Should one subscribe to Burger King IPO?

The timing of the IPO appears to be very good as the markets are at all-time highs, says Hemang Jani
ET Spotlight
Given the fact that it is a loss-making company and the valuations are not exactly cheap, I am not too sure how it is going to pan out over a period of time, says Hemang Jani, Equity Strategist & Senior Group VP, MOFSL.

On Burger King IPO
From retail investors’ perspective, from a listing gains point of view this looks to be interesting. More importantly, the timing of the IPO appears to be very good when the markets are at all-time highs. The last listing of the IPO was pretty good though in that IPO, the retail participation was on the lower side. From a short-term listing gain point of view, this may make sense but given the fact that it is a loss-making company and the valuations are not exactly cheap, I am not too sure on how it is going to pan out over a period of time.

But it looks like an interesting name in the current scheme of things and I am sure it would make sense for retail investors to go for it.

On Sun Pharma
The pharma sector has come back into the limelight but Sun Pharma despite strong Q2 performance and very good management commentary, was not participating in the overall pharma sector movement. In the last few days, we are seeing that traction coming back. Being the leader across many categories, people would definitely like to participate and Sun is one of our preferred picks within the large cap pharma names. There is a case for another 18-20% upside even from current levels.

On Tata Power
Tata Power has been one of our preferred picks ever since it was in the Rs 52-54 odd levels. We have revised our rating and our target to around Rs 80. What we like about Tata Power is the fact that there is a renewed commitment from the management in terms of debt reduction. Incremental steps are being taken towards that. Given the overall revival that we are seeing in the economy and the restructuring that the Tata Group has undertaken means we will see incrementally positive earnings coming from some of these companies.

We would definitely want to be selective in the power sector and Tata Power continues to be one of our preferred picks though the stock is a little lower in terms of price.

On PSUs like GAIL, ONGC moving up
It is a case of PSUs as a theme going up rather than individual factors. Some companies have been delivering good performances, some companies are announcing buybacks and in a market like this, people want to participate in some of these undervalued plays. From that perspective, some of the PSU names would merit attention. Companies like GAIL for example, given the kind of steps the government has taken to reform this entire energy sector and the city distribution gas companies and the way they are opening up that space. There is a feeling that for the entire transmission sector, you will see some more reforms and given the kind of positioning that GAIL, it looks to be quite interesting. So, within that energy space, we would like to participate in GAIL. It is one of the companies that is under our coverage and we have about 24% upside there from current levels.

On Vodafone-Idea hiking tariffs & others following suit
It looks like finally the price hike has started in the telecom sector. Even a moderate price hike can have significant impact because some of these companies are doing exceptionally well even when there is no price hike. Once there is some indication coming in from Vodafone, it should be possible for the other incumbents to also hike tariffs.

The only thing is we do not know how Jio is going to react to this because so far people were hoping that there is going to be some kind of price increase across the board. So Jio’s reaction will be needed to have a sectoral view but looks like the worst is behind us and we definitely would want to participate in Bharti even if there is a moderate price hike. It will have a big boost on their earnings for the next one or two years.

On whether one should partially profit book now
It is always a bit tricky to have this kind of profit booking or creating cash levels though it is always sensible to create some liquidity since the markets have been at record highs. Typically, when the market is in this kind of a momentum which is backed by the earnings upgrade with strong flows, it may go on for some more time. If you are a long-term investor, it does not really make sense to fine tune with liquidity but from a short-term trading perspective, it definitely makes sense to be a little careful about what you are getting into and keeping some kind of a position size on the allocation that you are doing because things can turnaround very fast on any particular news that may come across.

Overall, we should be a little careful but at the same time if you have a 1-2-year view, there is no point trying to fine tune it to perfection.




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