Tuesday, June 14, 2011

Noida Toll Bridge.

AC Choksi Share Brokers has recommended `Buy` on Noida Toll Bridge with a price target of Rs 39 as against the current market price (CMP) of Rs 25.15 in its report dated May 24, 2011. The broking house gave the following rationale:
> A Concession Agreement confers the right to Noida Toll Bridge Co. (NTBCL) for recovering the project costs with a designated rate of return (20%) over the 30 years concession period or till such time the designated return is recovered whichever is earlier; and if not recovered the right is extendable by 2 years at a time till the project cost and the designated return thereon is recovered.
> In Feb 2011 proposed toll hike was rolled back due to protests. As required for maintenance, NTBCL has taken up issue for increase in toll rates with authorities. It is expecting a hike in the range of 10-22% (at least 10%) in the toll rates by May - June 2011.
> From 2000-01 to 2009 -10 there has been good growth in the average daily traffic. For FY 2012, NTBCL is expecting at least 5% further traffic growth. The planned implementation of Noida and development of Yamuna Expressway will also lead to further increase in traffic.
> The Concession Agreement provides for granting Land Development Rights to NTBCL for supporting any shortfall in earnings. The Company has 100 acres of land and has been seeking development rights. Upon approvals and the commencement of land development, it will get revenues and profit contribution from land development also.
> As NTBCL pays interest at fixed rate on its debt of Rs 1.48 billion, it does not has any direct impact on its profitability in the current scenario of rising interest rates.

Valuations:

NTBCL has good earnings prospects in its business segment. Assured return clause in concession agreement, likely increase in toll rates, potential for increase in traffic and the clause in the concession agreement for grant of land development rights are some of the factors which are leading towards strong growth as well as earnings and profits of the company in the coming period. At the Current Market Price (CMP) of Rs 25.15 NTBCL is trading at a P/E of 12.51. Based on growth prospects, we believe that for financial year 2012, NTBCL`s forward Earnings per share (EPS) to be Rs.2.23, thus we recommend a buy call on the stock at CMP of Rs 25.15 which is trading at only 11.28x Financial year 2012 estimated EPS with a target price of Rs 39 giving a potential upside of 55%.

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