| Marg Limited-Target Rs 377 Outlook and valuations: Attractive; initiating coverage with 'BUY' We have valued Marg using SOTP at a fair value of INR 377/share. At CMP of INR 220/share, we see potential upside of 72% from current levels. Scale up at the port and volumes in SEZ and real estate business will be key drivers for our valuation. We initiate coverage on the stock with 'BUY' recommendation. Marg's business has transcended from being an asset light model to a mix of light and heavy assets, with high visibility and a sustained earnings model. The company plans to achieve this by setting up infrastructure assets and providing ancillary services to boost development of the surrounding hinterland. Cash flows from short-term EPC business are expected to support initial capital for its real estate and infrastructure assets, which will drive the company's future growth. Port strategically located to tap thermal coal demand Karaikal Port (KPPL), Marg's flagship project, commenced phase I operations in June 2009 and has already handled ~1.4 MT cargo in Q1FY11. It has undertaken phase IIA expansion to 21 MTPA. The port is well positioned to encash on bulk cargo demand due to its strategic location (well connected to central Tamil Nadu through rail and road), deep draft, faster turnaround time, and state-of-the-art facilities compared with neighbouring major ports—Chennai and Tuticorin. Improved traction in Chennai market to boost real estate business With signs of recovery in India on the back of strong domestic demand, Marg's real estate business, especially at the Swarnabhoomi SEZ (on the outskirts of Chennai), has picked up through improved land sale and lease rentals. Further, its multi-purpose mall at Karapakkam is first of its kind to address the underpenetrated organised retail in Chennai's OMR and increasing demand for office space by IT companies. In addition, the company's strong pipeline of residential project launches should aid valuations. External EPC business gaining ground Marg's current ~INR 28 bn order book comprises 20% external contracts. It is committed to enhance this share by forging alliances to develop a forte in roads and irrigation by registering itself with various government bodies like Military Engineering Services, Karnataka Housing Board, among others. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. --- On Mon, 10/4/10, VIJAY BHASIN <vbhasin2001@gmail.com> wrote:
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