Gateway Distriparks: Wild Movements

Have a look at some numbers: Gateway Distriparks touched a high of Rs. 135.95 on the BSE yesterday, and today it came down with a great fall to a low of Rs. 110.55. The stock closed down 7% today, with low volumes as compared to yesterday(212002 vs 638182 on the BSE). So what exactly was behind this movement? Along from our "smart money" hypothesis, there was speculation that aided, or rather profited the smarter money. What speculation?

There were reports that the company was looking to sell 25% stake in its subsidiary Gateway Rail Freight, in which it owns 95%. The company later clarified that nothing substantial has yet been formalized, although it did not deny the possibility. Now what propelled the sentiment was a view that the divestment would be used for GDL's expansion plans, ie setting up more container depots. The rail container business is yet to break even, and the company sees great potential.

The clarification:

With reference to news item appearing in leading web portal titled "Gateway Distriparks to sell up to 25% in subsidiary Gateway Rail Freight; to raise Rs 300 cr via stake sale in PE firm", Gateway Distriparks Ltd has clarified to BSE as under :

"To fund the growth / expansion plans of our group, we engage in discussions with potential investors from time to time. This is an on-going exercise and we have so far not concluded any arrangement with any investor.

Accordingly, we wish to state that the news report is speculative in nature and not founded on any concrete developments / public statements made by the Company."

A similar movement in GDL was seen a few months earlier when Allcargo Global had bought Temasek's block, only to later book profit on a considerable fraction of the block. Consequently, a lot of shares floated freely in the market- which, as you would guess, provided resistance to the stock's price. Now the stock has moved up in the last few weeks, in sync with our forecast from the levels of Rs. 88-90 to Rs. 100-105, breaking that level and quickly moving on to Rs. 110-120, and then the blitzkrieg.

Now what? Would one ask. One would have to observe thoroughly the daily movements as well as the delivery positions to come to a concrete solution. Although, as we had suggested earlier, we suggest again, this one is a good long term investment opportunity that should not be missed.