Financial Daily from THE HINDU group of publications
Sunday, Jul 17, 2005
Financial Daily from THE HINDU group of publications Sunday, Jul 17, 2005 |
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Investment World
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Stocks Markets - Recommendation Logistics - Stocks Aegis Logistics: Buy S.Vaidya Nathan
AN investment may be considered in Aegis Logistics, as growth prospects appear bright. As a focused play now in the logistics space, the company is well placed to capitalise on growth opportunities in the business of handling, storage and distribution of oil products, chemicals and LPG. The availability of expanded facilities that has removed capacity constraints, plans to acquire a wider geographic footprint and a sizeable reduction in debt and interest cost are positive factors. Over the past year, the company has completely exited the chemicals business, disposed of assets and also moved out of a joint venture. These moves have freed up cash flows and also removed the cyclical element imposed by the chemicals business on revenues and profitability. It sports a cleaner balance sheet after taking sizeable one-time charges in FY 05. At present, the company has a strong presence in the Mumbai port. As the port facilities there are set to expand over the next couple of years, it would open up growth opportunities for Aegis. The company has also tailored its facilities to handle a wider range of products over the past couple of years. This, too, should augur well especially given the buoyant trend in the industrial sector. At Rs 100, the stock trades at price-earnings multiple of seven times its likely FY 06 earnings and is attractively valued. Over the next few years, we expect companies in the business of logistics to attract enhanced investor interest driven by a greater recognition of their role in imparting efficiency to the supply chain. Buy this small-cap stock with a one- to two-year perspective. The possibility of a rise in the cost of operation and regulatory compliance are the principal risks to our recommendation.
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