Buy IL&FS Investment Managers - Q4 FY 2011 Update - Motilal Oswal

IL&FS Investment Managers Limited ( ILFS IN; Mkt Cap USD 160 mn, CMP Rs37.4, BUY)

Quarterly total income grew by 20%/9.5% on yoy/qoq basis and net profit grew by -16%/-8% on yoy/qoq basis whereas on yearly basis FY11 total income/net profit grew by 11%/6.5%.

During FY11 company concluded acquisition of saffron asset advisors (w.e.f August 2010) due to which the company charged extra amortization of Rs 8.5 cr on identifiable intangible assets, which will continue in future too. It also added added debt worth $ 20 mn for this acquisition, which will be repaid over three years.

The company plans to raise cumulative $ 500 mn as earning AUM during FY12 and also plans to return full capital of Leverage India Fund during FY12 and therefore some carry is expected during the later half of the year.

At the time of our report IIML was trading at 7% of its AUM for FY12E as against historical median of 7% MCAP/AUM. The correction has caused the MCAP/AUM to dip to 5.5%. Moreover, it offers a dividend yield of 4% at CMP.

We continue to remain positive on the stock with its unique business in the listed space. Investors with horizon of more than 2 years should remain invested as returns on the stock is highly correlated to fund flows in India and performance of infra and realty sectors, which are expected to do well in India over the next 2-3 years. Therefore, we are maintaining our BUY rating with an 18 month price target of Rs 60.

Source : Equity Bulls

Keywords