"FAIR VALUE" OF "NETSOL" RS. 174

"FAIR VALUE" OF "NETSOL" RS. 174

current Price: Rs.75.39

The company’s recent breakthrough into the European market and newly elected government is likely to increasedemand for their products. Netsol has decided to acquire 100% stake in Netsol Tech Europe (NTE) by private equityplacement amounting to Rs1.0b (10.03m shares at Rs99.85 per share) and also plans to increase its Paid-up capital by88% to 150m shares. Based on these investments coupled with appreciation of US dollar will make Netsol moreattractive for international companies looking to outsource in this area. In Jul07 US$ stood at PKR60.4 which rose toPKR67.78 in Jun’08, depicting an increase of 12.2%. Going forward, the net sales revenue of the company is expected toincrease at a 4 year CAGR of 24.3%. Keeping in mind the forecasted potential in revenue growthand appreciating dollar, we recommend investors to take long term exposure in the stock. The stock offers 56.7% TSRfrom our target price of Rs174 per share.