At near 40,000 points on the Sensex, the markets are not very cheap. Here are a few stocks that are under Rs 100 and could be worthy picks. In fact, many shares from the banking sector are now at mouth watering levels, which could make them worthy picks from a 2-3 years perspective.
Indiabulls Real Estate
This stock has come crashing down from levels of Rs 220. At these rates the stock has become very attractive.
Now, let us see some positive developments that have unfolded for the company in the last few months. The company has monetized 50% stake in two of its commercial assets in Mumbai, namely Indiabulls Property Pvt Ltd (One Indiabulls Centre, ‘Sky Forest' and ‘Sky') and Indiabulls Real Estate Company Pvt Ltd (Indiabulls Finance Centre) at an Enterprise Value of Rs. 9,500 crores.
The stake was sold to Blackstone group. The company has also sold residential assets in Chennai for Rs 285 crores.
The promoters are increasingly looking to reduce their stake in the company to focus on the Financial Services sector. They are also looking to sell their stake in tranches.
Annuity revenue solid growth levers for the company
By 2022, the company will have solid annuity revenue. For its office rental business (completed and owned) would generate revenue of Rs 85 crores and under construction expected annuity revenue is slated to be around Rs 566 crores.
In its JV portfolio with Blackstone, the company would generate Rs 670 crores (completed and owned) and under construction Rs 172 crores.
Apart from the annuity, the company's own under construction portfolio hopes to generate Rs 30,000 crores in aggregate revenues until 2022. Projects like Blu Estate & Club, Worli; Hanover Bond, London, Indiabulls Greens, Panvel; and Gurgaon projects will add significant value in the coming days.
Attractive valuations and solid land bank
IndiaBulls Real Estate has fully paid land bank of 1,046 acres in key cities across India, of which more than 95 per cent of the Land Bank is in high value super-metro cities - Mumbai (MMR), National Capital Region (NCR) and Chennai, and which is sufficient for proposed development over the next 5-7 years.
We believe that the robust growth at the company would continue. In fact, the company recently engaged in a buy back of shares. We believe that mechanism to reward shareholders would continue.
The company can report an EPS of Rs 40 in FY 2019-20. At a stock price of Rs 100 the trailing p/e is about 2.5 times. It is difficult to ascertain the EPS in coming years, due to the nature of business. However, we see tremendous value in the stock, given the real estate value that the company holds could be more than the free float market capitalization of the company. The shares of IndiaBulls Real Estate is really attractive at the current levels.
In fact, interest rates are unlikely to head higher anytime soon, which should be positive for a company Like Indiabulls Real Estate.
Jammu & Kashmir Bank
Jammu & Kashmir Bank was in the news recently for all the wrong reasons. There are allegations of corruption and nepotism in the bank against its former Chairman Pervez Nengroo.
The stock has collapsed from levels of Rs 60 to Rs 49. However, we tend to get stocks cheaper, when there is chaos.
Now, the important thing to remember is that J&K Bank is a government owned entity and we have seen all these problems at banks in the past.
However, the core fundamentals of the bank are improving, which makes a case for investment. the last few quarters have seen an improvement in recoveries.
J&K Bank: Reasonably priced
For the quarter ending March 31, 2019, the bank put on a solid financial performance. The net profits soared to Rs 215 crores from 104 crores.
The gross non performing assets dipped from 9.97 in the quarter ending Dec 31, 2018 to 8.97 per cent for the quarter ending March 31, 2019.
The EPS of the bank has improved dramatically from Rs 1.86 in the quarter ending Dec 31, 2018 to Rs 3.86 in the quarter ending March 31, 2019.
If the trend of recoveries and fall in NPAs continues the EPS could well swell pass Rs 12 in the current year. This means the stock is trading at a p/e of just 4 times.
However, the corruption and nepotism charges against the former Chairman, would remain an overhang on the stock.
As government owned banks are quickly losing market share, and are starved of capital, private sector banks are likely to gain market share rapidly in the years to come.
Karnataka Bank, a private sector player, whose stock at Rs 108, is not very expensive. In fact, the shares had hit a new 52-week low of Rs 93 only recently. The bank also pays a good dividend and last declared a dividend of Rs 3 per share.
The bank has a book value of Rs 181 and the stock is available, at just Rs 108, placing it at a price to book of 0.60, which is one of the cheapest in the banking space.
Karnataka Bank: Reasonable on valuations
While the price to book at 0.60 times is cheap, the stock is also available at a one year forward p/e of just 10 times.
This is extremely cheap for a private sector bank. The bank also has branches of more than 800, which means a decent franchisee network. While on most parameters the shares remain a good pick, rising interest rates will remain a concern for the banking sector.
However, non performing assets may plateau in the coming months, which should augur well for some private sector players like Karnataka Bank.
The financial performance for the quarter ending March 31, 2019 have also been good. Quarterly Net Profit at Rs. 61.73 crore in March 2019 was up 461.18% from Rs. 11.00 crore in March 2018.
Operating Profit at Karnakata Bank stood at Rs. 324.23 crore in March 2019 down 31.79% from Rs. 475.33 crore in March 2018.
Karnataka Bank EPS has increased to Rs. 2.18 in March 2019 from Rs. 0.39 in March 2018.
Interest rates are also slated to fall, with the Reserve Bank of India having cut interest rates twice now this year. This is likely to benefit a bank like Karnataka Bank. Though this is not a stock below Rs 100, we thought it would be worth recommending for investors to buy from a long to medium term perspective.
Buy the shares for the long term.
Federal Bank reported a good set of quarterly numbers for the period ending March 31, 2019. Net profits at the bank surged and non performing assets were significantly lower.
Overall, the bank is moving in the right direction to build strong and sustainable earnings momentum. BY FY21 estimated, the target price could be Rs 125 per share valuing the stock at 1.7x FY21E anticipated book value.
The banking sector itself is seeing tremendous buying support fro investors, as interest rates are headed lower. Buy the shares below Rs 100 for a price target of Rs 125.
A list of small cap stocks that you can buy
We have also in the past recommended some small and mid cap stocks that you should own. These have the potential to generate good returns in the coming years. Read by clicking on the links below:
Taxation on shares below Rs 100
It is important to note that if you sell your shares at a profit before one year, you are liable to pay taxes and its does not matter whether your shares are under Rs 100 or not.
Short term capital gains tax on shares is applicable if you sell your shares before one year. On the other hand, if you sell your shares after a period of one year, there is a tax liability that has been implemented from 2018-19. So, you need to factor the same before you sell your shares.
It is advised that if you are making a decent sum you can also pay the required taxes on the same.
The article is not a solicitation to buy, sell in securities or other financial instruments mentioned in the article. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and do not accept culpability for losses and/or damages arising based on information in this article.