Recommendation: Buy
CMP = Rs 19.5 (at the time of this recommendation)
Price target: Rs 30
Key points:
- The net interest income of Tourism Finance Corporation of India (TFCI) declined by 27.0% yoy to Rs 11.2 crore in Q4FY2008, mainly due to a 15.6% drop in the interest income and an 11.0% increase in the interest expenses.
- Notably, the operating expenses of TFCI declined sharply by 30.3% yoy during the quarter, primarily due to a higher base in the year-ago quarter on account of an extraordinary payment of Rs 1.0 crore made towards the arrears of employee expenses.
- In addition, there was a write-back of provisions (for bad and doubtful debt) of Rs 10.0 crore, as the same was no longer required. The significant write-back was the primary reason why the bottom line improved. Hence, the net profit for Q4FY2008 also increased by a strong 60.2% to Rs 15.3 crore.
- At the end of the fiscal, the sanctions made by the company stood at Rs 333.8 crore, up 36.0%. The disbursals also registered an increase of 50.0% to Rs 180.36 crore. However, the high growth in the disbursals could not translate into growth of the loan book due to higher repayment of loans.
- The loans increased by 6.0% to Rs 372.7 crore, breaking the previous five years' trend of declining growth. The gross NPA’s stood at Rs 61.0 crore on an asset base of over Rs 500 crore.
- During the quarter, TFCI raised Rs 63.8 crore through the preferential allotment of 1.32 crore equity shares of Rs 10 each for cash at a price of Rs 48 per share. The capital raising was aimed at enabling the company to finance its future growth.
- At the current market price of Rs 19.5, the stock trades at 8.2x its FY2009E adjusted EPS of Rs 2.4 and 0.6x its FY2009E book value of Rs 34.9.
- I maintain a Buy call on this stock with a price target of Rs 30.
