AccleyA kAle solutions ltd is A good stock option

Accelya Kale Solutions Ltd is providing solutions to the airline and travel industry and is part of the Europe based Accelya Group controlling 74.7% stake in the company. The company is primarily dependent on traditional carriers for major portion of its revenue but has recently come out with a software solution specially customised for low cost carriers. Accelya Solutions has recently picked up new clients like the Bangkok Airways, GoAir India, Garuda Indonesia, Flybe — Europe’s largest regional airline and Hawaiian Airlines for implementation of its new software. Considering the healthy deal pipeline and spurt in demand with the launch of its new flagship software version Revera, the company is growing rapidly. With the company now focusing on annuity revenue model, the profit margins have also increased tremendously. Since there is no fresh capital requirement at present, the company remains totally debt free. Thereby, it has been increasing dividend payouts year after year and returning cash back to the shareholders. Considering the company’s leadership globally and attractive valuation, it should trade at a premium to other mid-tier Indian IT companies. Taking all of the above into account, expected EPS for FY15 should be in the region of 58 and at the current market price of Rs 900, the stock looks under priced compared to its peers. The stock price structure of Accelya has been consolidating at the current levels for some time and has eventually broken its historical life-highs last month and rallying towards higher levels. It merits a strong buy with a potential price target of Rs 1,350 in six months time frame. Amidst broad based buying on the Indian stock exchanges, the Sensex and Nifty concluded last week above the 28,650 and 8,550 levels respectively with gains of around 1%. The banking stocks rallied ahead of the Reserve Bank of India’s policy review on 2 December in anticipation of a surprise rate cut by India’s apex bank. For investors wanting to enter the markets at these index levels, the wait has actually been longer. While retail investors are still wary of putting money into the markets, some have started investing in equity mutual funds through the systematic investment route. On the other hand, high net worth investors are committing a larger percentage of their surplus funds into arbitrage, balance and equity funds than their previous favourite — the fixed maturity plans. It is only the foreign institutional investor who has gone overboard and pumped billion of dollars into our debt and equity markets. They consider the Indian stock market to be one of the best places globally to invest in. While market men do not expect any major correction, any profit booking can be used as an opportunity for bull operators and fund managers to accumulate their favourite stocks at lower levels. Our advice to investors would be to hold blue chip stocks in their portfolio for super profits over the next few months. Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.