Continuing to expand
The Mumbai-based plastic goods manufacturer Time Technoplast continues with its fast-track growth plans defying worries related to global economic growth as it initiated the acquisition of an LPG cylinder manufacturer in the Czech Republic. The $5.2 million deal is expected to consummate by end-October ‘09. The company, which has been expanding its capacities relentlessly over the last two years, has added several new products to its portfolio such as plastic fuel tanks for automobiles, HDPE pipes, prefab structures, autodisable syringes, returnable packaging etc. This acquisition will help it manufacture another novel product for the Indian market viz. polymer compositebased LPG cylinders. The acquisition cost appears reasonable; it is just 1.4 times the acquired company’s PBDIT of $3.75 million in ‘08. The company named Kompozit-Praha had net sales of $15 million and net profit of $1.8 million in ‘08. Time Technoplast is also investing around $6 million in China for a greenfield unit to manufacture containers and drums. Unlike India, where the company has a technology tie-up with Germany’s Mauser for these products, the company will be going solo in China that will enable it to introduce other products over a period of time. Besides, the company is also expanding the capacity of packaging products in India at various locations. The company’s 50:50 joint venture with Netherlandsbased Schoeller Arca Systems to manufacture special packaging and material handling products obtained its first order of Rs 20 crore. The JV is investing euro 10 million to set up four manufacturing plants across the country. Despite these developments, the Time Technoplast scrip has underperformed the broader market since the start of September ‘09 gaining 2.1%, as against a 4.6% gain in the Sensex. The scrip has remained a laggard over the last one year, losing over 31.5%, while the Sensex gained 13.5%. The company is holding its AGM on 19 September in Mumbai, to approve the dividend of Rs 0.35 per share of Re 1 for FY09. At the current market price of Rs 47.30, the scrip is trading at a price-to-earnings multiple (P/E) of 12.5. The ongoing capacity expansions and the recent acquisition are likely to keep the company on a sustained growth track in the coming years.
Exploring for growth
India’s second largest oil marketing company Bharat Petroleum (BPCL), recently announced a farm-in arrangement in the Nanuken offshore exploration block in Indonesia with 12.5% stake for $11.1 million. This became the 27th exploration block in which BPCL holds a stake through its wholly-owned subsidiary Bharat PetroResources (BPRL) now. With this arrangement, BPCL now holds stakes in more number of exploration blocks compared to its peers - Indian Oil (21 blocks) and HPCL (26 blocks). At the same time, unlike its peers, which hold a majority of their exploration blocks within the country, a majority of 18 of BPCL’s exploration blocks are outside India, whereas only 9 blocks are in India. BPCL will also gain a 2.5% stake in Oil India, which produces over 68,000 barrels of oil and 6.2 million standard cubic metres of gas daily, with the government diluting its stake post IPO. BPCL’s September ‘08 acquisition of 50% stake in EnCana Brazil, which held non-operator stakes in 10 deep water blocks in Brazil, played a key role in expanding its portfolio of overseas exploration assets. The company continues to remain an active non-operator in most of its E&P assets trying to build the necessary skills to become an operator. So far, only in one onshore Rajasthan block awarded under the seventh round of NELP (New Exploration Licensing Policy), the company enjoys joint operatorship with Hindustan Oil Exploration Company. The company’s six million tonne petroleum refinery at Bina in Madhya Pradesh at a capital cost of Rs 10,378 crore, is set to achieve mechanical completion by end’09. The project also includes infrastructure for importing, storing and transporting crude oil, viz. a single point mooring on the western coast, a tank farm and a 934-km pipeline from Vadinar port on Gujarat coast to Bina. The project, in which BPCL holds 50% stake, is expected to come out with an initial public offer in the next few months. Although the global outlook on the refining industry continues to remain negative with weakness in GRMs (gross refining margins), BPCL is likely to do well in the coming quarters, provided its marketing losses are made good. The company’s earnings per share (EPS) will improve to Rs 139 after the September ‘09 quarter results, even if it posts zero profit, as it had incurred a net loss of Rs 2,625 crore in the September ‘08 quarter. The current market price of Rs 560 is just four times BPCL’s estimated EPS after the September ‘09 quarter. Considering the likely IPO of the Bina Refinery in the near future, which will unlock value of BPCL’s investments therein, and its focus on E&P, BPCL shares appear attractively priced currently.
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