Though our main indices have more than doubled over the last six months, there are still many stocks in the mid and small cap space which are available at a very cheap price. If the market was to sustain for some more time, chances of which are very bright, then we are sanguine that the prices of these stocks will multiply from here. Small stocks always carry risk of higher price erosion and loss of liquidity if the market sentiment reverses. However investors with a penchant for risk can consider buying into these stocks as chances of earning fabulous returns over the next couple of months is very high. We present two such ideas from the mid cap IT space.
Kale Consultants
Kale Consultants Ltd. is a leading solutions provider with exclusive focus on the Airline, Logistics and Travel (ALT) industry. Their offices are situated across four continents of Asia, America, Europe and Australia. It has three offshore delivery centers, two BPO service centers and three marketing and customer support offices, connecting 1500+ professionals through state-of-the-art infrastructure and facilities.
At current market price of Rs 77, the stock appears quite attractive as it is trading at just 3x of its FY11E consolidated EPS and very near to its book value. The current market capitalization of ~Rs 101 crore is less than its FY09 net sales of Rs 104 crore. The company has been able to manage its margins on the back of strong product portfolio, global presence and organic & inorganic growth initiatives.
Micro Technologies
It is one of the leading global security solutions companies focused on R&D. The company's current portfolio consists of seven major product lines, including fleet/vehicle monitoring, lost mobile tracking, sales force tracking and home security systems. It earns 35% of its revenue from exports to South Africa, West Asia and Kenya. Its core strength lies in product innovation, and hence it has now restructured its business model to ensure a research-centric approach, while outsourcing a bulk of the product manufacturing processes.
With the rising crime rate, demands for these products are likely to soar. Despite the financial turmoil ravaging economies globally, this is one company which managed to maintain a consistent growth graph. At current market price of Rs 138, the stock is trading at 50% discount to its book value and at 2.7x of trailing EPS of Rs 52.9. Also the current market capitalisation of Rs 152 crore is almost half of FY09 net sales.
Both these stocks are potential multi baggers from their current prices.
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