A strong performance by the Great Eastern Shipping stock lead to hopes that the company's performance would show a significant improvement in the current year. A couple of leading Indian and foreign broking houses had reportedly been buying the stock taking the price to a recent high of Rs 49.

But though the company's growth in revenues may be flat considering that the bulk freight rates have not really improved much from last year, its growth in profits is dependent on the position of the rupee vis-a-vis the dollar.

For the last few months the rupee has remained at Rs 35.70 with very strong indications of remaining there. This could work against Great Eastern's profit growth in the current year, just as it aided company's earnings in the previous year when earnings from freight was lower. Despite these facts the recent rise in the stock value was not due to any major development in the company, but rather due to the fact that it was in a no delivery phase, thus providing broking firms an opportunity to play in the stock.

Another bit of information that offered the stock as a good bet to punters were rumours surrounding a potential takeover by offshore investors. And thanks to this the stock began to appreciate sometime in early June, rising from a low of Rs 30 to a high of Rs 52 a few days ago. In November last year similar rumours surfaced regarding the takeover of the company by the Jatia group. But nought came from it, except that the stock reacted in a similar manner displaying almost the same pattern. It went from a low of Rs 24 in early November to a high of Rs 38 a couple of months later. Strangely enough these rumours have the habit of surfacing just at the most opportune moment i.e. a book closure period; making it very easy to play the stock.

Rising volumes, rising price

Aptech is in the limelight again. The stock price has gained 20 per cent in five trading sessions, moving from Rs 350 to the current level of Rs 425. If one were to take a look at the half yearly results announced recently, the stock deserves the warm welcome it received from the stock market.The company has recorded an impressive performance. For the six months period ended June 30, 1997 while income from operations increased 26 per cent to Rs 85.07 crore, profit at the net level jumped by 32 per cent to Rs 9.11 crore from Rs 6.92 crore in the corresponding of the previous year.

This profit was achieved despite a sharp increase in depreciation and tax provisions. While depreciation risen by 233 per cent to Rs 2.27 crore, tax provision was up by 320 per cent to Rs 2.10 crore. On the latest earnings, the earnings per share (annualised) stands at Rs 32.65.

Market observers feel that the recent jump in the stock price is probably due to a re-rating in its dicounting; which is much lower than the other listed companies from this industry. NIIT, which has a similar business profile, is traded at a PE multiple of 23, whereas Aptech's current discouting is 13. The thinking is that the discounting for this stock should go up.

Whether or not the stock does get a better discounting in future, for shareholders, one positive factor about the recent rally has been a smart surge in volumes. From a level of 1,500 shares when the stock was available at Rs 350 last week, the volumes has gone up to the current level of 8,500 shares -- a positive sign.

(With contributions from Deepak Singh Tanwar)

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.