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Wednesday, July 14, 2010

Gujarat Ambuja Exports: Review: Shareholding June 2010

Gujarat Ambuja Exports Limited (GAEL).

CMP: 28.10
Market Cap: 388.77Cr
Sales TTM: 1410.60Cr
Gross Profit TTM: 114.53Cr
Net Profit TTM: 49.29Cr
ROCE March 2010: 17.65% (calculated!)

GAEL as we all know is "The Best Buy" recommendation and receives a fair share of review at this blog.(link) The June 2010 shareholding has been published and is available in BSE and NSE websites.

The following is the comparison of the March 2010 and June 2010 shareholding data.

1. FII Foreign Institutional Investors were the largest sellers selling 36.69 lakh (3.669 million) shares reducing their holding to 4.07 lakh a reduction of 90%.
2. The shares offloaded by FII has been bought by corporates (21.56 lakh), High Net worth Individuals (10.24 lakh), Mutual Funds (3.5 lakh), Individual Investors (1.10 lakh) and Promoters (29,180 shares)
3. Corporates holders have the largest increase in the past 3 months increasing their shareholding from 2.55% to 4.11% avg holding for corporate account is 8,808.5 shares.
4. Small Individual investors share holding has also consolidated in the hands of few investors avg share holding has increased to 618.2 from 613.60 shares
5. High Net worth Individual (HNI) Investors has increased from 18 to 25 and the avg holding of HNI investors increased to 93,336.9 shares from 72,820.83 shares

Shares are being consolidated in the hands of few... specially corporates and HNI investors. Corporate accounts have low holdings (8,808.5 shares) which indicates that corporate accounts could be the vessel for short term holding till it gets transferred to promoters/HNI's in bulk...

Conclusion: If we look at GAEL's March 2010 results we can see an improvement in ROCE to 17.65% and an improvement in bottom line. GAEL Enterprise Value is about 442.9Cr which is very cheap for a company of GAEL size (1600Cr sales) and stature.

Ideal value of GAEL is around 1 times sales i.e. per share price of more than 100 per share. I would suggest new investors to invest at current price levels (Rs28.10) for 1.5 to 2 year target of 100+.
- We are already aware of promoters accumulating shares from the market .. latest price at which promoters have bought shares from market is Rs 22.05 on June 1,2010
- We also know that buyback (reduction in equity) was done at Rs 34.26 per share in 2008 for 9.66 lakh shares. (link) Which makes the move to 40 levels a given target.
- Promoter increasing shareholding and reduction in equity by share buyback..both these activities will provide the base for the share price to increase..
- Consolidation of shares in the hands of few (Promoters and HNI's) augur well for long term investors in GAEL.
- Increase in dividend payout, Increase in operating margins and quarterly net profit is what needs to be tracked along with promoter activity (buy/sell)
- GAEL is a perfect stock for armchair investing for the next 2 years making it a multi-bagger for sure!!

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