Category: Company Analysis

Thomas Cook – Are sum of parts greater than M-cap

Below is a post based an edited note to Insider Subscribers

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Thomas Cook (TC) now is a mini holding company which has multiple lines of businesses (a company which has 53 subsidiaries ) – A business analyst’s nightmare

 

Investment in TC is investment in Prem Watsa who has tremendous record of long term wealth creation, although I was not happy when he started a new fund in 2015 to invest in India in parallel to TC, cause at time of acquiring TC he commented that all new investments in India will be via TC however in his recent letter to shareholders he has made it clear that only related business (read travel and hospitality) will be acquired by TC rest would go to Fairfax India as much as possible

Over time Fairfax Financial would prefer to have all of its Indian investments (as far as possible) in Fairfax India with the exception of Thomas Cook and its subsidiaries, Quantum Advisors and ICICI Lombard General Insurance Company Limited.

The management had said that they would not prefer one over another however this year’s chairman’s letter made it clear that non travel business would go Fairfax India way,This fact is … Read the rest

Canfin homes – The out performance continues

Previously I wrote on Canfin homes here

The sustained outperformance was noticed when I was reviewing GRUH and REPCO a few days back

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GRUH Finance and REPCO homes both had decent year however when compared with Canfin homes there was performance was little subdued, which you will see in detail below

The top line (Loan book growth) was good for both companies including loan mix

Bottom line growth has clearly tapered down to 20s from 30s seen in FY12-14 years, both firms exercised good control on operational costs thereby continuing to reduce cost to income (C/I) ratio , GRUH following HDFC is having industry leading C/I ratio

On Contrary CanFin homes had an another fantastic year

Lending practices were tight with minimal net NPA

GRUH’s return metrics remain best in class however others are closely catching up

Overall both companies had a very decent year. But clearly, now 3 years in a row CanFin homes have outdone its fancied peers

Future variables to track

  • Loan book growth
  • Net NPA

If an individual has difficulty in buying viagra in uk gaining weight because of excessive stress, it will be relieved with this herbal ingredient. Likewise, take it while you are … Read the rest

Forecasting and Reality – Review of Suven Life sciences

I have previously written by Suven Life Science here and here

Reading and learning about Suven Life sciences has been huge learning curve, it has taught me few things

  • Forecasting in excel and actual numbers in real world are two different things, so one should not take their excel skills seriously. If you need a proof just refer my revenue and bottom-line prediction from last few years for Suven
  • Drug discovery is a long , hard and uncertain process and putting your odds is as good as throwing a dice. There are far few too many variables to model an outcome
  • Entrepreneurship is a long term commitment and as Investors, we are so lucky to jump the ship after a poor quarter, not the promoter who many times has put his/her everything on line

Reviewing 2016-17 performance of the company

Firstly numbers and management’s guidance for next year

 

All figures in INR cr except % 2015-2016 2016-2017 Growth 2017-18 E
Base CRAMS [Balancing Figure] 244 253 4% 291
CRAMS Commericial Supplies 0 34 100% 60
Speciality Chemichals 224 224 0% 224
Technichal Services 32 33 3% 33
Revenue From Operations 500 544 9% 608
Other Income 19 21 11%
… Read the rest

Actions speak louder than words !

In a recent interview with Guru Focus ,value investor Rohit Chauhan pointed out very important points regarding approaching equity investing. One of the points which stood out for me was below [emphasis mine]

12. Before making an investment, what kind of research do you do and where do you go for the information? Do you talk to management?

I follow the usual process of reading up on the last 10 years of financial statements and annual reports. In addition to that, I also try to understand the economics of the industry and competitive landscape. Finally I try to work through my checklist to analyze the idea from as many view points as possible.

I do not depend on talking directly with the management as much and base my decision more on what the management has shared in the conference calls and how they executed the plans.

As investors we are susceptible to falling for compelling stories created by management & media therefore often are unable to do an unbiased assessment of a an investment situation. This can lead to less than optimum investing outcomes. It pays to watch what management is doing than what they are talking.

As social

… Read the rest

MOIL – Debt Capacity Bargain ?

The rest of post is inspired by and adapted from this wonderful post on debt capacity bargains by Prof Sanjay Bakshi.

MOIL, a Mini Ratna, is India‘s largest  producer of manganese ore accounting for ~50% of the country’s total output. At present, MOIL operates 10 mines, six located in the Nagpur and Bhandara districts of Maharashtra and four in the Balaghat district of Madhya Pradesh. All these mines are about a century old. Except three, rest of the mines are worked through underground method.

MOIL is a debt free company, here is a snap shot from 2014-15 annual report

MOIL-1

How much money would you lend to MOIL against the security of its business ?

 

Other things remaining unchanged, it’s prudent to lend to large companies whose businesses are not cyclical. If a business is cyclical, then a prudent banker would not depend on peak earnings. Rather, he would compute average past earnings and then ask for a higher interest cover on those earnings than would have been the case if those earnings were not cyclical. ~ Sanjay Bakshi

 

Earnings of MOIL are not stable and dependent of future of steel industry and we know that the steel … Read the rest

Satin CreditCare – Ignore irritants ?

Update – 13/03/2016 : Post publication of this note, Rep from Satin credit care got in touch with me and provided some clarification on some concerns I had raised . I am editing this post to reflect same, This would provide completeness to a reader who is having similar questions.

Overall, I am happy that company has come forward and addressed our questions

Changes are highlighted in Red

 

Mid and small cap companies are not perfect diamonds there will be always something about them which we will dislike, As an investors we have to make a choice whether these irritants are ignorable or substantial

Over to case for today,

Satin Creditcare Network is one of the top ten largest[4th] Micro finance Institution (MFI) in India with an Asset under Management (AUM) of ~INR 25bn with primary focus on North & West India where it has a presence across 16 states and it is the largest player in terms of market share.

The investor presentation on their website gives a very good overview of business,their journey and important financial metrics.

Read the presentation here

satin 1

Satin is in business of money, a commodity business, sourcing cheap money and lending … Read the rest

Catching the falling knife – Eros International

Recently Eros media international has been in news although not for good reasons 🙂 Eros which is also listed in NYSE was downgraded by Wells Fargo ,a leading banking and financial services company.

See in this succinct note from the newspaper cut

Wells Fargo analyst Eric Katz had said the downgrade was driven by a continued increase in receivables in the United Arab Emirates business, concerns on whether Eros would turn free-cash-flow positive, and worries about Eros Now.

The management countered such claims

We would like to reassure our shareholders that there has been no material change to the previously announced strong fundamentals of the company.

The first quarter results have been strong and nothing has materially changed since then, the company said.

We will be announcing what we expect to be a strong second quarter in the first half of November,it added.

We reaffirm our commitment to enhance shareholder value.

We believe that the merit in our business and our fundamentals are there for everyone to see as we remain focused on achieving our business goals and objectives

also most of other brokerage houses that cover company continue to maintain their buy rating

My only exposure to Eros has … Read the rest

Annual Review – La opala

La Opala is one of the prominent kitchen utensils (tableware) companies in India, The Company’s brands comprise La Opala, Diva and Solitaire. Solitaire is directed at the high-end segment, Diva caters to the mid-end while the La Opala brand addresses the first-time requirements
They are engaged in the manufacture and marketing of opal glass tableware and 24%-lead crystalware products. Their opal glassware portfolio comprises plates, bowls, dinner sets, coffee mugs, tea sets, soup sets and dessert sets. Their crystalware portfolio comprises barware,vases, bowls and stemware. They introduced the heat-resistant borosilicate range of cookware during the fiscal gone by (Outsourced)
The company had another good year in terms of numbers
Sales, Profit and CFO all went up

Laopala-1Laopala-2

Key developments during the year

  • Equity dilution via qualified institutional placement to generate about INR 55 Cr (~11 million USD)
  • The addition of tea and coffee range products to broaden glassware portfolio
  • Start of importing of glassware and then selling them with a mark up

Only cialis prescription cheap one pill should be taken in a fashion that is similar to candy. We are levitra uk loved that gonna let you know about the various side effects on our web site. The Internet and … Read the rest

Suven Life – Embedded Triggers Triggered

Last year I wrote on Suven Life Sciences, also I did some secondary level maths to get a sense of returns an investor could get buying the business at then market cap (~2000 INR Crores or 400 Million USD) and exiting in 2024

See Snap shot below

Suven-1

The base case CAGR didn’t excite but reading management commentary compelled me to take a tracking position in model portfolio

Over to this year

One thing in AR gave me a Jeff Bezos moment

Suven-2

For the first time management was sounding optimistic (this is coming from a management which is very conservative on record)

Emphasis mine

Management views on past

Despite having grown the business every single year across the last five years, our business sustainability has been consistently questioned. We are perceived as a high risk service-based business marked by volatile quarter on quarter earnings because successful project completion may not necessarily translate into repeat orders if the project does not carry through at the innovator’s end

Management views on Future

The big message that I wish to send out is that this reality is likely to change. The volatility in our business model may moderate extensively following the commercialisation of

… Read the rest

Annual Review – Poddar Developers

Reading well detailed annual reports have their own pleasure. Today, post is on annual review of Poddar developers , I have written couple of times on Poddar here and here

Numbers first

Increase in Sales by 47.97% and increase by 156.88% in PAT

The company made allotment of 11,10,900 Equity Shares of Rs. 10/- each fully paid at a premium of Rs. 1115.21/-

Opportunity size is very big, here is extract from AR

The recently released Report of the Technical Group on Urban Housing Shortage (TG-12) (2012-17) has estimated the Housing shortage to be 18.78 million out of which 56.18 per cent is in the economically weaker segments and 39.44 per cent is in the Lower income group categories. As per projections of a report by the McKinsey Global Institute, the housing shortage under business as usual circumstances could go up to 38 million units by 2030

There is a thrust from central govt. as well for affordable housing

 Ministry of Housing & Urban Poverty Alleviation has undertaken studies and extensive consultations with a variety of stakeholders including the private sector, non-governmental sectors, state governments and urban local bodies as well as other Government of India departments as well as

… Read the rest