Updates and Follow-ups

Shilpa Medicare: The company has got funding from Barring Equity PE Fund. The co will be allotting 5 Lac warrants to promoters and 20 Lac shares to the PE Fund @ Rs 350/share. This is a major positive for the co in the long run and fundamentals will improve majorly.

Harrison Malayalam: We had discussed about the company a few days back. The company has come out with poor nos and the stock is down to 118 levels. We feel the intrinsic value of this company is much higher than the current M Cap of the company. Few reasons to substantiate our view:

1. The company has 57,800 acres of plantations. The value today would be multiple times higher than the Current MCap of just 210 Cr. Have a look at the 10 yr financial data of the company. in 2005, the co had sold 674 Hectares of one of its Rubber Estate and had got 33 Cr as other income. Similarly in 2006. the co had sold about 916 Hectares of another rubber estate and got 63 Cr as other income.

2. The asset value of the estates must have almost doubled since 2005. As of 2009, the company has about 25,000 Hectares of plantations. So if one extrapolates the above valuation, the real value of their assets would be huge.

3. Over the years the company has been able to reduce the labour and mechanize it’s plantations.

4. As Rubber & Tea prices are rising, logically the co should be making money.

5. The record date for the demerger should be announced in next few days.

Manjushree Technopack: We had earlier recommended MT at about Rs 32 here. The company has posted excellent Q1 numbers. MT is a proxy play to the domestic consumption story and the co should continue doing well. We expect the company co close FY 2011 with 195-200 Cr turnover and close to 15 Cr of NP. The stock should continue to do well.

Gujarat Reclaim Rubber: The co has posted a very good Q1. We expect the company to come out with better nos going ahead and the stock should do very well. The company had been featured in the latest “Tyre Asia” magazine and the article is a must read.

Balkrishna Industries: BKT continues to do well. The company has posted a good Q1 when other tyres cos suffered heavily on the margins side. The reason for good performance is the niche area the company is operating in. As per Q1 con-call of the co, the updates are:

1. The outlook is very positive. The co is already operating at 100% capacity and needs more capacity to fulfill additional demand.

2. Co is witnessing very strong growth in US markets. Share of EU has come down to about 55% from 70% earlier.

3. Co is adding about 20% capacity in next 1 year. At a cost of about 150 Cr

4. Co is undertaking a major expansion of about 900 Cr over the next 2 years. Post this the capacity of the company will get more than doubled.

5. Co wants to be a $ 1 Bln turnover company by 2015.

We feel that BKT is an excellent long term opportunity.

Sunflag Iron: As expected, the co continues to do very well. The promoters have been buying every other day from the open market. The stock is available at less than 5 PE and 1.2 times BV.

  • Prashant_dby

    Guys – First – You are doing a great job.

    My concerns on the Harrison Malayalam are:

    1. They are starting to sell branded products now. This may take some years and burn some money also, before their brands are recognised. I am not sure if they will be successful. Until unless we see some success, I am not sure if company can be a winner for investor.
    2. Land value – past land sold are no indication of valuation for remaining land with them. The land sold in the past may be at good location and remaining lands are not. Have they done any valuation of land available with them?

    Gujarat Reclaimed Rubber Products (GRRPL) – Guess I missed the bus…but wait…. I short listed this stock last year, but could not complete the detailed analysis.

    Thanks
    Prashant

  • Ayush

    Thanks, Prashant. If you liked GRRPL, I think the CMP is still not that high. You can always buy some now and accumulate on declines.

    • Gopal

      Any comment on
      1) Bombay Swadeshi Stores – they have stores in prime locations &
      2) Remi Edelstahl Tubulars Limited

      • Ayush

        Hi Gopal,

        Bombay Swadeshi Stores has stores at very good location so though that is a positive but earning growth is not there.

        Haven’t tracked Remi Edelstahl.

        Regards,

  • Vikas Karunakaran

    Hi Ayush,

    Poly Medicure is rocky like anything………..looks like it might soon become Opto Circuits.
    Is there any news regarding such moves where it is making new highs.
    And thanks for providing such wonderful scrip with huge potential in it.

    Regards,
    Vikas

  • Ayush

    Thanks, Vikas.

    No particular updates on Poly Medicure. Sometime back the company had announced it’s plans to reach 300 Cr turnover in next 2-3 yrs. May be the investors are getting visibility on the future growth.

    Thanks & Regards,

  • MoE

    Hi Ayush,

    Recently, on moneycontrol.com somebody identified 4 undervalued stocks. Empee distilleries, Wockhardt, VLS finance and Medi-caps. Can you please provide your view on any of them.

    http://www.moneycontrol.com/news/marketoutlook/experttips4undervaluedstocksyoucannotignore_476053.html

    Of these two are well below book value
    VLS finance CMP Rs 23 & BV 48
    Medi-Caps CMP 84 & BV 184

    And Medi-caps also seems very interesting because of it huge holding of debt mutual funds. It seems like a BNK capital but instead of shares it holds debt mutual funds (the lower downside) and instead of 80 per cent discount it is more like 100 per cent discount.

    These days it is difficult to take an investment decision without wondering how Ayush would look at it. Therefore it would be a great help if you could give your views..

    appreciate all the good work

    Thanks,

  • Vikas Karunakaran

    Hi Ayush,

    What is your view on SE Investment?
    This stock is an unknown scrip in Microfinance sector, even before SKS microfinance got listed?

    Regards,
    Vikas

  • madhu

    sir,
    Do u see any prospect in TCI FINANCE to become a dark horse?

  • Ayush

    Hi Vikas,

    SE Investment has already seen a lot of run up. Don’t have any views at these levels.

    Regards,

  • Ayush

    Hi,

    Sorry I haven’t been tracking TCI Finance.

    Regards,

  • Ayush

    Hi,

    I have also got recommendation on Empee…will try to read on the same.

    Had taken a look into Medi-caps earlier. A stock can’t be available at 100% discount…if so the CMP will be 0 😉 It didn’t attract me at that time caus mutual funds can’t be huge wealth creators. Most probably, the mutual funds will give market returns.

    But still please provide me the market value of investments Medi caps would be having and it’s current M Cap.

    Don’t track Wockhardt & VLS.

    Regards,

  • MoE

    Hi

    Medi-caps Market cap (CMP 85) is at 26 crore and it has investments of 38 crore in debt mutual funds. And plus it has a real business too..

  • Ayush

    Compare it with BNK Capital…BNK has investments worth 150 Cr while M Cap is just 35 Cr.

    BNK also has a business and is expanding the same.

  • MoE

    Hi
    I might have exaggerated it a bit to get it to your attention..
    but if there is market crash or fall a debt mutual fund seems like a safe bet. Also the company has a stake in an SEZ…

    clipping form the interview from money control..
    A: Medi Caps is the second largest gelatin capsule manufacturer. The interesting aspect about this company is a very small company with Rs 25 crore of marketcap but it has Rs 38 crore worth of debt mutual funds in the company’s investment accounts. So you are getting the business of Rs 25 crore virtually free. Along with that you still have Rs 13 crore of mutual fund in addition.
    Apart from this the company has recently entered into a joint venture (JV for a Pithampur SEZ spread over nine acres for manufacturing gelatin capsules. We feel that the potential for this particular SEZ on this nine acre land for the company is somewhere around Rs 70 to 80 crore. Given it is a 50% partner it adds Rs 40 crore or Rs 45 crore to the balance sheet in terms of the market share.
    So, if I add Rs 45 crore plus Rs 38 crore of mutual fund, plus Rs 25 crore of actual value for the business—it roughly works out to be Rs 100-102 crore. Given it is a small company and it should trade at some discount we feel there is still tremendous juice left into the stock.
    Q: So what target price would you play for here?
    A: We are looking at Rs 128, which roughly translates into 40% discount to its NAV from one year perspective. This stock is definitely undervalued from that perspective because you are getting the core business absolutely free if one goes and sells the mutual fund. There is no debt into the balance sheet of the company.

    • Ayush

      What would be their cost of investment in the SEZ ( as per annual report)? I don’t think we should value the SEZ part at more than that…caus these are long term projects and will take several years to materialize. Morever its not their core business.

      Regards,

  • madhu

    WILL YOU PLEASE LOOK INTO THE COMPANY ‘TCI Finance ‘ afresh only to guide us FOR taking investment decision though as per you, you do not track the same.Someone told me it will be a dark horse in future.
    Thanks in advance.

    • Ayush

      Hi Madhu,

      Like Pratyush mentioned, we try to go for simpler things which are easy to understand and available at attractive valuations.

      In this case, I found the Balance sheet complex and not easy to understand.

      Stock may do well…but one needs conviction to stay invested for long.

      Regards,
      Ayush

  • Hi Madhu,

    as much as we like to track new options and dig into stories, the daily
    announcements and results take up most of our time. Thus it becomes very
    hard to analyse stocks based on tips rather than logics. We like our readers
    to post stocks on logics and encourage creative criticism.

    I just gave a quick look to company, at M.Cap of ~50Crore, the company has
    mainly invested funds in Shares (~13Crore with market value ~100 Crore) of
    GATI & TCI Industries and given loans (~50Crore).

    The crazy part is that the company is funded by huge debt taken at ~13%
    while it’s income from loans given (which happen to be unsecured) is just
    11.5% (without considering NPAs which are massive 2.5% – I believe they are
    rather dead cause of no recovery).

    Advance for Land in Chennai ~7Crore is still standing from past year – again
    raising doubts.

    With a negative EPS and unexplained business structure, debt to equity of
    2.27, lack of details about advances, its future rather looks dark. I would
    instead go for BNK.

    These are my personal views which might be wrong somewhere, so do correct
    me. Also, please give us your logics.

    Best regards,
    Pratyush

  • Somu0915

    Hi,
    Can anyone guide me as to if there is any company water treatment?
    I know RJ is invested in Ion Exchange, but I dont think management is too aggressive.
    This sector is huge in potential. China and India have huge water problems in next decade.

    Warren Buffet is invested in a company which sells chemicals to these water treatment companies.

    I cannot find any listed player which is wholly into this space..
    Some names are – Thermax, Praj, Kirloskar Brothers but I cannot find any single player in this area.
    If someone knows any micro/mid cap company, please suggest.
    Sure shot multibagger in next decade.

    • Ayush

      Yes, this sector has huge potential for sure. But no dedicated co at reasonable valuations.

  • Manmohan

    Hi Ayush,

    Could you please let me know your email id.

    Regards,
    Manmohan