What is NET ASSET VALUE ?
The Term Net Asset Value (NAV) is used by investment companies to measure net assets. It is calculated by subtracting liabilities from the value of a fund's securities and other items of value and dividing this by the number of outstanding shares. Net asset value is popularly used in newspaper mutual fund tables to designate the price per share for the fund.
The value of a collective investment fund based on the market price of securities held in its portfolio. Units in open ended funds are valued using this measure. Closed ended investment trusts have a net asset value but have a separate market value. NAV per share is calculated by dividing this figure by the number of ordinary shares. Investments trusts can trade at net asset value or their price can be at a premium or discount to NAV.
Value or purchase price of a share of stock in a mutual fund. NAV is calculated each day by taking the closing market value of all securities owned plus all other assets such as cash, subtracting all liabilities, then dividing the result (total net assets) by the total number of shares outstanding.
Calculating NAVs - Calculating mutual fund net asset values is easy. Simply take the current market value of the fund's net assets (securities held by the fund minus any liabilities) and divide by the number of shares outstanding. So if a fund had net assets of Rs.90 lakhs and there are one lakh shares of the fund, then the price per share (or NAV) is Rs.90.00.
Wednesday, January 30, 2008
What are dividends?
If you've ever owned stocks or held certain other types of investments, you might already be familiar with the concept of dividends.
Even those people who have made investments that paid dividends may still be a little confused as to exactly what dividends are, however… after all, just because a person has received a dividend payment doesn't mean that they fully appreciate where the payment is coming from and what its purpose is.
If you have ever found yourself wondering exactly what dividends are and why they're issued, then the information below might just be what you've been looking for.
Defining the Dividend
Dividends are payments made by companies to their stockholders in order to share a portion of the profits from a particular quarter or year. The amount that any particular stockholder receives is dependent upon how many shares of stock they own and how much the total amount being divided up among the stockholders amounts to. This means that after a particularly profitable quarter a company might set aside a lump sum to be divided up amongst all of their stockholders, though each individual share might be worth only a very small amount potentially fractions of a cent, depending upon the total number of shares issued and the total amount being divided. Individuals who own large amounts of stock receive much more from the dividends than those who own only a little, but the total per-share amount is usually the same.
When Dividends Are Paid
How often dividends are paid can vary from one company to the next, but in general they are paid whenever the company reports a profit. Since most companies are required to report their profits or losses quarterly, this means that most of them have the potential to pay dividends up to four times each year. Some companies pay dividends more often than this, however, and others may pay only once per year. The more time there is between dividend payments can indicate financial and profit problems within a company, but if the company simply chooses to pay all of their dividends at once it may also lead to higher per-share payments on those dividends.
Why Dividends Are Paid
Dividends are paid by companies as a method of sharing their profitable times with the stockholders that have faith in the company, as well as a way of luring other investors into purchasing stock in the company that is paying the dividends. The more a particular company pays in dividend payments, the more likely it is to sell additional common stock… after all, if the company is well-known for high dividend payments then more people will want to get in on the action. This can actually lead to increases in stock price and additional profit for the company which can result in even more dividend payments.
Getting the Most Out of Your Dividends
In order to get the most out of the dividends that you receive on your investments, it is generally recommended that you reinvest the dividends into the companies that pay them. While this may seem as though you're simply giving them their money back, you're receiving additional shares of the company's stock in exchange for the dividend. This will increase future dividend payments (since they're based upon how much stock that you own), and can set you up to make a lot more money than the actual dividend payment was for since increases in stock prices will affect the newly-purchased stock as well
Even those people who have made investments that paid dividends may still be a little confused as to exactly what dividends are, however… after all, just because a person has received a dividend payment doesn't mean that they fully appreciate where the payment is coming from and what its purpose is.
If you have ever found yourself wondering exactly what dividends are and why they're issued, then the information below might just be what you've been looking for.
Defining the Dividend
Dividends are payments made by companies to their stockholders in order to share a portion of the profits from a particular quarter or year. The amount that any particular stockholder receives is dependent upon how many shares of stock they own and how much the total amount being divided up among the stockholders amounts to. This means that after a particularly profitable quarter a company might set aside a lump sum to be divided up amongst all of their stockholders, though each individual share might be worth only a very small amount potentially fractions of a cent, depending upon the total number of shares issued and the total amount being divided. Individuals who own large amounts of stock receive much more from the dividends than those who own only a little, but the total per-share amount is usually the same.
When Dividends Are Paid
How often dividends are paid can vary from one company to the next, but in general they are paid whenever the company reports a profit. Since most companies are required to report their profits or losses quarterly, this means that most of them have the potential to pay dividends up to four times each year. Some companies pay dividends more often than this, however, and others may pay only once per year. The more time there is between dividend payments can indicate financial and profit problems within a company, but if the company simply chooses to pay all of their dividends at once it may also lead to higher per-share payments on those dividends.
Why Dividends Are Paid
Dividends are paid by companies as a method of sharing their profitable times with the stockholders that have faith in the company, as well as a way of luring other investors into purchasing stock in the company that is paying the dividends. The more a particular company pays in dividend payments, the more likely it is to sell additional common stock… after all, if the company is well-known for high dividend payments then more people will want to get in on the action. This can actually lead to increases in stock price and additional profit for the company which can result in even more dividend payments.
Getting the Most Out of Your Dividends
In order to get the most out of the dividends that you receive on your investments, it is generally recommended that you reinvest the dividends into the companies that pay them. While this may seem as though you're simply giving them their money back, you're receiving additional shares of the company's stock in exchange for the dividend. This will increase future dividend payments (since they're based upon how much stock that you own), and can set you up to make a lot more money than the actual dividend payment was for since increases in stock prices will affect the newly-purchased stock as well
Premium Issure?
Generally, most shares have a face value (i.e. the value as in a balance sheet) of Rs.10 though not always offered to the public at this price. Companies can offer a share with a face value of Rs.10 to the public at a higher price.
The difference between the offer price and the face value is called the premium. As per the SEBI guidelines, new companies can offer shares to the public at a premium provided :
1.The promoter company has a 3 years consistent record of profitable working.
2.The promoter takes up at least 50 per cent of the shares in the issue.
3.All parties applying to the issue should be offered the same instrument at the same terms, especially regarding the premium.
4.The propectus should provide justification for the propose premium. On the other hand, exisiting companies can make a premium issue without the above restrictions.
A company’s aim is to raise money and simultaneously serve the equity capital. As far as accounting is concerned, premium is credited to reserves and surplus and it does not increase the equity. Therefore, a company which raises Rs.100 crores by way of shares at say Rs.90 premium per share increases its equity by only Rs.10 crores, which is easier to service with an investment of Rs.100 crores.
Thus the companies seek to make premium issues. As well shall see later, a premium issue can increase the book value without decreasing the EPS. In a buoyant stock market when good shares trade at very high prices, companies realize that it’s easy to command a high premium.
The difference between the offer price and the face value is called the premium. As per the SEBI guidelines, new companies can offer shares to the public at a premium provided :
1.The promoter company has a 3 years consistent record of profitable working.
2.The promoter takes up at least 50 per cent of the shares in the issue.
3.All parties applying to the issue should be offered the same instrument at the same terms, especially regarding the premium.
4.The propectus should provide justification for the propose premium. On the other hand, exisiting companies can make a premium issue without the above restrictions.
A company’s aim is to raise money and simultaneously serve the equity capital. As far as accounting is concerned, premium is credited to reserves and surplus and it does not increase the equity. Therefore, a company which raises Rs.100 crores by way of shares at say Rs.90 premium per share increases its equity by only Rs.10 crores, which is easier to service with an investment of Rs.100 crores.
Thus the companies seek to make premium issues. As well shall see later, a premium issue can increase the book value without decreasing the EPS. In a buoyant stock market when good shares trade at very high prices, companies realize that it’s easy to command a high premium.
Gujrat NRE Coke Ltd
Gujarat NRE Coke (GNCL) the largest non-captive metallurgical coke producer of the country with plants located in Gujarat and Karnataka also owns three coal mines in Australia. The company has coke manufacturing capacity of 1 million tonne which it plans to increase to 1.33 million tonne in a phased manner from April 2008. The company also has a steel unit of 0.3 million tonne p.a. capacity in Gujarat. Improving coke realizations on the back of strong demand from the domestic steel and cement industries as well as favorable global dynamics are likely to drive future growth in the company. Moreover, captive power generation capabilities and ownership of high quality coking coal mines in Australia are likely to improve the margins as well as ensure supply of quality raw material over the long term. Presently, Gujarat NRE Coke trades at a FY09E PE of 14.9, Market cap to sales ratio of 5.0 and Price to Book ratio of 3.6. We expect improving realizations and sustained availability of power and quality raw material at cheaper prices should drive growth for the company in the future.
Industry
Global steel industry has been in an uptrend with steel production growing at a CAGR of 6.54% during the six year period ending 2006. Iron and steel production is further expected to grow at 6-7% p.a. for the next 5-7 years on the back of robust demand from the rapidly growing BRIC (Brazil, Russia, India and China) countries. World crude steel production is on track to grow by 8% in 2007 having already grown at 8.1% yoy in the ten month period Jan-Oct 2007. Though declining consumption in North America and moderating trends in Europe have led to deceleration in global demand growth in 2007, robust consumption in rapidly expanding emerging economies, especially in Asia, is seen counterbalancing the loss in demand. Indian consumption, too, is increasing at a double-digit pace leading to rapid capacity expansion. From being the 7th largest producer of steel in the world in 2006, India has become the 5th largest in 2007 (till Oct 07). Global steel production is dependent on coal – around 68% of total global steel production relies directly on coal inputs as about 0.6 tonnes of coke are required to produce 1 tonne of steel. Expected growth in steel production would ensure a sustained growth and demand for coke in the near future.
Domestic coke scenario: Rapid expansion of steel manufacturing capacity in India is expected to put pressure on coking coal reserves. India is already a net importer of coking coal as the one available in India is high in ash content (18-22%) as against the coking coal found in Australia & New Zealand (ash content – 10-12%). Indian coke producers have thus embarked on a coal mine buying spree, buying mines in Australia, the largest producer of coking coal in the world in order to ensure regular supply and to protect themselves from rapid price fluctuations. India is expected to emerge as the second largest coke producer, next only to China over the next decade as coke manufacturing units get increasingly relocated to Asia amid shut down of obsolete capacities in OECD countries due to environmental constraints and high replacement costs. Coke is manufactured by a number of producers in India, primarily for captive consumption. As a result, the Indian coke industry is dominated by integrated steel plants that possess captive coking facilities.
India's growing demand for coking coal is presently addressed through imports as there is a shortage of coke capacity in India. In the long term, India is expected to remain dependent on imports. It is estimated that the total coke availability in India will be 21 million tonnes in 2007-08. The domestic demand for coke in the same period is expected at 26 million tonnes. The national shortage of coke is estimated at 5 million tonnes for the year 2007-08. The demand for steel in the Indian domestic market is likely to be buoyant as a result of sustained growth of major steel-consuming sectors like infrastructure and automobile and overall industrial growth. Also important is the fact that the domestic per capita steel consumption currently stands at 39 kg, whereas the global average is 150 kg and that of developed countries is 400-650 kg. Even if a conservative estimate of reaching the world average by 2020 is taken, India's demand must burgeon to 194 million tonnes of steel at a CAGR of 10% over the same period on a higher production base. The strategic decision of Gujarat NRE coke to focus on quality business has resulted in Company becoming a significant player in the industry globally, inspite of dominance of China in the global coke market. China dominates the global coke market due to the fact that the country, besides being the largest steel producer and consumer, is also the largest producer, consumer and an exporter of coke.
Company
Gujarat NRE Coke, engaged in the business of coal processing, manufactures low-ash metallurgical coke (LAMC). LAMC, mainly used in soda-ash plants, cast iron and brass foundries and the blast furnaces of steel plants, is largely imported into India. Gujarat NRE coke is the first company to acquire coking coal mines in Australia. The total reserves of the two mines acquired is 374mn tons.
The company has also made strategic investment in Pike River Coal Company Ltd. in New Zealand from where it will get low-ash premium quality coking coal. These acquisitions have added great value to the company and also insulates it from adverse price movements in both coke and coal markets. Adding further to the improved coke realization, input prices have also come down paving way for significantly better margins in coming times. Internationally the coking coal prices have come down from $115/ton to $90/ton. Company has seen aggressive growth in the last few years which was derived through a robust five-year expansion programme which more than five-folded the company's coke making capacity from 1.30 lakh MTPA in 2001-02 to 6.82 lakh MTPA in 2006-07. With the additional capacity of 3.24 lakh MTPA created at Dharwad, under its subsidiary, Bharat NRE Coke Limited (BNCL), the Company now controls around 1 million tonne of coke capacity. With the Indian economy now expected to report a sustainable annual growth beyond 8%, the demand for coke from core industries - steel and cement - is expected to increase sharply, creating a wide foreseeable gap between supply and demand. Gujarat NRE Coke is also in the process of commissioning two captive 15-MW power plants for generating power from waste heat, emanating from its coke plants situated in Bhachau and Dharwad (BNCL)
Key Investment Arguments
Gujarat NRE coke has a market cap of Rs. 3393.4cr, average daily volume of 1382200 shares for the last six months and net sales of Rs. 672.77cr during the trailing twelve months ended Dec 31, 2007.
It’s EBITDA and Net profit margins were at 19.9% and 10.8% resp. in FY07 and at 35.6% and 21.3% resp. in the nine months ended Dec 31, 2007.
The company has achieved a 5½-year CAGR of 49.4% in revenues, 46.4% in EBITDA and 60.2% in Net Profits.
Gujarat NRE coke trades at a PE multiple of 21.7 based on trailing twelve month (TTM) earnings, Price to Book ratio of 3.6 on FY07 book-value and Price to Sales ratio of 5.0 based on TTM net sales.
Debt-equity ratio of the company was at 1.2 in FY07. However, its interest coverage ratio stands at a comfortable 3.8 in FY07.
Expansion plan: GNCL plans to increase its overall coke manufacturing capacity to 1.25 mtpa by Q1FY09 from the current capacity of 1 mtpa. This capacity expansion is planned at its Dharwad plant. It also plans to increase its coking coal mining capacity from current 1 mtpa to 4 mtpa by 2011-12. The company is also setting up 45MW waste heat recovery plant which will help reduce cost. The total capex planned for this expansion is about $40 million.
Improved Coke Realizations: Coke prices have moved from $160/ton in Q2FY07 to $270/ton in Q2FY08. Going forward the company is expecting coke realizations to range from $300 to $340 per tonne for remaining two quarters.
Proposed merger of two Australian subsidiaries: Gujarat NRE Coke owns three coking coal mines in Australia through its listed subsidiaries India NRE Mineral and Gujarat NRE Resources Pty. The three mines: NRE No.1 colliery, NRE Avondale colliery and Elouera mines have a combined reserve of 456 million tones. The company has recently proposed a merger of its two subsidiaries, which will substantially improve valuations. The company also has strategic investments in Ray Resources and Pluton Resources in Australia and Pike River Resources, New Zealand. This vast captive source also acts as a buffer against coking coal price volatilities which is mainly determined by Chinese demand and supply. Currently the captive coking coal cost for the company is $ 90-100 CIF whereas for other players it is around $ 120-130 CIF.
The increasing demand from India has been the main driver of the coke market in 2007. With new steel capacities announced the demand is going to increase more within the country. China initially was keeping the coke prices lower than the fair value but now Chinese players have preferred to keep the coke prices firm.
Key Concerns
The demand for coke is directly linked to the fortunes of the steel industry. Any slowdown in the steel industry can affect the fortunes of the company. However, the growth in steel-making capacities is expected to be the highest in Asia, particularly China and India. Besides, the Government of India expects India to emerge as the world's second largest steel producer by 2016 with a production volume of around 120 million tonnes. This will adequately cover the demand for coke over the foreseeable future. Though coke prices are determined by China, the largest coke producer in the world, the Company endeavours to maximize margins and profitability through a steadfast focus on minimizing the cost of production.
The principal raw material in the manufacture of coke is coking coal, whose availability is critical for sustaining production. Coking coal prices have moved up recently amid huge demand and limited supplies. To ensure its availability, the company possesses a prudent sourcing mix of captive mines as well as other suppliers. The Company intends to meet 100% of its coking coal demand from its captive mines by 2008-09.
An increase in shipping freight rates on the one hand and suboptimal utilization of bulks on the other could escalate costs. Gujarat NRE coke has entered into long term contracts for charter of vessels at very competitive rates to guard itself from this.
Latest Developments
Gujarat NRE Coke has completed the acquisition of Elouera mine from BHP Billiton, a part of the Illawarra Coal Business located in New South Wales, Australia. The acquisition was made by Gujarat NRE Resources NL (Gujarat), the Australian subsidiary of Gujarat NRE Coke. In view of a global surge in demand for coal, the acquisition is expected to benefit the company. Post-transfer, the mine would be re-christened NRE Wongawilli. Large reserves of coking coal exist in the combined Wongawilli and Avondale leases that would provide over 20 years of mine life. _ Gujarat NRE Resources intends to start mining from February 2008, with development work on the first of the three blocks commencing with immediate effect.
Conclusion
On the basis of research, we feel that this is a good stock to buy at the current market price of Rs. 109.7. If everything goes well, the price is likely to appreciate to Rs. 157.0, within 12 months, translating into a gain of about 47%.
Industry
Global steel industry has been in an uptrend with steel production growing at a CAGR of 6.54% during the six year period ending 2006. Iron and steel production is further expected to grow at 6-7% p.a. for the next 5-7 years on the back of robust demand from the rapidly growing BRIC (Brazil, Russia, India and China) countries. World crude steel production is on track to grow by 8% in 2007 having already grown at 8.1% yoy in the ten month period Jan-Oct 2007. Though declining consumption in North America and moderating trends in Europe have led to deceleration in global demand growth in 2007, robust consumption in rapidly expanding emerging economies, especially in Asia, is seen counterbalancing the loss in demand. Indian consumption, too, is increasing at a double-digit pace leading to rapid capacity expansion. From being the 7th largest producer of steel in the world in 2006, India has become the 5th largest in 2007 (till Oct 07). Global steel production is dependent on coal – around 68% of total global steel production relies directly on coal inputs as about 0.6 tonnes of coke are required to produce 1 tonne of steel. Expected growth in steel production would ensure a sustained growth and demand for coke in the near future.
Domestic coke scenario: Rapid expansion of steel manufacturing capacity in India is expected to put pressure on coking coal reserves. India is already a net importer of coking coal as the one available in India is high in ash content (18-22%) as against the coking coal found in Australia & New Zealand (ash content – 10-12%). Indian coke producers have thus embarked on a coal mine buying spree, buying mines in Australia, the largest producer of coking coal in the world in order to ensure regular supply and to protect themselves from rapid price fluctuations. India is expected to emerge as the second largest coke producer, next only to China over the next decade as coke manufacturing units get increasingly relocated to Asia amid shut down of obsolete capacities in OECD countries due to environmental constraints and high replacement costs. Coke is manufactured by a number of producers in India, primarily for captive consumption. As a result, the Indian coke industry is dominated by integrated steel plants that possess captive coking facilities.
India's growing demand for coking coal is presently addressed through imports as there is a shortage of coke capacity in India. In the long term, India is expected to remain dependent on imports. It is estimated that the total coke availability in India will be 21 million tonnes in 2007-08. The domestic demand for coke in the same period is expected at 26 million tonnes. The national shortage of coke is estimated at 5 million tonnes for the year 2007-08. The demand for steel in the Indian domestic market is likely to be buoyant as a result of sustained growth of major steel-consuming sectors like infrastructure and automobile and overall industrial growth. Also important is the fact that the domestic per capita steel consumption currently stands at 39 kg, whereas the global average is 150 kg and that of developed countries is 400-650 kg. Even if a conservative estimate of reaching the world average by 2020 is taken, India's demand must burgeon to 194 million tonnes of steel at a CAGR of 10% over the same period on a higher production base. The strategic decision of Gujarat NRE coke to focus on quality business has resulted in Company becoming a significant player in the industry globally, inspite of dominance of China in the global coke market. China dominates the global coke market due to the fact that the country, besides being the largest steel producer and consumer, is also the largest producer, consumer and an exporter of coke.
Company
Gujarat NRE Coke, engaged in the business of coal processing, manufactures low-ash metallurgical coke (LAMC). LAMC, mainly used in soda-ash plants, cast iron and brass foundries and the blast furnaces of steel plants, is largely imported into India. Gujarat NRE coke is the first company to acquire coking coal mines in Australia. The total reserves of the two mines acquired is 374mn tons.
The company has also made strategic investment in Pike River Coal Company Ltd. in New Zealand from where it will get low-ash premium quality coking coal. These acquisitions have added great value to the company and also insulates it from adverse price movements in both coke and coal markets. Adding further to the improved coke realization, input prices have also come down paving way for significantly better margins in coming times. Internationally the coking coal prices have come down from $115/ton to $90/ton. Company has seen aggressive growth in the last few years which was derived through a robust five-year expansion programme which more than five-folded the company's coke making capacity from 1.30 lakh MTPA in 2001-02 to 6.82 lakh MTPA in 2006-07. With the additional capacity of 3.24 lakh MTPA created at Dharwad, under its subsidiary, Bharat NRE Coke Limited (BNCL), the Company now controls around 1 million tonne of coke capacity. With the Indian economy now expected to report a sustainable annual growth beyond 8%, the demand for coke from core industries - steel and cement - is expected to increase sharply, creating a wide foreseeable gap between supply and demand. Gujarat NRE Coke is also in the process of commissioning two captive 15-MW power plants for generating power from waste heat, emanating from its coke plants situated in Bhachau and Dharwad (BNCL)
Key Investment Arguments
Gujarat NRE coke has a market cap of Rs. 3393.4cr, average daily volume of 1382200 shares for the last six months and net sales of Rs. 672.77cr during the trailing twelve months ended Dec 31, 2007.
It’s EBITDA and Net profit margins were at 19.9% and 10.8% resp. in FY07 and at 35.6% and 21.3% resp. in the nine months ended Dec 31, 2007.
The company has achieved a 5½-year CAGR of 49.4% in revenues, 46.4% in EBITDA and 60.2% in Net Profits.
Gujarat NRE coke trades at a PE multiple of 21.7 based on trailing twelve month (TTM) earnings, Price to Book ratio of 3.6 on FY07 book-value and Price to Sales ratio of 5.0 based on TTM net sales.
Debt-equity ratio of the company was at 1.2 in FY07. However, its interest coverage ratio stands at a comfortable 3.8 in FY07.
Expansion plan: GNCL plans to increase its overall coke manufacturing capacity to 1.25 mtpa by Q1FY09 from the current capacity of 1 mtpa. This capacity expansion is planned at its Dharwad plant. It also plans to increase its coking coal mining capacity from current 1 mtpa to 4 mtpa by 2011-12. The company is also setting up 45MW waste heat recovery plant which will help reduce cost. The total capex planned for this expansion is about $40 million.
Improved Coke Realizations: Coke prices have moved from $160/ton in Q2FY07 to $270/ton in Q2FY08. Going forward the company is expecting coke realizations to range from $300 to $340 per tonne for remaining two quarters.
Proposed merger of two Australian subsidiaries: Gujarat NRE Coke owns three coking coal mines in Australia through its listed subsidiaries India NRE Mineral and Gujarat NRE Resources Pty. The three mines: NRE No.1 colliery, NRE Avondale colliery and Elouera mines have a combined reserve of 456 million tones. The company has recently proposed a merger of its two subsidiaries, which will substantially improve valuations. The company also has strategic investments in Ray Resources and Pluton Resources in Australia and Pike River Resources, New Zealand. This vast captive source also acts as a buffer against coking coal price volatilities which is mainly determined by Chinese demand and supply. Currently the captive coking coal cost for the company is $ 90-100 CIF whereas for other players it is around $ 120-130 CIF.
The increasing demand from India has been the main driver of the coke market in 2007. With new steel capacities announced the demand is going to increase more within the country. China initially was keeping the coke prices lower than the fair value but now Chinese players have preferred to keep the coke prices firm.
Key Concerns
The demand for coke is directly linked to the fortunes of the steel industry. Any slowdown in the steel industry can affect the fortunes of the company. However, the growth in steel-making capacities is expected to be the highest in Asia, particularly China and India. Besides, the Government of India expects India to emerge as the world's second largest steel producer by 2016 with a production volume of around 120 million tonnes. This will adequately cover the demand for coke over the foreseeable future. Though coke prices are determined by China, the largest coke producer in the world, the Company endeavours to maximize margins and profitability through a steadfast focus on minimizing the cost of production.
The principal raw material in the manufacture of coke is coking coal, whose availability is critical for sustaining production. Coking coal prices have moved up recently amid huge demand and limited supplies. To ensure its availability, the company possesses a prudent sourcing mix of captive mines as well as other suppliers. The Company intends to meet 100% of its coking coal demand from its captive mines by 2008-09.
An increase in shipping freight rates on the one hand and suboptimal utilization of bulks on the other could escalate costs. Gujarat NRE coke has entered into long term contracts for charter of vessels at very competitive rates to guard itself from this.
Latest Developments
Gujarat NRE Coke has completed the acquisition of Elouera mine from BHP Billiton, a part of the Illawarra Coal Business located in New South Wales, Australia. The acquisition was made by Gujarat NRE Resources NL (Gujarat), the Australian subsidiary of Gujarat NRE Coke. In view of a global surge in demand for coal, the acquisition is expected to benefit the company. Post-transfer, the mine would be re-christened NRE Wongawilli. Large reserves of coking coal exist in the combined Wongawilli and Avondale leases that would provide over 20 years of mine life. _ Gujarat NRE Resources intends to start mining from February 2008, with development work on the first of the three blocks commencing with immediate effect.
Conclusion
On the basis of research, we feel that this is a good stock to buy at the current market price of Rs. 109.7. If everything goes well, the price is likely to appreciate to Rs. 157.0, within 12 months, translating into a gain of about 47%.
Primary & Secondary Market
There are two ways for investors to get shares from the primary and secondary markets. In primary markets, securities are bought by way of public issue directly from the company. In Secondary market share are traded between two investors.
PRIMARY MARKET
Market for new issues of securities, as distinguished from the Secondary Market, where previously issued securities are bought and sold.
A market is primary if the proceeds of sales go to the issuer of the securities sold.
This is part of the financial market where enterprises issue their new shares and bonds. It is characterised by being the only moment when the enterprise receives money in exchange for selling its financial assets.
SECONDARY MARKET
The market where securities are traded after they are initially offered in the primary market. Most trading is done in the secondary market.
To explain further, it is Trading in previously issued financial instruments. An organized market for used securities. Examples are the New York Stock Exchange (NYSE), Bombay Stock Exchange (BSE),National Stock Exchange NSE, bond markets, over-the-counter markets, residential mortgage loans, governmental guaranteed loans etc.
PRIMARY MARKET
Market for new issues of securities, as distinguished from the Secondary Market, where previously issued securities are bought and sold.
A market is primary if the proceeds of sales go to the issuer of the securities sold.
This is part of the financial market where enterprises issue their new shares and bonds. It is characterised by being the only moment when the enterprise receives money in exchange for selling its financial assets.
SECONDARY MARKET
The market where securities are traded after they are initially offered in the primary market. Most trading is done in the secondary market.
To explain further, it is Trading in previously issued financial instruments. An organized market for used securities. Examples are the New York Stock Exchange (NYSE), Bombay Stock Exchange (BSE),National Stock Exchange NSE, bond markets, over-the-counter markets, residential mortgage loans, governmental guaranteed loans etc.
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