Hot picks for 2008
Rahul Shah, Head - PCG, MF Global likes Simplex Infra, Ankur, Alembic Drugs and Pharma, Sea Marine and Great Offshore, reports CNBC-TV18. He believes 2008 will be the year where mid and small caps will out perform the largecaps.
Q: Why have you chosen Simplex Infrastructure and what is your target for the same?
A: We like infrastructure sector because it has the visibility and the opportunity and within this, we like Simplex Infra, which is best positioned to take advantage of this.
Simplex Infra used to predominantly be in the area of piling and road projects; it has now moved away from that, which are low margin businesses and is focusing more on railways, irrigation, construction projects. We believe that it not only has the visibility of topline, but also the margins will improve over a period of time. The stock is right now at Rs 640 and will give handsome returns in the year to come i.e FY08-09.
Q: Why do like midcap pharma and what sort of growth rates can you set out for Ankur and Alembic?
A; We like the midcap pharma sector, because there are many companies with CRAMS and outsourcing area, which demand attention. Out of those we like Alembic and Ankur Drugs & Pharmaceuticals. Both are into a very niche segment and are at very attractive valuations. While Ankur focusses on CRAMS and outsourcing is available close to 8-9 times FY09, Alembic is a diversified play on Pharma with a topline as high as Rs 800-1,000 crore.
So these two by no means are small companies and they will grow much more than the frontline companies in the years to come and we believe that these two companies have the potential to appreciate from current levels.
Q: Sea Marine and Great Offshore, what is your call on them?
A: We are bullish on offshoring as a sector and within that we like companies like South East Asia Sea Marine and Great Offshore. South East Asia Sea marine had vessels on dry-docking for the last two years and the company could not deliver results as per expectations, but I guess dry-docking of most of its vessels is over and one may see a great momentum in revenues in the year to come. It is out an out asset play and we believe that there is great visibility of revenues. The oil ruling at this level gives a lot of comfort and they are available at attractive valuations.
All in all, we believe this sector will also fetch returns in the year to come.
Q: Do you think the midcap and the smallcap index will continue to out perform the larger indices as they have done for the latter half of 2007 or do you think that may not be the case?
A: I guess midcap and smallcap will out perform the largecaps, but the only thing is that midcap companies are an asset class in itself, there is dearth of liquidity and management track record is not clear in most of the midcap companies. So one will require great conviction and patience for having a multi bagger in your pocket
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