important tools in active fund management. It is the ratio of active return (the return over the index return) to active risk annualised. A higher Information ratio indicates better fund manger.  Sortino ratio is similar to Sharpe ratio, except it uses downside deviation. The upward volatility as measured by Sharpe ratio does not lead to losses. It is the downward volatility that leads to losses; hence the use of which doesn't discriminate between up and down volatility. So, higher the Sortino ratio, higher would be the effective return over a period of time. Click here to read report: Investor's Eye

Regards, The Sharekhan Research Team myaccount@sharekhan.com   www.sharekhan.com to manage your newsletter subscriptions