Tata Tea Growing Up AGAIN.....KKP Investor

Tata Tea has a similar profile to Tata Steel that we talked about last week. How, you say? Well, the Tata's have figured out that grabbing market share throughout the globe is what is going to have a huge impact on each of it's kingdoms over the long term. If you are also a visionary thinker as the Tatas have been, then you will also agree that buying Eight O'Clock coffee, Tetley, JEMCO and Good Earth will be impactful to the top and bottom line of TataTea. Then you get to Glaceau where Tata's have been doing tremendous marketing, but in the end, it is going to help net margins. Now Coca Cola and Tata Tea are working together to decide what to do with the partial ownership that Tat has of the vitaminized water bottler, Glaceau.

Once upon a time, we used to be water drinkers with each of our meals - no exceptions. The Western world used to drink Coke or Pepsi and that was the 'in' thing to do. Today, on a global level it has become a real fad (fashion) to be walking around with bottled water instead of Bull or Coke or 7-Up or Mountain Dew or even Coffee for that matter, or for that matter to order bottled water at a restaurant, or be served only bottled water at your 'working-lunch-session' (you can tell I'm in constantly in sales meetings!). Chai is another big hit for non-Asian folks. Asians do not go for it at Starbucks since it costs $3.98 per medium cup of Tea (and Coffee is $2!). It is this fad that is Tata Tea does not want to give up with Glaceau, or for that matter by staying 'national only', and it is very likely that we will get some new developments from the Coca Cola <> Tata Tea discusions that are currently on-going.

Let's look at the chart of Tata Tea (not attached here).....It was riding high at around Rs 1000 before the big acquisition. It took a hit all the way down from Rs 1000 to Rs 550 (in the Feb/Mar low). All due to the weight of all the debt and dilution of acquisitions. The chart is forming a great pattern seen typically in a stock that is about to bottom, and start moving up (higher high and higher lows). Volume during updays has not been in a 'blow out' category, but it not 'in the groove' as yet. Early buyers should consider buying this fundamentally solid company with 1/3rd position at this time and additional positions later. Tata Tea seems to have a 'zinger' (catalyst) in place now. Basically, folks, Dalal Street memory is starting to fade about why it was a bad idea to hold Tata Tea (in last 3-6 months), we are getting renewed buying that will start breaking resistance levels (1st one already broken). All this time the Promoter, FI and MF holdings have been pretty well intact, but now this Global Brand is about to start showing it colors.

The stock currently trades at 9.9x FY08E earnings estimates. Its strong operating performance partly offset interest concerns in the upcoming nine months. It should continue to exhibit strong revenue growth over the next two years. Also, it will utilize the proceeds from the recent issue of shares to repay debt and, thereby, reduce the decretive impact of interest on earnings. The stock is well on it's way to a price target of Rs1000.

Good luck ya'al......

KKP_Investor


ps: I am a long long term holder of Tata Tea