The Sensex has now fallen almost 10 per cent from historic highs of 38,936 points. Picking the best small cap stocks is never easy in a falling market. However, we have picked some very good ones, which can generate good returns in the medium to long term. Take a look at some of the best small cap stocks that can be purchased in 2018.
IndiaBulls Real Estate
From a holding period of 2-3 years, Indiabulls Real Estate shares could be a solid pick. The company has some massive developmental and office rental portfolio, which could fetch superb annuity revenue and solid sales revenue in the next few years.
Its development portfolio under construction is valued at a staggering Rs 28,857 crores. Under its office portfolio annuity revenue that is completed and owned is to the tune of Rs 109 crores and under construction expected annuity is Rs 511 crores.
Under its JV with Blackstone, the expected annuity revenue is around at Rs 4,600 crores by 2022, expecting a 95 per cent occupancy.
IndiaBulls Rel Estate reported a reasonably good set of numbers for the quarter ending Sept 30, 2018. The company reported an EPS of Rs 1.68, as against Rs 1.30 in the corresponding period of last year.
The net profits also surged to Rs 75.9 crores from Rs 61.6 crores in the corresponding period of last year.
IndiaBulls Real Estate: Huge value
The Equity Value of Development Portfolio is estimated at a staggering Rs 17,134 crores. The Equity Value of Owned Office Rental Portfolio is placed at Rs 5,908 crores and the equity Value of 50% in JV Portfolio with Blackstone is at Rs 2,250 crores. Interestingly, the equity Value of Land Bank, estimated @ 1.5 crores per acre aggregates Rs 1,569 Crores.
As against this, the company has a total net debt of only Rs 4,803 crores.
The company also recently announced a buyback of shares and accordingly, the equity capital of the company will stand reduced.
From a 2-3 year perspective, the shares of Indiabulls Real Estate is an excellent buy. We believe the shares can easily double from the current value. The shares are available at a p/e of just around 7 times, one year forward p/e. The price to book is also around 0.6 times, which is pretty attractive.
South Indian Bank
South Indian Bank reported a decent set of numbers for the quarter ended Sept 30, 2018, that surprised the street.
The CASA was up 11.5 per cent for the quarter ending Sept 30, 2018, as compared to Sept 2017. Deposits grew 11.6 per cent, during the same period.
The net profits at the bank jumped to Rs 70 crores, a growth of 1650%.
The bank is now going ahead with a strategy of powering growth. It is setting efficient branches & processing centers for faster processing of loans. A new retail banking department to focus on retail loan & liability/investment products is being constituted. There would also be a special cell to monitor non performing assets.
South Indian Bank: Reasonably valued
The bank would also lay an emphasis on retail presence. A retail hub in Kochi would focus on steps to increase focus on housing finance, with a dedicated officers for marketing retail loans.
So far in the Sept quarter the number of Mortgage loans sanctioned was to the tune of 1,982 Nos. It is likely that we will see a renewed thrust on housing finance in the days to come.
South Indian Bank shares at the Rs 14, is trading at a p/e of just 8 times, one year forward earnings. The dividend yield on the stock is also a decent 2.71 per cent. Buy the stock for long term gains.
Jagran Prakashan is among the top publishing houses in the country. It owns the "Dainik Jagran", which is the largest read daily newspaper in the country. It also owns the "Radio City", through its subsidiary Music Broadcast and also owns Mid-day", which is the Number 1 read evening newspaper in Mumbai and a very popular one.
Interestingly, while its leadership status in certain categories remains, its digital business too is soaring. The company's unique visitors now equal a staggering 40.6 million. Radio City is a leader in cities like Bangalore.
Now, going ahead, while the newspaper revenues and advertisement revenues may remain flat, we see tremendous potential in the radio and the digital business.
What is most interesting is that with elections in key states like Madhya Pradesh, Rajasthan and the general elections next year, advertisement spends are going to soar. This means for the next four quarters, the company is likely to do very well.
Jagran Prakashan: Reasonably good financial performance
JPL has reported a decent set of quarterly numbers for the period ending June 30, 2018. Digital Business, which largely included the print business saw a robust growth of 16 per cent jump in revenues, when compared to the previous quarter of last year.
The radio business, which again is on a sustained growth path, also saw margins expand by 300 points. The one area that remains a concern is the print business. For two successive quarters there was a de-growth, but, for the June quarter this business saw a jump in revenues to Rs 361 crores from Rs 314 crores in the previous quarter.
The company regularly distributes good dividends and has engaged in buybacks to enhance shareholder value. The next big trigger for the stock would be the election season, which should begin shortly. The shares of Jagran are available at a p/e of just 10 times one year forward earnings. A good small cap stock to buy.
The article is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article. The author owns shares in Jagran Prakashan as on the date of publishing the article.