The Hindu Business Line : Allcargo Global jumps 22% on third quarter numbers

After its Q3 results, three brokerages – Enam, ICICI and Edelweiss – had come out with buy calls as the numbers were better than expected. However, the recovery so far is mostly reflected in price and not in volumes.

The stock on Friday moved up 5 per cent to Rs 515.35. But it recorded a volume of 3,990 shares on the BSE.

Enam said that a looming slowdown might impact the merchant trade related freight forwarding business of Allcargo. “However, AGL is largely present in the less-than-container-load segment, which is relatively insulated against full-cargo-load segment,” it said.

Exposure

Its marginal exposure (only three per cent of ECU Line revenue) to the US and larger exposure to EU, Latin Amarica and Asia make the company less vulnerable, analysts mentioned. A possible shift in cargo movement mode from air to ship is also seen as a positive going forward if downturn continues.

Edelweiss said that as the company showed a robust performance in the first three quarters, it has revised its EPS numbers upwards by 13.94 per cent and 27.03 per cent for FY09 and FY10, respectively.

Debentures

Allcargo, to part finance its capital expenditure, had issued 10,81,081 fully and compulsorily convertible debentures (FCCDs) at 6 per cent (net of tax) coupon to raise Rs 100 crore and 15,13,514 warrants to Blackstone. FCCDs are convertible at 1:1 ratio at Rs 934 a FCCD. Warrants can be converted into equal number of equity shares of Rs 10 each, subject to an EBIDTA clause, which says that if the group EBIDTA is within Rs 190 crore during this calendar year, the conversion price would be Rs 934 a warrant. If the EBIDTA is between Rs 190 and Rs 200 crore, the conversion price would be Rs 1,100 each.

According to analysts, FCCDs are not going to put additional pressure on the balance sheet as the company is protected against redemption and provisioning.

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