Sunday, August 3, 2014

Beware of Frauds

I wanted investors to know about a strange company called 'Parekh Aluminex'. I had told my wife in 2007-2008 how can a company keep growing its revenue, debt and profits all at a steady pace of 30% per year, year after year forever. I wanted to dig deep to find the recent 95% drop in price in company's shares and then came across the article "The curious case of Parekh Aluminex" which saved all my efforts of writing. Please go ahead and read it.

Another one that I found was 'Hanung Toys and Textiles'. There were people recommending a buy on this company here and here. The company's share price has corrected by more than 90%.

Another ones that can be added to the list are 'Opto Circuits' and 'KS Oils' but not from fraud perspective and more from wrong management perspective.

The amount of debt that just these these companies had amount to around INR 5000+ crore and there are many such unlisted companies. God save the indian banking sector.

Update: I might add companies like Kwality in near future as my mother-in-law called me up to buy the company and when I looked at the financials, it feels like another Parekh Aluminex.
Bookmark and Share

Sunday, July 27, 2014

Strange things happen in stock market (and off-market)

I am holding shares of a company 'Divyashakti Granites' for more than two years now. I had bought them at an average price of around INR 25 when the book value of the company was very high and even the net current assets are higher than the price. What I found was that in the month of June, there was an off-market transaction where somebody bought shares of the same company off-market for just INR 12. I have never seen something like this happening in any of my holdings earlier. The price of the scrip has moved from INR 25 to 31 now. This really is strange!!!!
Bookmark and Share

Sunday, July 20, 2014

Bubble Bubble

Lately, most of you have noticed that I am reducing my holdings in stocks and increasing cash. Many of the stocks I bought last year around August has appreciated by 100 - 200% and my portfolio has gone up decent enough in the last one year. But looking at valuations of some quality companies I can see a bubble like valuations being developed in some pockets of the stock market. See the following list:

CompanyP/EPrice Gain 2009-2014CAGR Gain 2009-2014
Page Industries5726 times92%
Astral Poly Technik3530 times97%
Kewal Kiran Clothing3318 times78%
Eicher Motors5343 times112%
Poly Medicure27.546 times115%
La Opala RG37.470 times134%

The list is very long. All the investors who took a plunge in blood bath of 2009 have been rewarded handsomely. The companies are from diverse range of industries but most of them were midcap-microcap in 2009 while today their market cap is sizeable now touching large cap valuations. I am warning investors that this is not going to end well.
Bookmark and Share

Saturday, February 22, 2014

Mazda Ltd - Value Buy

Mazda is an engineering company established in the year 1990. The company mainly manufactures vacuum systems and evaporators.

The average ROCE of the company over the last ten years is around 30% but it was lesser at 25% last year. The company has consistently paid dividend over the last 14 years. The company sold its valve division in FY11 for around 13 Crore which resulted in exceptional after tax income of 10.824 Crore. The company had investments to the tune of INR 18.8 Crore in mutual funds and short term investments at the end of FY13. Beyond this, the company had net current assets to the tune of INR 39.12 Crore in FY13. The company had negligible debt of INR 2.41 Crore at the end of FY13. So the current enterprise value of INR 45 Crore is way lower than the amount of 58 Crore at which the company can be liquidated.

Special Food Division
Company has started a food division which had a turnover of INR 8.52 Crore with an operating profit of INR 1.07 Crore in FY13. They are selling instant drink powder, fruit jam, ketchup and custard powder under the brand bcool.

Promoters are very shareholder friendly and their stake in the company over the last one year has increased by more than 5% and most of the shares were acquired from open market between the price of INR 80 and 100.

Mutual Fund Holding
Very few mutual funds are holding the company.

The company at the current market price of INR 102 is trading at much lower than its book value of INR 194. With a healthy cash flow of INR 10 Crore, the company is damn cheap at INR 45 Crore valuation given its investments and net current assets.
Bookmark and Share
Related Posts with Thumbnails