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Zylog Systems - Multibagger

Monday, December 10, 2007

Zylog Systems - By S.P.Tulsian, Investment Advisor
Reco Price Rs. 380.10 CMP: Rs.380.10 (Gain 0.00%)

Zylog Systems is a global services provider with 100% EoU status with focus on Application Development and Integration (Web Application, Web Services, Application Integration, Business Intelligence, Data Warehousing and Mobile & Wireless Application) and Enterprise Infrastructure Management.

Zylog Systems

A growing IT company

Zylog Systems is a global services provider with 100% EoU status with focus on Application Development and Integration (Web Application, Web Services, Application Integration, Business Intelligence, Data Warehousing and Mobile & Wireless Application) and Enterprise Infrastructure Management.

The company went public on 20th July 2007, with an IPO of 36 lakh equity shares of Rs 10 each, issued at Rs 350 per share and the IPO evoked huge response and the company has been able to mobilize Rs 126 crores. The object of the issue was to set up 2 Offshore Development Centres (ODCs) with capacity of 800 and 1,250 seater near Chennai. The company presently has 250 seats software development facilities, operating from 15,000 sq. ft. rented space. The total area of both the new ODCs would be 2,05,000 sq. ft., of which, one would be ready in first quarter of 08 and another one by last quarter of 08.

For FY 07, the total income of the company was at Rs 408.12 crores with PBT of Rs 56.63 crores and PAT of Rs 54.86 crores on equity of Rs 12.85 crores. Post IPO, the paid up equity of the company is now placed at Rs 16.45 crores of which promoters are holding 33.61% with MF, Banks and FII holding 16.96% and 49.43% is held amongst the public with the 44,500 shareholders. IPO was for about 22% of expanded equity and hence 78% of the pre-IPO equity of the company have atleast one year lock in, which is upto 15-08-2008.

For six months ending 30th September 07, total income of the company was at Rs 286.48 crores with EBITDA of Rs 53.70 crores, PBT of Rs 45.95 crores and PAT of Rs 40.44 crores, resulting in an EPS of Rs 24.59 on equity of Rs 16.45 crores. For FY 08, the topline of the company is likely to be Rs 600 crores with PAT of Rs 85 crores, giving an EPS of close to Rs 52.

The present seating capacity in Chennai, would rise form 250 seats to about 1,050 seats by March 08 and to 2,300 seats by December 08. This would sharply improve the topline and bottomline of the company in FY 09 and FY 10.

The share is now ruling at Rs 350 at its issue price. This discounts FY 08 earning by about 7 times, while may have discounting of just 5 times for FY 09 earnings. It seems that the fundamentals of the company have not been rightly understood by the market and share lost as an I.T. Stock, which now a non-preferred sector.

Buying the stock at Rs 350 with 12 months view can give about 40% return to medium – long term investors. A safe bet.

Disclaimer: The writer may be deemed to be concerned or interested in the recommendation as he and his clients are invested in this scrip.

Posted by FR at 9:15 AM  

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Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.