BNK Capital

Cmp Rs 33

Expected price Rs 120

BSE code 500060

Registered Address

Mayfair Towers 2 Palm Avenue
Kolkata 700019 West Bengal
Tel : 91-33-22810560/61 Fax : 91-33-22800457

Simple Moving Averages on Bse

Days Rate

30 23.76

50 22.26

Equity Rs 5 crs Revenue Rs 8 crs PAT Rs 5.69 EPS Rs 12 PE 2.75 Dividend 10%

It’s a Kolkata based company which is a one of the holding co of RPG group. In past we had initiated buy call on a company known as J K Trade Investor which was a holding co of Raymond Gr and after our buy call stock went on hit CCT from Rs 18 to Rs 90. CMP is still Rs 96.

We have exclusively come out with another first of its kind research which is available first to our members though we have already initiated buy call yesterday.

We suggest aggressive buying in this co which will help you to get sizable gains.

We could manage to get the Balance Sheet as at 31/3/06. Since the turnover is not that high in FY 06 it can be concluded that its investments are more or less intact.

The company is a holding company of the RPG group & needs to be valued as such. It has the potential of valuations like other holding companies- B F Utilities - Kalyani Group (Rs 3000), UB Holdings-UB Group (Rs 850) etc.

The company’s book value is just Rs 30 as at 31/3/06. However its holdings are not valued at market rates. A back of the envelope calculation gives us the following figure:

Valuation of BNK share as at 31/3/06 after incorporating the value of quoted shares	Rs in lacs
Value of quoted investments	10896
Value of unquoted investments (book value)	528
Value of investment in subsidiary (book value)	52
Total	11476
Less –Loan funds	1657
Total funds available for shareholders	9819
No of shares (in lacs)	50
Value of each BNK share (as at 25/11/06) in Rs	196

Some of the major holdings of the company as at 31/3/06 with their value as at 25/11/06 are stated below.

Holding as at 31/3/05	Nos of shares	Rate	Amount in lacs
CSEC	3017351	346	10400
RPG lifescience	10950	101	11
RPG Transmission	5100	170	8
Zensar	21849	228	49
Varun Shipping	14850	70	10
KEC International	61600	370	227
KEC International	61600	25	15
Sterling bio	5000	125	6
IFB industries	74670	25	19
India foils	224000	9	20
Hinduja TMT	2000	598	12
Mcleod Russel	14000	125	18
Ceat	59443	100	59
Bombay Burma	2000	390	8
Philips carbon Black	47698	111	53
		TOTAL	10896

As can be seen from the above calculations , the value of the major known quoted investment has jumped to Rs 109 crs as on 25/11/2006, giving the value of each BNK share (as at 25/11/06) Rs 196.

Valuation Matrix…..

Co has earned Rs 5.69 crs majority of which is from interest and dividend which will either rise or remain stable and therefore the chances co raising its dividend from 10% to 30% is not ruled out. Therefore the stock which offers 3% yield and has potential to give 10% yield needs to be discounted at least 10 times of its earnings. Since its EPS is Rs 12 the current market price needs to be Rs 120.

Booster dose…

BNK has investment in realty cos the value of which can’t be accounted at this stage. This is a bonus attraction for investment in this stock.

It holds 1.25 lac shares of Jayshree Nirman in nos valued by BNK at Rs 75.60lacs in their books.

It also holds 70000 shares of Pressman properties valued by BNK at Rs 30.10lacs.

It also holds 67500 shares of Fairluck Commercial Ltd valued by BNK at Rs 5.87lacs.

Our Balance Sheets analysis makes its clear that these investments are very old with huge exposure to the stock market; as such their real value is much more than shown. We certainly believe that these investments offer an opportunity where returns could be similar to RDB because all these investments are in realty in Kolkata which has appreciated over 50 times in last 5 years. It can unlock at least Rs 100 per share in coming years.

BPO Valuations:…..

The company holds a 47% stake in a BPO company, which had approx 500 seats in seats in FY06 (valued at cost in the above exercise).

Hinduja TMT with 900 seats is valued at Rs 2400 crs therefore going by industry standards even if its BPO arm having 500 seats needs to be valued nothing less than Rs 200 crs. It could give decent value of Rs 400 per share.

Commodity Exchange Memberships……

The company also has membership of the stock & commodity exchange. Valued at cost.

Additional Triggers…..

The company has declared a 10% dividend for the year ended 31/3/2006.

The management has recently passed a resolution to raise capital of 50 crores. Co may try to raise stake in the co at lower price which few vested investors might prevent by taking the share price to its realistic levels. Same thing had happened in J K Investo Trade which could see the de-listing wished by promoter.

The share holding pattern shows that the management has around 52% official holding as promoter and as per information other bodies corp which constitute appx 16.46% also form the promoter holding as such the liquidity remains very low ( i.e only 32.% appx with public), so easier for the price to rise with no major supply.

Strategy…..

The strategy should be to accumulate this share in large quantity before market realizes it’s potential and sell above Rs 120 in part to make your investment free and rest hold till the time value is fully unlocked.