Category Archives: Valappils

All about Valappil’s equity portfolio. What I buy, what I sell. How is my portfolio performing!

Investment in Glenmark Pharma

Glenmark PharmaGlenmark Pharma looks attractive for investment with an expectation of 45% return in 2-3 years.  I added Glenmark Pharma to my portfolio buying a few shares today at Rs. 239.40 per share. It is third company in my portfolio from pharma sector, other two being Piramal Healthcare and Biocon. With this investment, pharma sector constitutes 10% of my total Indian equity portfolio at current market price.

Reasoning for investment

While first three quarters of the financial year 2009-10 has seen a lukewarm performance reported by the company, the scenario is expected to improve fourth quarter onwards as the businesses begin to pick up. Glenmark Pharma is expected to report strong growth going forward as its generics business in the US, Latin America, Europe and semi-regulated markets scales up. Management’s ability to strike out-licensing deals for its molecules and a strong R&D pipeline at present with potential going forward makes Glenmark’s prospects bright.

Recently the company got final approval from US Food & Drug Administration for Ropinirole Hydrochloride tablets in multiple strengths. Ropinirole Hydrochloride tablet is the generic version of GlaxoSmithKline’s Requip tablets. The drug is used for treating signs and symptoms of idiopathic Parkinson’s disease. The annual sales of the drug in the US is about $500 million.

As in any business, there are risk factors too to be considered when investing in Glenmarks Pharma’s shares. The high debts position, realisation from R&D front, increased competition and price erosion in the US generic markets are some of the risk factors going forward. Due to the global financial crisis and its impact on companies, revenues from the out-licensing deals may not be as forthcoming for some time as they once were. This will have an impact on Glenmark’s margins.

The company continues to be in talks with global pharma majors to garner some out-licensing deals. The fact that the company was able to bag such a deal with Medicis Pharmaceuticals USA is an encouraging sign.

Company is already working towards reducing the debt burden. The cash generated from the improved performance of its business will go towards paying off this debt. Besides this, the company has filed a draft prospectus with the SEBI for listing Glenmark Generics and part of the proceeds from this listing will also be used to retire debt.

About Glenmark Pharma

Glenmark Pharmaceuticals Limited was incorporated in the year 1977. Glenmark Pharma is a mid-sized Indian pharma company with focus on niche therapeutic areas of dermatology, gynaecology, paediatrics and diabetics. The domestic formulations business contributed about 29% to the company’s revenue in FY09. On the international front, while exports to the semi-regulated markets have been growing at a strong pace, the company is also strengthening its presence in the US and European generics market on its own and through the partnership route. The company is also focusing on R&D.

Glenmark is a leading player in the discovery of new molecules both new chemical entity and new biological entity with eight molecules in various stages of clinical development. The company has a significant presence in branded generics markets across emerging economies including India. Its subsidiary, Glenmark Generics Limited has a fast growing and robust US generics business. The subsidiary also markets APIs to regulated and semi-regulated countries. Glenmark employs nearly 6000 people in over 80 countries. It has twelve manufacturing facilities in four countries and has five R&D centres.

Bought Biocon Limited

I bought Biocon Limited at 270.75 today. Pharmaceutical sector is a good defensive sector to be included in one’s equity portfolio. At present I have only two companies from pharma sector and with this buy, pharma constitute 7% of my total equity portfolio.

Biocon is a fully integrated biopharmaceutical company with expertise in the fields of biopharmaceuticals, custom research and clinical research. The company is a bulk drug supplier and has a market share of about 40% in the European market in bulk statins a drug class used for treatment of cardio-vascular diseases. Biocon is the largest Indian company in the biotechnology space and has a strong product portfolio.

The biopharmaceutical segment contributes 75% to the Indian biotech industry’s revenues and has been the key growth driver. The Indian biotech industry is expected to generate US$ 5 bn in revenues by 2010 and create more than one million biotech jobs over the next five years. On a global basis too, the biopharmaceutical market has undergone rapid expansion since its emergence 30 years ago.

The positive points for Biocon are healthy operating margin, long term earning growth, decent return on capital invested, consistent dividend payout history, larger promoter holding, lower FII holding, high liquidity, reasonable current ratio and low leverage.

In the global scale, while the fundamental factors driving the industry remain strong, the same is bogged down by intense competition and severe price erosion. The Indian domestic pharma industry is expected to grow at a CAGR of 16% over the next five years, however company’s success is highly depended on R&D efforts, and industry is fragmented and highly competitive. Thus the risk is that whether the company will be able to withstand these industry risks.

Recently Equitymaster recommended Buy with a target price of 360.00 with a two-three year perspective in their paid research service. HDFC Securities has recommended buy rating on the stock of Biocon with a target of Rs 327, in its February 11, 2010 research report. IndiaInfoline recommended buy rating on the stock with a target of Rs 320, in its anuary 14, 2010 research report.

Selling Gujarat Gas Company

It is time to be more cautious on share market in India. I am gradually offloading some of the shares prices of which has reached its reasonable valuation and achieved my target. At this time, I would prefer to sit more on cash rather than buying anything in haste.

Today, I am selling Gujarat Gas Company on a return of 97% in a holding period of 21 months! I bought this in April-May 2008 at an effective average cost of Rs. 125.67 (adjusted for bonus shares) which now stands at Rs. 247.60.

I still see buying opportunity in Suzlon Energy and Bharti Airtel. But I am not buying it right now as these shares already constitute 6.5% and 10.8% of value of my holding respectively. One should be disciplined and should avoid concentration of investment in a few shares, even if it looks attractive to buy more.

105% return in a year!

In the year 2009, my equity portfolio gave me a return of 105%! At the same time, Sensex gained 81%  and Nifty 76%. For the two year period from January 1, 2008, my return is 38% while it was a loss of 14% for both Sensex and Nifty! This is the power of long term view of investment. It is not the up and down of the Sensex that determines your return. It is based on what companies you invest in! If you invest in good companies, don’t bother about the movements of Sensex. Shortlist good companies, and invest at the right price! By investing with a long term view, you don’t have to hook up in front of computer screen watching the market movement every day.

My current holdings has 15 companies which now has gained altogether 40%. Since the market has shoot up too much so fast recently, I am currently not buying any thing aggressively, but selling those which have achieved my target. I still hold some shares that I bought in March 2006! Average holding period of my current holding is 18 months. My largest holding is Infosys Technologies.

Suzlon Energy is the biggest gainer in my current portfolio which stands at 132% and I will be holding it for some more longer time. I am holding it since December 2008. Tata Communications which I bought recently is at a loss of 4%.

The highest return on shares that I sold during 2009 was on Tech Mahindra. It was sold with a gain of 270% in 10 months! And my biggest loss in one company was 92% on Gremach Infrastructure. In fact, Gremach was not a good company that qualify for investment as per my investment principle. It was a mistake.

At the moment, I would be more cautious until a correction, but would not hesitate to invest if I find a good company at the reasonable price. I don’t listen to brokers call. I depend on independent research reports, most of them paid service and some comes free. But it is worth paying. Drops Savings Investments suggest one company a month which is at attractive valuation at the time of recommendation. This recommendation is made after studying various research reports and company reports and continuously tracking its price movements and news. This is from the watch list that I track for my own investment and it is what I would be investing.

You are free to contact me at any time and it would be my pleasure to give my suggestion at any time.

Nothing to buy!

What to buy this week? I dont’s see anything from my watchlist or I will have to expand my watchlist to see anything sitting undervalued and unnoticed. Indian shares are getting too expensive!

Suzlong Energy might be a good bet! But it is already in my top 10 holding and I dont add more of those shares which are in top 10 while top 10 constitute more than 80%! Now it has gone like 92.00%. My holding in Suzlon has already given me 100% return within a year! I still hold it because I see its value and its potential to gain more!

Now the stock market in UAE is getting cheap and may consider buying here selectively!

Sold Wockardt, bought Bharti Airtel

Yesterday, I sold Wockardt @ Rs. 175.61 and realised of 80% return in seven months! A three year target was 173.00 and it was achieved in 7 months. So there is no meaning in keeping but can re-enter at a later stage if found attractive.

Bought Bharti Airtel @ 280.70 with a three year target of Rs. 529.00. Drops Savings and Investments recommended Bharti Airtel at the beginning of this month @ 299.95. It has come down a bit, but the long term prospects remain intact. It may be sluggish for some time, but there is good potential.

Here is the opportunity to buy Air Arabia!

What about an offer to buy Air Arabia? Yes, shares of Air Arabia is available at rock bottom price! Its closing price yesterday was AED 1.00 which was its issue price on July 2007. Two and half years later, you are getting an opportunity to buy at same price.

For year 2008 it declared 10% cash dividend. It gives a 10% dividend yield which is very rewarding. At market price of 1.00, its price to book value is 0.90 and price to earning ratio of 8.90.

The current sluggishnes in the aviation industry may last for another one or two quarter. But generally aviation sector in the Middle East has been resilient to the recession. Having two hubs and third one announced recently, Air Arabia has bright long term prospects!

Air Arabia  is the first & largest low cost carrier (LCC) to operate in the Middle East and North Africa. It commenced operations in October 2003 and has safely transported more than 11 million passengers since inception. It has main hubs at Sharjah, UAE and Casablanca, Morocco. Air Arabia (Maroc) took off on May 6, 2009 serving mass European market from Morocco. It announced the establishment of third hub in Egypt recently. It operates a total fleet of 20 new Airbus ‘A320’ aircraft and has signed agreement with Airbus to acquire 44 A320 aircraft. It currently fly to over 47 destinations from Sharjah and 11 destinations from Casablanca. It became profitable from first year of operation and it is the first airline to go public in the Middle East with shares traded in the Dubai Financial Market.

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