Post Demerger impact of Asian Hotels – Unlocking the hidden value

Hi friends, this is exciting!

Asian Hotels (which we recommended recently for its demerger news) has filed a document with BSE detailing the post-demerger financial aspects including the post-demerger balance sheet of the three new companies. We were flirting with the data to guess the post demerger scenario and here are the possibilities (provided in the excel sheet below).

As per the announcement, a shareholder holding 100 shares of Asian Hotels will get:
– 50 shares of AHL residual company
– 50 shares of Chillwinds
– 50 shares of Vardhman Hotels
The new figures show a significant rise in the book values, as during the demerger, the assets are transfered at their fair values.

Do give it a look at the above numbers and share your comments.

Update on Q3 nos

“Its’ the work on your desk…It’s the work on your desk. Do well with what you already have and more will come in.” – Charlie Munger

Dear Friends,

This post is to bring an update and review of all the stocks discussed till now.

Performance till now:

S.NO SCRIP NAME Date of Recommendation Price of Recommendation CMP Percentage Returns Remarks
1 CHI Investment 11-05-2009 25 45 80.00 Exit was advised earlier at higher price
2 Shilpa Medicare 26-07-2009 93 239 156.99 Hold
3 Jaihind Projects 02-08-2009 95 173 82.11 Hold
4 Albert David 25-08-2009 75 119 58.67 Book partial profits
5 Siemens Healthcare 14-09-2009 1100 1270 15.45 Exit was advised earlier
6 Ahlcon Parentals 28-09-2009 37 47 27.03 Hold
7 Fresenius Kabi 28-09-2009 80 120 50.00 Book partial profits
8 Majestic Auto 22-10-2009 68 62 -8.82 Hold
9 Suprajit Eng 26-10-2009 90 155 72.22 Hold
10 IST Ltd 16-11-2009 100 140 40.00 Buy
11 Manjushree Technopack 18-11-2009 32 46 43.75 Hold
12 Asian Hotels 01-12-2009 425 508 19.53 Buy on declines

Individual Updates:

1. Shilpa Medicare: This stock has been a wealth-creater. The company has yet again posted excellent Q3 nos. Based on the same, the future looks bright and the stock is getting the attention of bigger investors (Read: ICICI Prudential mutual fund 🙂 ). On repeat or better financial performance, the stock has potential to reach 350 levels.

2. Jaihind Projects: The company has been doing well. As per a recent ET article, the co has to complete major projects by mid this year. One should continue to hold.

3. Albert David: This stock was picked as more of a value pick to park idle funds. One can consider booking partial profits.

4. Suprajit Engineering: The company has come out with excellent Q3 nos. The stock has also done well. To reward the shareholders, the management has proposed 45% interim dividend, 1:1 bonus and stock split. Though a bit aggressive than required, all these developments can take the stock to higher levels.

5. IST Ltd: As per the recent updates, the construction activities are going at good pace and co has built almost 10 lac sq ft of space. Leasing out of the same in due time will be a very positive development. If things keep going as per the plans, the stock has all the potentials of becoming a multi-bagger.

6. Manjushree Technopack: We have been providing updates in other threads.

7. Asian Hotels: Usually demergers create lot of shareholder wealth. So one should remain invested and look forward to buying on declines.

We are trying to bring some new picks from the Q3 nos. In the meanwhile some of my other favourite cos have come out with very good numbers and investors can consider them for investing: Balkrishna Industries & Poly Medicure.

Manjushree Technopack (MT)

Top 10 Brand Values
Top 10 Brand Values

This was the article in “Economic Times” which specially attracted Dad. At number one, in respect of brand value, it was none other than Coca-Cola, and on a bit of research, it was revealed that Manjushree Technopack (MT) was providing bottling services to them. Yeah, it became an instant favorite 😀 .

banner

MT is a packaging solutions provider with an experience of two and a half decades in providing its customers with cutting edge plastic packaging solutions.

Few positives:

  • MT has been growing at CAGR of almost 25% for last 5 years. This growth rate is expected to continue for next few years based on the aggressive expansions the company has been undertaking. The company has been tying up with the top MNCs
  • MT has an impressive client profile : Cadbury, Nestle, Coca Cola, P&G, Bisleri etc
  • MT has been able to maintain very good operating margins and able to expand the same with increase in turnover. The other good things are its strong balance sheet – reasonable debt equity ratio, control over debtors and inventory to get strong cash flow.
  • As per the recent announcements, the company has tied up with Coca Cola & Bisleri and is putting up exclusive capacities to cater to their requirements. As per the arrangement, the offtake will increase 50% every year.
  • MT is also targeting to cater to the liquor industry and has tied up with likes of UB Group, Radio etc.

Attractive Valuations:

  • At CMP of Rs. 32.50, the stock is available less than 5 PE.
  • It is trading at a discount to its BV of 44 by almost 25%.
  • Co is a regular dividend paying company & had paid 10% dividend last year.

Expectations:

  • We expect MT to continue to grow @ 20-25% for next 2-3 years.
  • For FY 2010, MT may be able to deliver 130-140 Cr turnover resulting into a NP of 8-10 Cr. Hence an EPS of 6-7.5

Snapshot of past financials:

snapshot

CHI Investments – Update

ETIG has recommended deep discounted holding companies for long term investment in it’s article: http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETM/2009/09/07&PageLabel=19&EntityId=Ar01900&ViewMode=HTML&GZ=T

CHI Investments has topped the list and is still available at approx 84% discount to it’s NAV J. We had recommended CHI Investments at just Rs 25 in our blog post: http://dalal-street.in/chi-investments-interestingly-mis-priced/

With better discovery by investors, this mispricing should reduce going forward. The gap can reduce to 50% of NAV like in other holding cos. If so, the stock has potential to reach Rs 125-150+ in long term. Another positive factor in this stock is – that it is listed both on NSE & BSE and has decent liquidity unlike other small holding cos (which are illiquid). Also, CHI Investments has investments in cos which are related to power sector and have high growth plans.

With increasing media coverage and shareholders, the risk of unjust merger is also getting reduced.

Albert David

Hi Friends,

Have a look at this small sized pharma company which has been performing very consistently over the years yet the valuations are cheap.

The pharma sector is going through very good times and one should invest in good company still available at reasonable valuations. Good things are:

  • At CMP of 75, the stock is trading at less than 6 times FY 09 EPS of 13.2 and much less than the BV of 100+.
  • The company has a good dividend track record and paid a dividend of 35% last year hence giving a div yield of 5%.
  • Company though not aggressive yet is a slow and steady performer with clean balance sheet. They did major upgradation, expansion and modernization of their facilities a year back and the positive effects should be seen in coming quarter nos.
  • They have very strong cash flow as the company is very disciplined on the Inventories and Debtors position.
  • Their Q1 nos were pretty good and if they repeat or improve the same, the company should be able to post an EPS of 17-20 for FY 10 and stock has potential to give 50-100% in a year.

This is one of the stock ideas in which one can lock his profits .

Views Invited

Financial Snapshot:

Year

200203

200303

200403

200503

200603

200703

200803

200903

201003

   
Type

Full Year

Full Year

Full Year

Full Year

Full Year

Full Year

Full Year

Full Year

Full Year

   
Sales Turnover

95.60

103.33

114.39

101.79

127.42

141.16

158.12

183.91

200.00

   
Other Income

2.78

4.30

4.79

3.02

3.79

2.26

2.21

2.14

   
Total Income

98.38

107.63

119.18

104.81

131.21

143.42

160.33

186.05

200.00

   
Total Expenditure

86.43

93.83

103.04

92.54

113.97

121.51

137.84

160.75

   
Operating Profit

11.95

13.80

16.14

12.27

17.24

21.91

22.49

25.30

28.00

   
Interest

2.86

2.41

1.73

1.73

1.50

2.48

3.84

5.15

5.00

   
Gross Profit

9.09

11.39

14.41

10.54

15.74

19.43

18.65

20.15

23.00

   
Depreciation

3.15

3.45

3.47

3.92

3.87

4.77

6.73

7.95

8.00

   
Tax

2.00

2.74

3.69

2.42

4.45

7.56

4.59

4.66

5.00

Best

Worst

Reported PAT

3.94

5.20

7.25

4.20

7.42

13.20

7.33

7.54

10.00

11.50

8.00

                     
EPS  

9.11

12.70

7.36

12.99

23.12

12.84

13.20

17.51

20.14

14.01

PE  

10

10

10

10

10

10

10

10

12.00

6.00

Exp Price  

91.07

126.97

73.56

129.95

231.17

128.37

132.05

175.13

241.68

84.06

CMP (7-Aug-06)      

90

90

90

90

90

75.00

75.00

75.00

                       
OPM %

12.50

13.36

14.11

12.05

13.53

15.52

14.22

13.76

14.00

   
NP %

4.12

5.03

6.34

4.13

5.82

9.35

4.64

4.10

5.00

   
                       
Dividend %

16%

18%

20%

20%

25%

30%

30%

35%

     
Dividend Amt

0.91

1.03

1.14

1.14

1.43

1.71

1.71

2.00

     
Payout %

23.10

19.81

15.72

27.14

19.27

12.95

23.33

26.53

     
                       
ROCE:

20.66

23.33

27.55

15.25

21.19

20.82

14.78

15.21

     
                       
M Cap:

42.83

                   
BV:

100

                   

Jaihind Projects

“First I determine themes that will be played out over the next several years. Then I identify groups of stocks that reflect those themes.” – Ralph Wanger

Working on the above advice, we all will agree that the next big opportunity is in the Gas Sector. Early beneficiaries will surely be “pipe line laying” companies.

Jaihind Projects (JPL) is a leading player in this space and is scaling up very aggressively. I have been bullish on JPL for quite some time and feel that there is enough potential.

About Jaihind Projects (http://www.jpl.in/)

  • It is only listed dedicated player available in this space.
  • Company has been doing this work for major PSUs such as Gail, IOC, GSPL etc for several years. Gail, GSPL etc have ambitious targets for building pipeline network across India, JPL should surely gets its share in future orders.
  • The company has grown from just 50 Cr turnover in 2005 to 325 Cr turnover last year.

Going Ahead:

  • Company is expected to achieve a turnover of atleast 500 Cr+ this year and if they are able to maintain their historical operating margins at around 12%, the company has potential to achieve Net Profit of atleast 20-25 Cr.
  • Which will result into an EPS of say 20-25 on an expanded equity of close to 10 Cr.
  • At current market price of less than 100, the forward P/E is less than 5. Considering the things will go well, stock has potential to more than double in two years period.

Risks:

  • The company has been taking debt to expand so if there are delays, the company can be adversely affected.
  • The company has been diluting equity by issuing shares to promoters on preferential basis.
  • The company doesn’t pays dividend to conserve cash for growth.

Do work out the calculations and share the views.

Shilpa Medicare – A strong bet on Oncology

The company has come out with very good June Qtr nos and deserves a closer tracking.

About the company and the business:

  • Company has been expanding in the Oncology space and wants to be the largest Oncology API manufacturer in India apart from big formulation cos which do production for captive use. This space has lesser competition and hence quite high margins
  • Go through the announcements of the regulatory approvals the company has achieved in last 1 year. Co claims to be one of the few cos to get such approvals
  • Company expects to get USFDA approval by year end.

On Financials:

  • Company has scaled up from just 25 Cr topline in 2003 to 138 Cr last year and targeting close to 200 Cr this year.
  • Margins have been on the rise over the years due to co’s deliberate move from low margin to high margin business. The margins are currently at 25%+…on a turnover of 200 Cr this will result into an operating profit of 50 Cr, from this we should subtract the interest and taxation cost, which shouldn’t be more than 7.5 & 10 Cr respectively. We get a figure of 35 Cr+ as potential cash flow this year and NP could be close to 25 Cr, conservatively.
  • For margins calculations I have been removing the forex adjustments. Last year the company suffered a notional 10.85 Cr forex loss on the outstanding ECB. In this quarter there is a gain of 2.9 Cr.
  • There are some losses in the consolidated nos, as the company did an acquisition in Austria last year. These losses are expected to come down soon.

Why I like the company:

  • I like companies with scalable business model having high operating margins. Shilpa is growing fast with operating margins expected to remain very healthy around 25%.
  • The company seems honest and has been applying conservative accounting policies. The company has been providing good amount of depreciation and tax at the maximum rate.

Valuations:

  • Currently trading at less than 8 times expected FY 10 EPS of 12 (this EPS is excluding forex gains/losses). Not very cheap but a strong buy on declines.

Annexure 1:

Year

200303

200403

200503

200603

200703

200803

200903

201003

Type

Full Year

Full Year

Full Year

Full Year

Full Year

Full Year

Full Year

Full Year

Sales Turnover

24.11

35.66

37.51

47.62

68.39

95.81

138.09

200.00

Other Income

1.78

0.73

1.12

1.27

2.36

2.52

0.90

Total Income

25.89

36.39

38.63

48.89

70.75

98.33

138.99

200.00

Total Expenditure

23.68

30.88

32.79

40.58

56.79

77.22

102.00

Operating Profit

2.21

5.51

5.84

8.31

13.96

21.11

36.99

50.00

Interest

0.29

0.46

0.31

0.39

0.32

0.85

4.92

7.00

Gross Profit

1.92

5.05

5.53

7.92

13.64

20.26

32.07

43.50

Depreciation

0.30

0.82

1.00

1.77

2.30

3.51

6.05

9.00

Extraordinary Adj

0.00

0.00

0.00

0.00

0.00

0.00

10.85

0.00

Tax

0.63

1.74

1.24

1.88

3.48

5.44

8.39

9.00

Reported PAT

0.99

2.49

3.29

4.27

7.86

11.31

6.78

25.00

EPS

0.74

1.85

2.40

2.46

4.53

5.32

3.08

11.35

PE

12.00

Exp Price

136

CMP (26-Jul-09)

95

OPM %

9.17

15.45

15.57

17.45

20.41

22.03

26.79

25.00

NP %

4.11

6.98

8.77

8.97

11.49

11.80

4.91

12.50

Mcap

209.24

ROCE:

21.73

39.54

29.53

17.61

21.34

12.21

The ride of CHI Investments

CHI Investments has hit an another upper circuit closing at Rs.44.25. What a wonderful ride it is going on.

We recommended CHI Investments on 15th May on this blog, when its price was Rs.25.

chi-vs-sensex

CHI Investments may reach Rs.70 in near future and the old investors should start reducing their average costs (and enter into other value picks). However, we still recommend in holding a major part of the stock for a long term.

The real beauty of the stock is that it is still discounted at around 85% as KEC (forming 50% of its portfolio) too has seen a similar price rise. Seeing the recent trend, it wont be hard for the stock to reach the optimum levels and reduce the discounting.

Keep circuiting up CHI Investments!

CHI Investments – Interestingly mis-priced

chi investments

CHI Investments

Investment Rationale:

  • Holds investments worth Rs. 224.00 Cr as on 11th May, 2009 while it’s own market cap is just Rs. 28.50 Cr. The company is debt free. (Annexure 1)
  • Compared to other investment/holding companies, CHI is available at just 1/10th of the value of investments it holds while others trade at about 1/4th of the value of investments they hold. (Annexure 2)
  • The company majorly holds shares of CESC & KEC International, the stock should move at least linearly to the stock price movements of both the stocks and with better stock discovery, the discounting can reduce giving it a multi-bagger potential. Being in power sector and leaders in their business areas, both CESC & KEC International are expected to do well. (Read the latest Business Line : KEC targets to be a $ 2 billion company in 3-4 yrs.)
  • CHI Investment receives almost 4-5 Cr as dividend/interest income annually.

Continue reading CHI Investments – Interestingly mis-priced