Some long term speculative stocks

These stocks are recommendations from various sites, groups etc...that I have liked. These are some of the stocks, I would put around 5000 and just look at how it shapes up in the long term.


Arston Engineering: (K R Choksey Securities views on Arston Engineering)
CMP: 34.30

The company has two interesting business segments, one is the construction of turnkey projects and second is the manufacturing of storage tanks which are mainly required by customers who are in petrochemicals and petrol and refineries segment. This company is into the fabrication of this particular storage tanks. Essar Oil has confirmed its package and the company is on track as far as the execution of project is concerned. This company is now expected to complete Rs 20 crores worth of pending orders from Apparel Plus. They also have some overseas orders particularly from Dubai in which they will be supplying some storage tanks. The important aspect is that they have been in negotiations with some of the retail outlets of petroleum companies where they would be putting up their petro gas stations. This company would be completing those projects and hand it over to the company. I think that is where opportunities lie as far as business is concerned.

In a Rs 10 crore equity, the management holds just about 15% or so. Net worth is almost negative at Rs 10 crores but they have outstanding dues to the tune of Rs 25 crores plus. In the past, in the balance sheet they have written of these dues and whatever recovery is made is being added to P & L. So we believe that if this kind of progress goes forward and if this company can probably receive this kind of money, they have the capacity to deliver.


Hotline Glass (views of K R Choksey Securities )
CMP Rs 19.50:

Hotline Glass produces glass funnels. The company has put up a JV with LG Electronics to manufacture colour picture tubes. So Hotline Glass supplies colour funnels to them, and they have another JV with LG Philips to whom they supply colour TV panels. This business has just started and the production is getting stabilised. The company will have a 10 million ton capacity which will result in a substantial increase in business for the company. And in June 2006 and thereafter they will also be starting with the production for the glass panel business for colour picture tubes which will go to LG Phillips. The company will shift to gas based fuel in the first quarter of the next financial year, which will bring down the company's fuel costs. So we are expecting this company to have a good run hereafter as they are based on a good business model.

If one looks at the financials of the company it certainly does not look interesting because on an equity of Rs 80 crores, the EPS is hardly anything to talk about. The company also suffered when it had to stop production for sometime because it shifted majority of its production capacity to 29” colour picture tube funnel. One cannot find any attraction with Rs 80 crore equity and with almost a loan of about Rs 50 crore in the balance sheet and with a profit of as little as Rs 2 crore and the total capital being employed of about Rs 150 crore, yet going forward this business is likely to find better performance as a result of which I think the stock is available at Rs 18 at this point of time and maybe when the performance starts coming in, the market will take note of it.

Ester Industries (vews of Anand Rathi Securities)

CMP: 20.25

am not saying that this is the stock to be bought right away. There are certain potentials and risks in this stock. However, this stock is worth watching for investment. This is a Polyethylene Terephthalate, PET, film maker with the capacity of 25,524 metric tonnes, and 85% of its turnover comes from PET films. The rest comes from engineering plastics.
Right now the concerns are that, the high raw material prices of both these products, i.e, Purified Terephthalic Acid, PTA, and Mono Ethylene Glycol, MEG, are very high, looking to the oil prices. Therefore, the margins are under pressure.
Apart from this, the other concerns are that, there has been a large domestic capacity addition in last one year alone, nearly to the extent of 65%. The other concern is the reduction in the Duty Entitlement Passbook Scheme, DEPB rate, for this product from 4% to 8%; as well as reduction in the import duty from 20% to 15%.
But the potential lies in the strong demand for PET films. Exports are also rising and utilisation levels are very high in the industry. The company is going into more value added products like metallizing films, where it has recently added 4875 metric tonnes of the capacity. That is going to be commissioned in this month alone. So it has potential, and I think at around Rs 19, this stock is for the long term. It is for people who can bet on reduction in either the raw material prices, or improvement in the realisation of the product.