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Raja Simhan T.E.

CHENNAI, May 12

THE Sify ADR (American Depository Receipt) on the Nasdaq is again in the limelight.

As on May 9, the stock's last sale was $7.70, volume 139,075 and market capitalisation over $1,000 million.

Such a performance has now brought back interest among some of the top US-based research firms to analyse and rate the Sify stock.

This is happening after a gap of about two years, even as the stock went through a roller-coaster ride on the Nasdaq following the dotcom bubble burst, sources said.

Information available on the Nasdaq Web site says that of the nine research analyst firms, one gave Sify above 55 per cent score, two gave above 40 per cent, two 29 per cent and another two 25 per cent.

The analysis of Mr James P. O'Shaughnessy for the Growth/Value Investor said, "The first requirement of the Cornerstone Growth Strategy was that Sify has a market capitalisation of at least $150 million. This will screen out the companies that are too liquid for most investors, but still include a small growth company. Sify with a market capitalisation of $1,010 million, pass the criterion."

The assessments and analysis were based on May 9, with the stock's closing price of $7.70 per ADR.

In the report card of Validea for Validea Technology, Sify passed five criteria including annual earnings growth, current price level, four-month S&P relative strength line, insider ownership and institutional ownership.

However, the company failed in strong revenue growth and relative strength.

Validea Technology said, "Most Internet companies have little if any earnings; looking at revenue growth is a better way to gauge how successful the company is performing in the fiercely competitive Internet environment. Investors should look for revenue growth above 20 per cent, with anything over 50 per cent being exceptional. Sify's revenue growth rate of 17.50 per cent fails the test."

Incidentally, Sify's stock price of $7.7 was close to the 52-week high of $8.1, which was a positive sign, the research firm added.

On insider ownership, it said, "Companies with the best practices have strong insider ownership, which we define as 15 per cent or more. When there is a strong ownership, management is more likely to act in the best interest of the company as their interests are right in line with that of the shareholders."

Insiders own 71.03 per cent of Sify's stock, and management's representation was large enough to pass the Insider Ownership test, the firm said.

The Motley Fool analysis for the Small Cap Growth Investors gave Sify a 41 per cent score, with Sify passing in the firm's seven criteria including insider holdings, cash and cash equivalents, inventory to sales and sales.

However, Sify failed in nine sectors including profit margin, relative strength and R&D as a percentage of sales.

For the Contrarian Investor by Mr David Dreman, Sify got 43 per cent, passing four areas including market capitalisation but failing in nine areas including return on equity (RoE).

"The company should have a high RoE, as this helps to ensure that there are no structural flaws in the company. This methodology feels that the RoE should be greater than the top one third of RoE from among the top 1,500 largest cap stocks, which is 9.86 per cent, and would consider anything over 27 per cent to be staggering. The RoE for Sify of -50.62 per cent is not high enough to pass this criterion."

A Sify official said that the return of such large research firms and analysts shows that Internet stock on the Nasdaq was on a strong comeback.

Further, any stock above $5 attracts large research firms to that counter, providing tips to the investors, the official added.

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