Thursday, June 15, 2017

IST Ltd - Value Buy?

IST Ltd is an automotive parts supplier started in 1977. It supplies parts to many companies in and outside of India. Company also has a subsidiary Gurgaon Infospace which has set up an IT SEZ and most of the revenue of the company comes from the subsidiary.

Financials
The average ROCE of the company over the last 10 years is 23% while it is at 31% for the last 3 years. The company's main business of auto parts is not making any money. The biggest income is rent received from IT companies in their SEZ. Based on the latest financial results, the company has non-current assets worth INR 354 Crore, the net current assets are around INR 33 Crore and fixed assets are worth INR 139 Crore. So the company can be easily liquidated for INR 500 Crore+.

Business
The biggest revenue source of the company is rent(lease) from SEZ to the tune of INR 75 Crore while the expenses are nil so all of this goes to the bottom line of the company. The company is getting some tax benefits so not paying full 35%+ taxes.

Shareholding
The promoters hold 74.99% in the company but not paying any dividends.

Valuations
At the current market price of INR 1105, the company's total valuation is INR 650 Crore. The book value of the company is around INR 762 and the EPS is INR 140 so P/E is less than 8. Except for the lack of dividend, the company doesn't look very expensive.

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Saturday, June 10, 2017

UFO Moviez - Value buy?

UFO Moviez is India's largest digital cinema distribution network distributing movies through satellites and is also an in-cinema advertising platform.

Financials
The average ROCE of the company over the last 3 years is around 15% while RoE is 13%. As per the latest financial results here, the net current assets of the company stood at INR 125 Crore at the end of FY17. The company has fixed assets of INR 258 Crore and there is a goodwill on consolidation of INR 183 Crore. The company has large depreciation resulting in very high cash flow averaging INR 120 Crore per year in the last three years.

Business
The company's latest presentation gives idea about the business model of the company. The company earns income from two main sources, telecast of movies through satellites and displaying ads during the intermission and at the start of movies in theatres. The company now distributes movies to more than 5000 digital screens in India and totally 6000+ screens in the world. The company's in-cinema advertising is being used in more than 3700+ screens. The average income from ad has increased from INR 1464 per second per screen in 2013 to 1732 per second per screen in 2017 and the average ad time has gone up from 2:46 minutes to 4:34 minutes. The company recently signed a contract to show ads on 300 screens of United Media Works. Recent Demonetisation took a big toll on the growth of the company and GST also might be a dampener for people to go for movies as taxes are going to increase.

Shareholding
The promoters hold around 28% shares and holding has decreased by a small percentage lately. The promoters seem shareholder friendly as dividend payout is around 45% for recent year (INR 10 for EPS of INR 22).

Valuations
At the current market price of INR 380, the market cap of the company is around INR 1050 Crore which is less than 9 times its operating cash flow of last three years. The company's IPO came out in 2015 at INR 625 but all the money went to existing investors at that time. The business is very new but over time as number of multiplexes grow and they upgrade their technologies, chances are that this business will grow. So the stock is not a value buy but more a future play.
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