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Saturday, December 25, 2010

Market News

Nov 30,2010: GAIL: 490: 1000Cr Net Profit Every Quarter Starting March 2011

Market News: MAN Industries: Poised...

MAN Industries
CMP: 80.95
Market Cap: 443Cr
Reserves: 463Cr
Debt: 308.41Cr
Sales March 2010: 1643Cr (TTM)
Gross profit: 226.89Cr (TTM)
Net Profit : 108.76Cr
Enterprise value 650Cr

was reviewing MAN Industries for one of our blog readers/members..
MAN Industries is doing well has almost 11Cr of forex profits not yet booked.. (as per Sept 2010 results)
shareholding is also getting consolidated  .. along with good cash flows.. all augur well for MAN..
It is not mandatory for consolidated results to be published..on a quarterly basis.. (though might change in the future)

I would say good choice hold on for better price in the future..

I was looking at technical data and stock seemed to be poised for immediate jump in price. I would buy only for short term.. trade.

PN: this recommendation is a short term play..(10-15% spike) company is fundamentally sound .. so we have a fundamental valuation backstop..

=happy investing

Friday, December 17, 2010

Company: VIP Sell .. Sell Fast..

CMP: 605.25
Market Cap: 17106.5Million
Sales TTM: 6895Million
Gross Profit TTM: 1126.0Million
Interest TTM: 49Million
Net Profit TTM:680Million
Reserves Sept 2010: 1880Million

VIP has acquired a lot of brands and its Vision is "To be the Global Leader in Travel Products Business"
which is also a very focussed and fairly well defined Vision. The question we are trying to address is .. 

Is it worth investing in VIP at these price points. A company with 6,890Million sales and 1,120Million Gross  profit and 680Million Net Profit and 873.1Million debt.. The total cost of acquisition is 17,106.5+873.1 -11(Cash) = 17,869.6Million

That is 15.95 Times Gross Profit and 26.27 times Net Profit (TTM)  a PE of 26.27 means VIP is expected to grow atleast 30% each year 

Now as far as I understand a suitecase/luggage is a product which will last atleast for a few years (Lets assume 5 years) so for VIP to maintain a sales level of 6,890Million it needs atleast 689x 5 = 34,450Million of market which is dedicated to VIP products and will buy VIP products for next 5 years.. 

Now considering that VIP is expected to grow 30% each year VIP needs to have a market of 62,306 Million Rupees. Basically assuming 5 year replacement cycle for luggage by a customer and assuming 30% growth VIP will need a captive dedicated market of 62.30Billion Rupees to sustain 30% growth for the next 5 years..

If the market size is less than 62.30 Billion Rupees then VIP by increasing sales is actually eating its own market for the next year sales.. 

Luggage and "Travel" products are long lasting products not required on a daily basis. Even Regular business travelers do not invest in new luggage for each and every trip. Also with additional baggage cost for extra luggage even Indian have started travelling light.. 

Conclusion: VIP: Enterprise value:17,869 million, Sales: 6895Million 
Gross Profit: 1126.0 Million , Net Profit: 680 Million

VIP is a fully priced share where one is paying 2.59 times Sales and 26.27 times its Net Profit (TTM) with such a high premium it really does not leave much space for appreciation. Also Luggage is not a consumable item  and one does not expect to invest in new travel equipment every time we travel .. 

PN: I do not have any shares in VIP. These are my personal views and opinion based on publicly available information.. Please do your own deep dive before investing.

Sunday, December 12, 2010

Stock: Jayant Agro: Back Up The Truck!!

Jayant Agro Organics was on lower circuit on Friday the stock was down 19.9% and stock closed the day at 87.80 on NSE. The 200 Day Exponential Moving Average "EMA(200)" stands at 117.10 thats 33.37% higher than current market price..

Is this a time to Buy or wait for a further correction? That's a tricky question cause markets always have a way of proving us wrong. Catching the unsuspecting investor on the wrong foot.

I would buy based on the facts that:
- Jayant Agro is entering into higher value added castor derivatives (Sebacic Acid).. Plant has commenced operations this year as trial runs have been completed.
- Jayant Agro has in 6 months reported profits (13.08Cr) more than profits of last 12 months (Year ending March 2010 12.63Cr)
- Jayant Agro Management has also been upbeat about its future and increased shareholding in the company.
- Jayant Agro Management has eliminated preferential capital and issued equity shares in return to promoters and other investors (indicating that going forward equity shares will outpace the returns on the preferential capital)
- With 6 months consolidated sales at 580Cr full year Sales are expected to exceed 1000Cr
- In the past 2 year Sept 2008 to Sept 2010 almost 10.75 lakh shares have moved from weak hands (small individual investors) into the hands of high networth individuals and promoters.

As can be seen..
1. Small individual investors have reduced from 6087 to 4709 and holdings have reduced by 10.75lakh shares (Small investors are investors holding less than 20,000 shares)
2. HNI (High Networth Individuals) have increased from 24 to 48 and they have increased their shareholding by 4.20 lakh shares
3. Promoters have increased their shareholding by 9.75 lakh shares 6.5%
4. There has been a reduction is shareholding by corporate bodies by 2.99 lakh shares.

All in all no of investors have reduced from 6550 to 5242 and shares have changed hands to high networth individuals.. and promoters. 

Jayant Agro closest competitor is a company called "Bitor" formerly known as "Jayant Oil" Bitor is a private company which was the largest exporter of castor meal from India till 2004 SEA(Solvent Extractor Association of India) from 2005 onwards Jayant Agro has been receiving the award of "Highest Exporter of Castor Meal" from SEA

Here is a great article about castor which appeared in Business Standard 2008 and BITOR (Jayant Oil)(Link)

First Call Research has given a buy call on Jayant agro with research report (Link) In Page 10 of the report ..the estimated Net profits for march 2011 is 132 million (13.2Cr) which has been achieved in 6 months itself..

Jayant Agro management recently started better reporting of data such as
- consolidated results on a quarterly basis
- publishing of audited reports for subsidiary companies (Link)

Conclusion: Jayant Agro has been consolidating its position in castor. It is the largest processor of castor seeds from 2005 till date and is now entering into higher margin castor derivatives space. Promoters have been increasing their stake in Jayant Agro and even HNI have been consolidating their position. India has inherent strengths in castor as the largest producer and exporter of castor in the world. 
Jayant has been performing exceptionally well and is on its way to report 100% increase in net profits over march 2010 .. The current steep fall in prices is an opportunity to increase holding in Jayant Agro at prices 33.39% below its 200day EMA .. 

PN: These are my views about Jayant Agro based on publicly available information.. Please do your own deep dive before investing.  Personally I would take this opportunity to "Back up the Truck" and enjoy the opportunity the Market has offered..

=happy investing

Thursday, December 09, 2010

Buy!!: Stock Market Fall.. Where are we heading.

Market is correcting .. and its Crunch time..
The question is what should be our strategy? If you have cash in the bank (Hey u're the smart guy around!!)
For the rest of the folks.. its time to prune the garden..

- Look at your short term gains..
- Look at your short term losses..
- Give a good hard look at your list of investments and select which are your best bets..
- Prune your loss making "So and So" investments
- Increase your investments in your best bets which are available cheap..
- If you have long term capital gains take them as they are tax free and reinvest in your "Best Bets"

Indian economic indicators are:

As we can see the M3 growth is slowing down but still a healthy 16.2% Inflation is still pretty high and that is a cause of worry.. which could be the reason for decrease in M3 growth. But Growth is strong and even Exports is picking up. Are we going to see higher interest rates? I don't think so.. here's why?

As you can see India has one of the highest interest rates in the world.. Hungary,  South Africa and Pakistan are the only countries with higher interest rates..  Any increase in interest rates is going to increase flow of capital into India .. So I guess what the RBI is trying to do is..
-  Reduce Banks risk taking abilities by asking them to increase their deposit rates and maintaining borrowing rates at the current levels.. reducing their spreads.(sell Bank stocks and other speculative industries like Housing)

This Spread tightening by Banks will help the India economy to have stable interest rates but reduce speculative activities (such as hoarding of commodities and maybe also speculative stock market investments) 

All this is good governance.. but with a decrease in money flow FII get to enter into the fastest growing economy at lower price points.. (stock prices..) 

Conclusion: This is a good time to get in as the India growth story is nowhere close to an end.. Look at China with interest rate of 3.99% ..(Image India with 3.99 % interest rate) Indian economy is doing just fine and will continue to do so..  As mentioned above buy what you are certain/confident about. My Personal favorites are 

=Happy Investing

Wednesday, December 01, 2010

Gujarat Ambuja Exports: Dalal Street Journal Article...

The latest Edition of Dalal Street Journal (DSJ) Dated: Dec 5,2010 has 1 page article on Gujarat Ambuja Exports. It is part of a featured article on Gujarat State as the ultimate investment destination. Gujarat Ambuja Exports has been selected as a representative company to portray the great investment opportunities in Gujarat.

There is also a 1 page Advertisement by Gujarat Ambuja Exports. The advertisement states that Gujarat Ambuja Exports is a well diversified yet focussed company. Sept 30,2010 quarterly results are:
EPS: 1.67 per share, Turnover up 27.07% and PAT up 145%

The company MD Mr Manish Gupta has been interviewed by DSJ wherein Mr Manish Gujta has stated the various segments for GAEL i.e. Solvent Extraction, Edible Oil Refining, Starch and derivatives and cotton yarn segment.

Agro Processing Segment: Mr Gupta has also stated that the agricultural output of the country will be good due to good monsoon and soy production is going to be 1Cr tonnes instead of 97 lakh tonnes last year. Soy meal exports prices are stable and hence soybean meal exports will be profitable (+ve parity) The edible oil market in India is also growing strong at 4.4%.

Cotton Yarn Segment: Cotton yarn segment is reporting bullish market conditions.. in-spite of increasing cotton prices.

Corn Starch Segment: Corn prices have been stable, margins are good and continue to be good demand. Due to increase in demand of Corn starch derivatives corn prices are stable but will be trending up. Corn starch derivatives are user industries are: Consumer Goods, Pharmaceuticals, Confectionaries, Breweries.

All segments of operations are having positive encouraging outlook. Corn derivatives and textile yarn segments will have consistent demand higher than supply. Agro processing division is going to have a steady demand in the near future.

Mr Gupta expects all segments to perform on the expected lines during the remaining period of the year. Since Q3 and Q4 are the best performing period for the seasonal period so GAEL will easily report higher turnover and profits for the remaining 2 Quarters .. and this is a conservative statement.

Revenue Mix: 50% agro processing, 30% maize processing, 20% cotton yarn processing

Fund raising Plans: All capital expenditure would be met from internal accruals. It has been company policy to have lowest possible long term debt for future expansion.

Outlook for India Inc: Govt is making all efforts to maintain 9% growth in GDP. Feel good factor across the globe for India is quite positive.

Is there Better demand due to good monsoon: Good monsoon has helped increase demand in various sectors of the economy.. specially soy de-oiled cake and soybean oil.

Conclusion: The company management as always has been modest about the prospects of GAEL with a controlled +ve bias statement in DSJ interview. The management also has maintained good fiscal prudence by keeping very low debt (only 18Cr Long term debt as per March 2010 Annual Report) and continue to keep their eye on financial wellbeing of GAEL which is very good for long term investors. The largest reported segment of GAEL i.e. Agro processing division which is responsible for 50% of all revenues is going to have a good positive margin for this year 2010-2011. We are also aware of new Maize processing plant capacity being setup in Karnataka which is the largest Maize growing state in India so future prospects are good as company is increasing capacity in higher margin maize processing/derivatives segment which will also reduce volatility in earnings. As always GAEL is an agro processing story which will deliver great results for investors due to their focussed approach and fiscal prudence.. Its really surprising why there is such low institutional presence in GAEL stock

Previous Article: Gujarat Ambuja Exports: Promoter Guidance for 2010-2011

Tuesday, November 30, 2010

GAIL: Market News: 1000Cr Net Profit every Quarter starting March 2011

GAIL CMP: 490.50 Market Cap: 62,218.8Cr
Market has that GAIL (Gas Authority of India) is on an expansion mode for past 4 years .. Company has doubled its GAS carrying capacity and Tripp-led its Gross Fixed Assets.. The company is also entering into City gas distribution.. There is an unmet demand of GAS along with falling GAS prices.. GAIL is expected to report net profit of 1000Cr every quarter consistently from year 2011 onwards.. 

The key risk is the subsidy burden..however deregulation of natural gas and petrol prices followed by fixing pipeline tariffs ? have been encouraging for the industry..
Gail is trading at a one year P/E of 17.5 against its five year high P/E of 23.3. Considering its future earnings, reasonable valuations and a low beta of 0.6, Gail is a good bet.

GAIL is using its Operating Cash flows to build new Assets.. It is also using the free Operating Cash flows to pay down its debt .. So this is really great for long term investors in GAIL.

The GAIL Stock is close to its 100 Day Exponential moving Average..where it has always found support This is a great price to enter for the long term..

Monday, November 29, 2010

Company: Nitta Gelatin: Value Buy Shares

Nitta Gelatin:
CMP: 142
Market Cap: 119.28Cr
Reserves: 99.43Cr
Debt: 0.26Cr
Sales TTM: 205.49Cr
Gross Profit TTM: 28.11Cr
Net Profit: 14.47Cr
5yrs Avg Cash Flow from Operations: 19.98Cr
ROCE: March 2010: 27.79%
Last dividend: Rs 6.0
Dividend Yield: 4.23%

Nitta Gelatin India Limited (NGIL), one of the most successful Indo-Japanese industrial ventures, was incorporated in 1975 and started commercial production in 1979. Using state-of-the-art production facilities NGIL manufactures Gelatin, Collagen Peptide, Ossein, Di Calcium Phosphate. and Chitosan.

This downturn has provided excellent opportunities to accumulate great companies at great prices.. Nitta Gelatine would be one such company available close to its 52 Week low. Company dividend payout contained a special dividend so dont expect the dividend yield to continue.
Consistent positive cash flows from operations
80% promoter holding
Zero Debt status..
Introducing new value added products ..

This is a great company at a great price.. and your money is safe the stock will also easily double from these levels in 1-2 years time frame for sure.. Must buy!!

Conclusion: Must buy!! 

Saturday, November 27, 2010

Company :Tata Communications: Best Buy Stocks: Long Term only 5-10+ years

Tata Communications:
CMP: 258.35
Market Cap: 7362.98Cr
Following are the Consolidated figures as per Annual Report March 2010
Sales: 11194Cr
Debt : 7308Cr
Reserves : 4249Cr
Profit Before Tax: -ve 681Cr
EPS -ve 20.97

Annual Report March 2010

Tata Communications is a leading global provider of a new world of communications. With a leadership position in emerging markets, Tata Communications leverages its advanced solutions capabilities and domain expertise across its global and pan-India network to deliver managed solutions to multi-national enterprises, service providers and Indian consumers.

The Tata Global Network includes one of the most advanced and largest submarine cable networks, a Tier-1 IP network, with connectivity to more than 200 countries across 400 PoPs, and nearly 1 million square feet of data center and colocation space worldwide.

Tata Communications' depth and breadth of reach in emerging markets includes leadership in Indian enterprise data services, leadership in global international voice, and strategic investments in operators in South Africa (Neotel), Sri Lanka (Tata Communications Lanka Limited), and Nepal (United Telecom Limited).
Tata Communications looks to be in dumps with a profit before tax of -ve 681Cr but lets dig a little deeper..
- look at Cash Flows from Operations one of the most basic numbers indication actual company health..

Net Cash from Operating Activities: 1552.80Cr
Cash Flow from Investing Activities: -ve 2502.85Cr
Cash flow from Financing Activities: 257.37Cr
Cash & cash Equivalents at the beginning of the year: 863Cr
Cash and Cash Equivalents at the end of the year: 257.37Cr

Tata Communications has invested 2502.85Cr in investment activity (new asset creation)

- To fund this .. cash flow from operations ie.. 1552.80Cr has been used..
- In addition 257.37Cr has been generated from financing activities
- In addition the company had cash in hand of 863Cr ..
So money flowing into the company from these 3 sources (Operations, Financing and Cash in hand from last year) has been used for investment..

So the company is making money at the operating level .. it is just that the company has so many deductions that it can report losses which will help in reducing taxes paid to the govt ..

Another very important number is Current Assets, Current Liabilities and Net Current Assets numbers:
Current Assets: 6141.74Cr
Current Liabilities: 7528.89Cr
Net Current Assets: -ve1387.15Cr

There are different valuation parameters
1. Off the hook valuation parameter is : If the Enterprise Value is less than Net current Assets then the company is selling for less than the cash in the system.
2. A more Sophisticated parameter is: If the Net current Assets is -ve which means you have more liabilities than Assets at the end of the year.. it means the company is in a position of strength (domination) and hence it is able to hold payments to its creditors (increasing liabilities) and extract money in advance from its debtors (reducing Current Assets) this results in a free float which the company can then use..

So a -ve Current Assets scenario shows that Tata communications is generating 1387Cr from its operations just by delaying payment to creditors and accepting cash from debtors .. this is possible only for very large well established companies.. in a commanding position in their area..and will result in interest savings of 138Cr (assuming 10% interest rate on 1387Cr float ..)

For Example let us look at Hindustan Unilever Limited (HUL)
Consolidated Current Assets:  5539Cr
Consolidated Current Liabilities: 6816Cr
Net Current Assets: -ve 1276.73Cr

So even HUL has a Net Current Asset number which is negative indicating it has a strong domination over the market.. can hold its creditors for longer period and expect debtors to pay upfront resulting in cash flows from its operations of 1276Cr which on a yearly basis at 10% interest works out to 127Cr
In addition to the excellent and tight financial operating model that Tata communication has there is another investment bonanza for investors:

When the Govt dis-invested its stake in VSNL to Tata's there was a clause which said Tata's are supposed to release free hold land which measures 773.13Acres 85 acres in Chennai and majority of the rest of the land is in Pune .. some is in Delhi, Mumbai and Calcutta (these are the cities where VSNL had operations before takeover by Tata's)

- Share holders are supposed to receive compensation for the land.
- Since govt holds 25% and also sold 25% to Tata's with the same clause .. the majority of the beneficiary is going to be the Govt.
- Since VSNL disinvestment to public was done before selling of stake to Tata's... Individual investors will also get compensated for the Land bank..
- Individuals who tendered their shares when Tata's took controlling stake will also receive compensation..

Ofcourse the Tata's do say that the major beneficiary of the Land deal is Govt (which is true as the Govt  will receive 50% stake in the 773Acres land company that needs to be carved out of Tata Communication..

However Individual investors will also benefit and for the shares that they own in Tata Communications they will receive equivalent rights to the Property company that needs to be carved out of VSNL/Tata Communications.

So Right now Tata Communications is Tata Communications (operations) + 773Acres and the property company carved out will have Zero Debt...
 Ofcourse Tata Communications will try to wriggle out and try and reduce the amount of actual property transfer but its a long drawn out(Legal)  affair.. as this clause for a separate property company was part of the initial contract.. Also as part of the clause..Tata Communications cannot issue additional equity until the 773 Acres property is carved out of Tata Communications..

So the high debt is because Tata's have no way to grow other than debt..and now Tata's donot have the much wriggle room as debt is already pretty high...

This Value equation is well known to the Institutions..and is visible in the fact that actual Public holding in Tata Communications is  less than 2% and Institutional investors, Govt and Tata's own 98% stake in Tata Communications..

Conclusions: Tata Communications is a well oiled cash generator which is available Very Very Cheap. It also has a 773Acres Property company attached as a free gift. Go and buy !! It is a true Deep Deep discount stock and a multi-bagger but has a gestation period which could run into 2yrs or more..(when the property company is carved out..)  An addition into Best Value Buy For sure!!

Company: Fresenius Kabi Oncology Ltd: Ready to step up!!

Fresenius Kabi Oncology Ltd
CMP: 108.45
Market Cap: 1715.68Cr
Sales TTM: 422Cr
Gross Profit TTM: 100.5Cr
Net Profit TTM: 72Cr
Debt: 269Cr
Reserves: 476.28Cr

Fresenius Kabi Oncology Limited strives to provide state-of-the-art third generation chemotherapeutic drugs right from development to manufacturing & marketing across the globe. It is all set to become a leading player in Oncology (Cancer) generics by virtue of a comprehensive product portfolio of injectables, oral cytotoxics, cytostatics, intermediates and active pharmaceutical ingredients (APIs). Fresenius Kabi Oncology Limited product portfolio and manufacturing facilities are being endorsed by world's leading regulatory authorities.

Fresenius Kabi Oncology Limited is a 90% subsidiary of Fresenius Kabi. Fresenius Kabi specialize in therapy and care for critically and chronically ill patients.. Fresenius Kabi is the leader in infusion therapy and clinical nutrition in Europe and in its most important countries of Latin America and Asia Pacific. Within I.V. generic drugs, Fresenius Kabi counts among the leading suppliers in the U.S. market. 

All over the world more than 21,000 employees are committed to improving the quality of life of critically and chronically ill patients with innovative products for patients in hospitals and outpatients.

Fresenius Kabi Oncology Limited is erstwhile Dabur Pharmaceuticals which has been sold to Fresenius Kabi at Rs 75 per share.

It is a well known fact that India is strong in the generics market and Fresenius Kabi Oncology Limited is going to specialize in third generation generics for oncology. The good part is the parent company is a well established brand world wide and these generics are to be sold as Fresenius Kabi products. 

Reading through their latest annual report we see that Formulations unit in Baddi (India) and active pharmaceutical Ingredients unit in Kalyani have been  USFDA approved. the API unit in Kalyani is undergoing expansion project I and even before Project I is completed Expansion project II has already begun. We can also see that the company has been reporting better results starting year ending March 2010. 

Conclusion: Fresenius Kabi Oncology Limited is a focussed organization with a clear mandate to concentrate on generic oncology drugs. With a parent company with 90% stake in Fresenius Kabi Oncology Limited we can expect company to start delivering great numbers in the future consistently.. Company does not seem to be a deep value buy but it is specialized and concentrated in specific area where the parent company has inherent strengths. It will contribute to parent company revenues and complement and grow in a symbiotic relationship.. Worth keeping a watch and entering into it..

Wednesday, November 24, 2010

Company: AGC Networks: Cheap Stock..Value Buy!!

AGC Networks:
CMP: 229.50
Market Cap: 326.8Cr
Sales year ending Sept 2010: 541.80Cr
Gross Profit: 45.12Cr
Net Profit : 34.6Cr
Debt : NIL

AGC Networks erstwhile Avaya Global Connect majority stake was bought by Essar group from Avaya. 59% stake was sold for 44 million USD ie  198Cr that would put a value of 335Cr for AGC Networks. Essar group had a additional stock buyback for another 20%

Avaya is one of the leading players in the world for endpoint IP based solutions and it sure seems a bad move to sell a company (AGC Networks) in one of the fastest growing economies of the world (India).

Avaya however did make a 900 million buyout of Nortel enterprise solutions. Maybe Avaya needed the cash. AGC Networks already has a set practice which includes Avaya products and solutions. Essar becomes a high profile channel partner for India. (my guess).

lets return to AGC network valuations.. If you look at the latest Sept filing by AGC Networks..
Reserves is 238.82Cr
Cash and Bank Balances: 153.35Cr (consolidated) 143.26Cr (Standalone)

If we remove the cash component the Enterprise value would be Market cap - cash in hand = 326 - 153 = 173Cr

So here we have it Gross Profit is 45.12Cr Profit before tax is 52.34Cr as 6Cr is interest income. has 153.35Cr of cash and bank balances.. has Zero debt and 238Cr of reserves.. this is for a 500Cr sales company with enterprise value of 173Cr.

Conclusions: AGC networks is Cheap very cheap!! though promoters are now Essar group and not Avaya.
In a growing field with a global giant like avaya backstopping AGC with technological support its a Winner.. the only thing is the Essar group with 80% holding..hopefully they will have shareholders interest in mind as they are the largest shareholders.. FYI there is a Rs4.50 dividend with an Ex dividend date as 29th Nov 2010 ..

Saturday, November 20, 2010

Company: Varun Industries: Listed Stock which is a Uranium Play?

Varun Industries:
CMP: 214.20
Market Cap: 473.68Cr
Sales TTM: 2159.36Cr
Gross Profit TTM: 160.42Cr
Net Profit TTM: 36.44Cr
Interest Payments TTM: 87.68Cr
Debt: 830Cr
Reserves: 150Cr

Varun Industries Limited has evolved from being India's leading steel ware exporter  to a highly proactive multi-dimensional global conglomerate with business interests that include steel ware and steel raw materials, oil and natural gas, wind energy, uranium, mining, gems and jewellery...
Established in 1989 as a small trading house it was incorporated as Varun Continental Ltd in March  1996 and changed to Varun Industries Limited  in  April 2005.
An ISO 9001: 2008 company, Varun was listed in November 2007 on both Bombay Stock Exchange and National Stock Exchange and  has featured in the list of Top 500 Indian companies in both 2008 and 2009 compiled by Dun & Bradstreet , Economic Times and other reputed agencies.  More important, the group is currently  touted as among the 50 fastest moving mid sized Indian companies.

Enterprise Value: 473.68+830-0.78 = 1302.90Cr 

Varun is not a deep discount stock.. but then when you hear about its uranium prospects:
The Varun Group has acquired 1011 blocks (100 in process) covering approximately 6900 sq. kms and with estimated reserves of 17,00,000 tons of uranium, 43,50,000 tons tons thorium and traces of gold for the purpose of exploration, exploitation and out put sale.
The preliminary work has been completed and the evaluation of Reserves will commence shortly. The Group is optimistic of completion of the Exploration phase before the generally estimated 2-5 years.

Oil and Gas Prospects:
Varun Group has acquired block 3101 covering approx. 6800 sq. kms . This block is located in the confirmed petroleum province of Madagascar. Varun also has an offshore Natural Gas block measuring 13,200 sq.kms on the basin of the Indian Ocean which is possibly among the largest in the world Geophysical and Geological inhouse studies have been completed and the prognostics are promising.

Madagascar is an island nation in Indian ocean you can read more about it in Wikipedia 
http://en.wikipedia.org/wiki/Madagascar Oil prospects and uranium both seem to be valid
and well known.. 

Varun however has a lot of debt and lot of sundry debtors 681.93Cr.

Conclusion: Uranium and Oil in a future with scarce energy resources is too good to be true.. Investors should keep an eye on the stock and maybe take small positions just in case  any positive developments take place in uranium and oil fields.. and we might get a bump..Right now the promoters are more interested in backward integration for their steel business.. which gives a fair indication that the uranium and oil prospects will remain prospects for some time. promoter's own estimate is 2-5 years for any development activity so hold on don't jump the gun yet.. watch and invest in dips..

Monday, November 08, 2010

Results on Diwali - 2010

Let us take this opportunity to look at how the suggested stock picks have performed..
I will also try and maintain Diwali day as day for review of stocks every year..

If hypothetically one had invested Rs10,000 in each and every recommendation (there are 16 recommendations) we would have invested 1,60,000. As of Diwali day investments would have generated absolute return of 54.35% on our investment.
- Please note this includes investment such as NILE which was recommended this Diwali itself and is just 2 days since it was recommended..
- I have included the rights issue by Camlin Fine chemicals at Rs 15 which means one has invested more than the Rs10,000 in Camlin to subscribe to buy all the stocks allotted as per rights issue..
- If one had invested Rs 50,000 each in the "Best Buy" stocks..(investment amount 1,50,000)  we would have made a slightly higher percentage  64.88%

As we can see the year to date results for the index we have beaten the Small Cap, Mid Cap and NIFTY and the top performing Bankex..
(again strictly not comparable as investment ideas were given as early as 29 may 2009 (Venky's) though most investment ideas were published starting Dec 2009)

Conclusion: Venky's has really matured as an investment which means one cannot expect Venky's to give 100% price appreciations.. 
- GAEL and Jayant Agro and a few others such as Pitti and Manugraph have started performing.. please note these all should give 100% or more so .. it would make sense to hold with a price target of 100% or more of investment price..

Friday, November 05, 2010

Diwali Dhamaka: NILE Limited

NILE Limited:
Current Market Price: 119.90
Market Cap: 35.99Cr
Reserves: 24.87Cr
Debt: 37.63Cr
Sales: 153.19Cr
Gross Profit: 11.21Cr
Net Profit: 3.24Cr
ROCE: 14.52%

NILE Limited: Nile Limited is an ISO 9001 certified company manufacturing world class Glass Lined Equipment, Pressure Vessels, Lead and Lead Alloys. Nile has emerged as a leader in achieving customer satisfaction by delivering quality products, with a fervent desire to convert every customer relationship into a prospective partnership.
NILE Limited has 2 divisions: 
- Glass Lined Equipment and Pressure Vessels and 
- Lead & Lead Alloys (32,000Tonnes Per Annum)
GMM Pfaudler which is a leading player in Glass lined pressure equipments ..  has a 20% stake in NILE Limited  and a hostile takeover was attempted but unsuccessful and GMM Pfaudler will
have to sell its stake in NILE Limited

The company has recently expanded its capacity for Lead Recycling Plant to 32,000 Tonnes.
With profits returning the stock could easily give us 100% or more
 returns within 12 to 18 months time frame
PN: This is a Diwali Pick but does not mean that the stock is going to fly anytime soon.. It is however a

Sunday, October 31, 2010

SEBI Guideline: 50% of Public holding in Demat

Market regulator the Securities and Exchange Board of India (Sebi) said that only shares of those companies would be allowed to trade in the normal segment where at least 50% of non-promoters holdings are in the dematerialised form by October 31. 

The regulator has asked stock exchanges to shift all companies that don’t comply with this requirement to the ‘trade-to-trade’ segment, commonly known as ‘T’ group. Only delivery-based trades are allowed in ‘T’ group stocks; traders can’t square off their positions intraday. This affects trading volumes as participation is lower when there is no scope for intraday buying and selling of shares, say brokers. 

According to ET data, 1,541 companies listed on the BSE have less than 50% of their public shareholding (excluding promoters) in the demat form, as on June 30, 2010. Hind Zinc, Jaybharat Textiles , Vippy Inds,Balaji Distilleries , Lanco Inds , Nissan Copper , Nissan Copper, Indian Metals, Subros and Panchmahal Steelare a few notable examples of fundamentally sound companies where more than half of non-promoters’ holding is in physical form even 14 years since demat was introduced. 

Let us look at the recommended stocks and their public shareholding in demat.. If the public holding is below 50% in demat then the shares will automatically be in Trade to Trade with 5% circuit limit and no intra-day squaring off of positions and lower volumes..
We have public shareholding in demat form for Sept 2009 and Sept 2010 for reference.

As we can see Regency and Superhouse will be in Trade to Trade with 5% trading band starting Nov 2010
Also What can we deduce from SKM Egg .. the public shareholding has increased from 44.5% to 56.88%
while stock price has fallen and promoter shareholding has fallen. SKM has made the cut..

As far as GAEL is concerned.. the public shareholding has been consistent even as promoters have been increasing stake.
- This I think is the reason why promoters are buying small lots.. 
- Promoters are working hard to get physical shares dematerialized 
- Then the promoters are buying the similar amount of shares from the market maintaining the demat % above 50%

This can also be deduced from the fact that the first 2 pages of the annual report is dedicated to de-materialization procedure.. clearly indicating the promoter interest in getting the physical shares dematerialized.

=happy investing 

Tuesday, October 26, 2010

Buy NIFTY Oct NIFTY 6000PUT at 7.20

It cost just 7.5 x 50 +150 = 525

If the market falls below 6000 we could make some serious money.. else you loose 525 bucks..

Its very risky but the amount under risk is very small..

=happy investing

Gujarat Ambuja Exports: Promoter Guidance for Year 2010-2011

Recent interview of promoter Mr Manish Kumar Gupta in CNBC TV18.
The promoters of Gujarat Ambuja Exports have provided the following guidance.

1. Guidance for Topline (Total Sales) for the year ending March 2011 1600Cr
2. EBDIT (earnings Before Depreciation Interest and Tax) ..no guidance given but generally next 2 quarters are better for GAEL .. so assuming we maintain the current margins of 9.5%
Sales Year ending March 2011: 1600Cr
EBDIT margin 9.5% = 152Cr
Net Profit Margin: 5.43% = 86.88Cr
EPS: Rs6.28
Please note these numbers mentioned above are "Estimates" and could be on the higher side.

I think what we need to keep in mind is:
1. Average Topline for GAEL for past 5 years: 1515.68Cr
2. Average Gross Profit for GAEL for past 5 years: 113.71Cr (EBDIT Margin 7.5%)
3. Average Net Profit for GAEL for past 5 years: 47.88Cr (Net Profit Margin: 3.15%)

So all the above mentined estimates are definitely within the capacity of GAEL. Infact we could see GAEL exceed the 1600Cr topline... and already the Net Profit Margin is 5.43% for GAEL for the past 3 quarters..

Please find link to the CNBC TV18 earnings call with Mr Manish Gupta

Previous Article: GAEL: Sept 2010 Result Review
Next Article: GAEL: Dalal Street Journal Management Interview

Monday, October 25, 2010

Gujarat Ambuja Exports: Sept 2010 Result Review

The results of Gujarat Ambuja Exports for the Quarter ending Sept 2010 are out.

Highlights are:
1. Top line Sales growth on a year to year basis up 21.92%
2. Bottom line Net Profit growth on year-year(Y-Y) basis up 134.48%
3. Depreciation on Y-Y basis down 22.79% (which could mean that last year numbers were suppressed by increasing depreciation or this year numbers are being pumped up by decreasing depreciation)
Personally I feel last year numbers were depressed to keep stock price down for accumulation..
4. Interest payments are down 6.17% Y-Y (generally since GAEL does not have long term debt it could indicate easy interest rate terms or lower raw material holding cost.
Personally I think its easy interest rate terms cause GAEL is still increasing stock in trade/work in progress numbers for Sept 2010.
5. This is good on a segmented basis All divisions of GAEL, Cotton yarn, Maize and Other Agro processing divisions improved margins.. Windmill division had a drop in margin but would not be concerned as Windmills is not a large business and actually depends on wind patterns (out of control of GAEL management)
6. The Agro processing division is what made all the difference in GAEL topline and bottom line as margins have improved on Y-Y and specially on Q-Q basis since June 2010 margins were just 0.60%
I would say further improvement in margins should be expected maybe 1-2% even to match 2009 Full year margins of 5.22%

Conclusion: There is very little that has gone wrong with GAEL and results are really good.. having said that I think this is not a time to sell as results will continue to do well for the next 12 months.. I would suggest already invested individual to Hold on to their cheap stocks..
To those who are late in the party it is still a great price to get GAEL below 38 levels.. cause this was the buyback price set in 2007-2008 and GAEL is still very cheap.. considering the target price of 100+ in 12 months time frame.. price of 40,60 for GAEL is closer than you think.. once the ball starts rolling..

=happy investing

Previous Article: GAEL: Sept 2010: Shareholding Report Review
Next Article: GAEL: Promoter Guidance for Year 2010-2011

Saturday, October 23, 2010

Anekantavad: True Essence Of Ahimsa

Anekantavad: True Essence Of Ahimsa

The twin doctrines of anekantavad and syadvad are an integral part of the Jain dharma's great experiment with ahimsa . Today, more than anything else, it is these uniquely Jain values that need to be examined and deeply contemplated upon.

Anekantavad - Many-ness of "Truth":

Most conflicts happen because of an inability to see the other's point of view, to acknowledge that one's version of truth is just that - one version.

There are infinite points in space from where to look at anything. Anekantavad is the Jain doctrine of the many-ness of truth, that there can never be only one point of view. It is best illustrated through the oft-quoted story of the seven blind men and the elephant.

Seven blind men came upon an elephant. Relying on their sense of touch, each one groped about and tried to make sense of the object in their path. The one who was near the elephant's trunk, felt it and was convinced he had touched a snake hanging from a tree. The one near the pachyderm's massive legs thought they were pillars, another took it to be a grove of trees.

Each one, from his place near a particular part of the elephant's anatomy, had a different theory about the huge obstacle. Soon, a quarrel ensued, since none was able to comprehend the other's point of view. "How can all of them be such fools", each blind man thought of the other. Everyone remained rooted to his spot beside the elephant. Since each one was convinced of the validity of his own explanation, the quarrel went on.

"Let us move around this object", one of them suggested. The moment they did so, they realised that although each one was correct in his place, they were all wrong, since their view had been limited by their staying in one spot. They moved around, collated their views, and finally realised that what they were trying to describe, from different positions, was in fact an elephant.

Syadvad - Maybe of "Truth"

This is what anekantavad is all about; it is the ability to recognise the multiplicity of reality, and it stems from syadvad, which is the doctrine of 'maybe', of examining an idea, object or thought from different standpoints.

This demands great dynamism, a constant movement to various positions around the elephant under examination - although the Ultimate Truth is One, there are as many ways to reach and speak of it as there are sentient beings in this world.

Aparigraha: Non-possessiveness
This willingness to give up everything for the sake of truth as enshrined in anekantavad, even refusing to be rigid about one's own point of view, is inextricably intertwined with another Jain ideal: that of aparigraha, or non-possessiveness.

Aparigraha, literally translated, means the giving up of worldly and material possessions, as evidenced in the aparigraha mahavrat of Jain Digambar munis, who abandon everything, even clothing, on the path to kaivalya.

True renunciation, however, is a state of mind, of being in the world (which we are, can we deny it?) and yet not of it.

As Sant Kabir says:
Tan ko jogi sab kare,
           man ko virla koye
Sahaj sab vidhi paiyye,
            jo man jogi hoye.

Material wealth is easily donated by everybody..
              But can we donate attachment to one's thoughts..
Effortless all paths will be..
             who renounces attachment to one's thoughts..

An important part of aparigraha (non-posessiveness)  is, therefore, anekantavad-syadvad(Many-ness, Maybe-ness of Truth) following which, one lets go of attachment to one's thoughts, ideas or standpoint, which really are the hardest to give up since they stem from one's ego. This is what makes aparigraha of attitudes the greatest way to move beyond one's ego-bound self to a greater realisation of the larger, all-encompassing Self.

Anekantavad, and attitudinal aparigraha, however, must not be misunderstood as intellectual fickleness. It is more about flexibility; an ability to bend that can come only with a real understanding of the nature of reality, which is yielding, dynamic, ever in flux.

Tao Te Ching, the book of Taoism says:

"Be humble and you will remain entire
           Be bent and you will remain straight
Be vacant and you will remain full
           Be worn and you will remain new".

The anekantavad sensibility leads to pluralism, a tolerance of diversity of thought, faith, of difference of any and all kinds. It is an acceptance of the fact that though I think my truth is right; I acknowledge that so might be yours. This is stepping back from the obduracy of "my truth, faith or religion is better than yours" and a movement towards genuine ahimsa, an embracing in love of all humanity. That is the message of the Jinas, the spiritual conquerors, whose timeless creed is Jainism.

PN: I have replaced the english translation of Sant Kabir doha..
original translation is:

It is easy to renounce the material world,
            true renunciation is where one renounces from the heart.
For such a person, everything flows effortlessly.

Original article link

Friday, October 22, 2010

Jayant Agro Half Yearly Results:

Jayant Agro Organics Sept 2010 Half Yearly Results are out.
Please note these are "Consolidated Half Yearly Results 2010 " comparison with "Consolidated Half Yearly Results Sept 2009)

- Sales: 580.85Cr (Last Year: 374.99Cr)
- Gross Profit (PBIT): 31.34Cr (Last Year: 19.83Cr)
- Interest Payment: 12.42Cr (Last Year: 5.62Cr)
- Tax Expenses: 5.82Cr (Last Year: 5.47Cr)
- Net Profit: 13.08Cr (Last Year: 8.73Cr)

Conclusion: Jayant has reported Consolidated Half yearly 54.89% increase in Top line (Sales) and 49.82% in bottom line (Net Profit) as compared to consolidated last year figures..
Gross Profit margin has increased to 5.4% (Last Year 5.29% ).. the net profit is being restricted due to increase in Interest payments 2.14% (Last Year 1.5%)
Jayant Agro has already exceeded the Consolidated Net Profit of year ending March 2010 12.46Cr in 6 months earnings.. We can expect Jayant to report better results for the next 2 Quarters. Full year March 2011 Net Profit could be close to 25Cr  (my assumption)