FINANCE & STOCK ADVICE: My View On Indian Overseas Bank

About The Company Background

Indian Overseas Bank (IOB) is a mid-sized public sector bank headquartered in Chennai. The bank has a dominant presence in southern India, which accounts for 45% of its branch network. At present, the bank has a network of 1,781 branches spread across the country. IOB has a strong international presence in eight countries. The bank is characterised as one having superior NIMs, best return ratios – return on equity (RoE) – and healthy asset quality. IOB did business of Rs 115,800 crore and had a balance sheet size of Rs 82,256 crore in FY07. On the technology front, 72% of business, or 800 branches, are covered under core banking solutions (CBS). The bank plans to enhance this number to 90%, or 1,500 branches, by FY08. Also, IOB plans to foray into a joint venture with Sompo Japan Insurance Inc, Allahabad Bank, Karnataka Bank and Dabur Investment for starting its non-life insurance business.

Financials of the Company

Total deposits grew from Rs 70,205 crore in Q1FY08 to Rs 85,001 crore in Q1FY09 recording a jump of 21.08%. Gross advances increased from Rs 48610 crore as on Q1FY08 to Rs 63419 crore in Q1FY09, growing by 30.46%. The operating profit for Q1FY09 was at Rs 241.18 crore as against the operating profit of Rs 409.17 crore for Q1FY08. This decrease in the first quarter of this year was mainly due to the loss booked on account of the inter segment category transfer of securities and loss on sale of securities and provision for wage arrears.

The net profit for Q1FY09 was Rs 255.97 crore. This figure was lower by Rs.12.52 crore when compared to the net profit of Rs 268.49 crore booked during Q1FY08. Business per employee increased from Rs 4.81 crore in Q1FY08 to Rs 5.93 crore in Q1FY09. The gross NPA came down from 2.34% in Q1FY08 to 1.73% in Q1FY09. However, the net NPA percentage has gone up from 0.50% to 0.75% for the same period. We expect IOB to deliver a 15% CAGR in PAT over FY08-FY10E.

Valuations

At the current market price of Rs 101, the stock is trading at 1.1x and 0.9x its FY09E and FY10E ABV of Rs 92 and Rs 114, respectively. We believe IOB at these levels offers value in terms of reasonable business growth coupled with higher than average NIMs. We believe the bank will be able to generate higher than average RoEs of 23-24%. We expect the company to deliver a 20% return over six months. At the target price of Rs 121, the stock is trading at 1.3x and 1.1x its FY09E and FY10E ABV.

About The Stock

The entire banking pack is volatile and may under perform in the coming days, its better to stay away from bank stocks.

MULTI BAGGER STOCK GROUP

Some of my group's multi bagger picks during the rally were NMDC , MMTC , STC , Larsen ,Jindal Steel & Power , Unitech , BF Utilities , Jai Corporation , Walchand Nagar Industries, RNRL , Reliance Infra (Reliance Energy) etc.

I had been long associated with a corporate engaged in financial services , where with the assistance of specialized tools along with my special analysis as per some historical accepted theories of stock market like W. D. GANN's Theory , Elliot Wave Theory and others are used with reliable insider information of so called " operators" who play a major role to make a stock ,a Multi Bagger ,I do make my gem picks in this market.

I had been running my group , where the associated people get the reliable and most beneficial to get the unexpected return as seen in the above mentioned tips. Say for example the stock called MMTC had jumped from 2000 level to 56000 per share of historical price where the capital appreciated by 28 times in very short period with 2700% return on capital employed. Likewise in RNRL we started accumulating at RS 25 level from where we saw it moving at 250 level giving 10 times with 900% return.

These sort of return is helpful as ,

1. Handsome gain will make a jack to our capital.

2. Limited stocks trade , as daily trade could be avoided , which is more risky.

3. Long term capital gain , so no tax liability.

4. Whole income in white, which could be further deposited into fixed deposit to get assured monthly income later.

5. Strong income tax file without paying any taxes.

Our role here could be summarized as :

1. Giving tips to all registered member at proper time , when the stock is just about to take off, neither too early not too late.

2. Make sure investor do not gt stuck into it.

3. Recommend to exit when the operator is about to leave it.which is the most important work or else the whole accumulated and deemed profit will be washed away along with part of investment and will remain stuck for long - long period.


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My View On Indian Overseas Bank