It is important to re-evaluate the portfolio and weed out non-performers, or the stocks in which the story is not developing as expected, or switch to new ideas which look cheaper or have more value than others. We have exited from couple of our ideas over last few days:
1. Jocil – Initially discussed @ 265, it is a good company with good fundamentals. The company has also rewarded with a bonus in the ratio of 1:1 and the stock is cum-bonus @ 285. Yet, we are switching out as we feel better ideas are available. Also a couple of negatives are – 1.) The company hasn’t been growing over last few quarters while the debt has increased. 2.) Company is import dependent and due to strong rupee weakness, they may get a hit.
2. Balaji Amines – Initially discussed @ 48, though the stock seems cheap at 4 times PE multiple @ 35, but the negatives are – 1.) The debt levels are too high to be comfortable with. 2.) Being in chemical sector, stock usually get low PE ratios due to lumpy earnings. At this time, there are several companies which are debt free, domestic business and showing growth, yet available at 4-6 times earnings. Eg: Indag Rubber, IFB Agro etc.
Some new ideas which we are studying and look good are – AMD Industries, Oriental Carbon & Chemicals and GIPCL. Continue reading Portfolio shuffling…
Are there any value picks in this market? Yes, I believe there are a few options like – Jocil. Most of us would be hearing this name for the first time 🙂
The company is a subsidiary of Andhra Sugars (55.02% stake) and is listed only on NSE. The company specializes in manufacturing of Stearic Acid Flakes, Fatty Acids, Toilet Soap, Soap Noodles and Refined Glycerine. The company has been doing contract manufacturing of toilet soaps for leading FMCG brands such as – HUL ( Liril, Lifeboy etc), ITC (Vivel, Superia etc), Marico ( Manjal, Jasmine etc), Johnson & Johnson (Savlon) etc.
Very strong financials:
- Jocil has been growing at a CAGR of 51% for last 3 years and a CAGR of 25% for last 5 years, yet it is available at a P/BV ratio of just 1.25, TTM PE of just 6.
- It is a debt free company. Has excess cash of 25 Cr on Balance Sheet (as of 31st March 2009)
- Has limited investment in inventory and debtors. Hence the business is not working capital intensive.
- Has a track record of excellent dividend payout ratio. (Payout ratio has been around 35% for last two years)
So at CMP of 265, we are getting an FMCG related company at a M Cap of about 115 Cr having atleast 25 Cr as cash on Balance Sheet, turnover of approx 300 Cr, Operating profit of approx 35 Cr and a Net Profit of 21 Cr. Isn’t it a value pick?
Other trigger could be – If the company maintains the div payout ratio of even 30%, it means a 150% dividend this year :):)
Company’s website: http://www.jocil.in