Saturday, October 27, 2018

Akshay Kumar doesn't guarantee a company or brand's success

A long time back (almost 4 years back in 2014), I had prayed to God to save the Indian banking sector in Beware of Frauds post. Now that the banking sector is being saved by RBI and Indian Government, another thing that I want to highlight is the mention of a company named "Kwality" in the same post. I had mentioned that my mother-in-law called me to check if she can buy the shares of "Kwality". The price at that time was hovering around INR 50. I pleaded my mother-in-law to not invest blindly.

I also looked at the company's brand at the website. This is the same company that had ice-cream brand "Kwality Walls" which was acquired by Hindustan Unilever in 1994.

The company then signed up Akshay Kumar as brand ambassador in 2015 and renewed him again in 2017. The advertisement also show an actress Asimah Mirza whose instagram account you can see here. Due to good revenue growth and profits, the share price went up from 50 to INR 160 in March 2017 and I was depressed that I gave wrong advice to my mother-in-law. By March 2018, the price came down to INR 80 and I was thinking that I may have been wrong but not completely wrong.

What is the situation now? The price is hovering at INR 7 and hitting lower circuit of 5% daily. The latest news says that the company has defaulted on its 1200 crore loan and is going to go to NCLT (National Company Law Tribunal).

Strange are the markets!
Bookmark and Share

Saturday, August 4, 2018

Sector in Decline - Newspaper Publishing and Media

Lately, you all might have seen that I am buying some publishing businesses such as Jagran Prakashan, Just Dial while I was already holding Hindustan Media Ventures. The valuation of these companies are given below in the table

CompanyMarket CapOperating Cash Flow(3 year average)P/ENet Current Assets
Jagran Prakashan380044512.25575
DB Corp432937013.9675
Hindustan Media Ventures12461509.151330
Just Dial376515526.231000

If you check the history of many of the companies, Jagran Prakashan (who owns Dainik Jagran) did a buyback at INR 195 for 292.5 Crore and share price is now at INR 125. On the day of buyback validity, the share price was at INR 160. Jagran also owns another listed company Music Broadcast which owns 91.1 FM - Radio City. Surprisingly, Music Broadcast is also doing buyback. DB Corp (who owns Dainik Bhaskar) announced a buyback at INR 340 for 312.5 Crore while the current price is INR 237. Just Dial is an internet based business for finding local businesses (Yelp of India). It also has approved buy-back at INR 800 for 220 Crore. I am not sure why at one side market is evaluating cash-rich companies like these generating decent cash flow at ridiculously low valuations while some others are trading at 75-100 times cash flow such as Dabur, Honeywell, Berger Paints, Page Industries, Jubilant Food and many others. Time will tell whether I am right or the market.
Bookmark and Share

Sunday, July 8, 2018

Recently Listed Good Quality Companies

Since the last 5 years, a lot of IPOs have come out and when I recently looked at the list, it seemed many good quality companies have got listed and I missed catching them. Here are a few:

NameBrand/UseIPO PriceCurrent Price
Sheela FoamSleepwell6801500
Music BroadcastRadioCity333312
Matrimony.comBharat Matrimony985745
Quick HealAntivirus321275
Mahanagar GasPiped Gas421809
Just DialLocal Business483570
ThyrocarePathology Lab446570

Many of these companies are having a great brand and use and all of them are from different sectors of the economy. Even the business is generating pretty good ROCE and having a reasonable valuation. Make sure you keep an eye.
Bookmark and Share

Monday, April 30, 2018

Recent IPO Performances

There has been flurry of activity on the IPO front recently and in my last post I already covered that there has been mixed results from two companies in auto ancillary sectors. I want to extend it to now cover all the IPOs between 2013-2018 and show where they stack. Here is the result:

CompanyIPO DateIssue PriceCurrent PriceGain/LossPrice 27 Oct
Repco HomeApril 2013172598247.7%331
Just DialJune 2013483448-7.5%437
WonderlaMay 2014125365192%267
Snowman LogisticsSept 20144749.455.2%34
Sharda CropchemSept 2014156406.7160.7%330
Shemaroo EntertainmentOct 2014170479181.76%446
Monte CarloDec 2014645532-17.5%347
Ortel CommunicationMarch 201518121.75-88%7
Adlabs EntertainmentApril 201518050.35-72%11
Inox WindApril 2015325108.7-66.55%78
VRL LogisticsApril 2015205424.3106.7%255
MEP InfraMay 2015638331.75%42
UFO MoviezMay 2015625394.7-36.85%313
PNC Infratech26 May 2015378 (Pre split 5:1)166.8120.6%127
Manpasand BeveragesJuly 2015320 (Pre bonus 1:1)395.4147.1%83
Syngene InternationalAugust 2015250615.6146.25%570
Power Mech ProjectsAugust 20156401028.9560.75820
Navkar CorpSeptember 2015155179.5515.8%67
Pennar EngSeptember 201517883.95-52.85%52
Shree Pushkar ChemSeptember 201565219.45237.6%180
Sadbhav InfraSeptember 2015103134.4530.5%101
Prabhat DairySeptember 2015115179.9556.25%100
Coffee DayNovember 2015328332.91.5%260
Interglobe AviationNovember 20157651407.884%870
S H KelkarNovember 2015180240.6533.7%172
Dr Lal Path LabDecember 2015550847.754.1%893
Alkem LabDecember 20151050196987.5%1940
Narayana HrudayalayJanuary 2016250274.510%220
Precision CamshaftFebruary 2016186101-45.7%60
Teamlease ServicesFebruary 20168502647.9211.5%2514
Quick HealFebruary 2016321333.24%185
Bharat Wire RopeApril 201645124.75177.25%72
Equitas HoldingsApril 201611015641.8%99
ThyrocareMay 2016446668.7550%560
Ujjivan FinancialMay 2016210405.3593%181
Parag Milk FoodsMay 2016215314.4546.25%251
Mahanagar GasJuly 2016421894.8112.5%814
Quess CorpJuly 20163171162.7266.8%686
L&T InfotechJuly 20167101592.9124.35%1656
Advanced EnzymeAugust 2016896 (Pre split 5:1)254.642%177
Dilip BuildconAugust 20162191163431%382
S P ApparelsAugust 2016268369.737.95%275
RBL BankAugust 2016225537.65138.95%500
L&T TechnologySept 20168601337.0555.5%1560
GNA AxlesSept 2016207555.15168.2%353
ICICI PrudentialSept 2016334433.229.7%325
HPL ElectricOct 2016202114.45-43.35%56
Endurance TechnoOct 20164721285.95172.45%1104
PNB Housing FinNov 20167751364.776.1%700
Varun BeveragesNov 2016445645.0544.95%760
Sheela FoamDec 20167301517.55107.9%1500
Laurus LabsDec 201642850818.7%340
BSE LimitedFeb 2017806812.051%596
Music BroadcastMar 2017333387.816.45%329
Avenue SupermartsMar 20172991483396%1227
CL EducateMar 2017500211.55-57.7%113
Shankara BuildingApril 20174601948.4323.5%1086
S Chand and CoMay 2017670401.6-40%194
HUDCOMay 20175865.9513.740
PSP ProjectsMay 2017210574.75173.7370
Tejas NetworksJune 2017257336.3530.9%237
Eris LifeJune 2017603765.3526.9%684
CDSLJune 2017149293.8597.2%239
GTPL HathwayJuly 2017170152.75-10.15%85
AU Small Finance BankJuly 2017358731.65104.4%523
Salasar TechnoJuly 2017108388.55259.77%210
Security & IntelligenceAugust 20178151180.6544.9%835
Cochin ShipyardAugust 2017432530.9522.9%379
Apex Frozen FoodsSept 2017175646.7269.55%340
Bharat Road NetworkSept 2017205179.75-12.3%116
Dixon TechnologiesSept 201717663463.296.1%2084
Matrimony.comSept 2017985836.65-15%480
Capacite InfraSept 2017250361.3544.55%180
ICICI LombardSept 2017661752.9513.9%800
SBI Life InsuranceOct 2017700758.858.4%570
Pratap SnacksOct 20179381359.845%1004
Godrej AgrovetOct 2017460703.2552.9%512
Indian Energy ExchangeOct 201716501631.95-1.1%1600 (after split 160)
General InsuranceOct 2017912711.9-22%634 (after split 317)
Reliance NipponNov 2017252252.950%160
Mahindra LogisticsNov 2017429487.213.5%550
Khadim IndiaNov 2017750776.53.5%594
HDFC Standard LifeNov 2017290519.1579%360
ShalbyDec 2017248217.55-12.3%149
Future Supply ChainDec 2017664700.155.5%649
Astron PaperDec 201750137.85175.7%110
Apollo Micro SystemsJan 2018275232.3-15.5%116
Newgen SoftwareJan 2018245239.3-2.3%232
Amber EnterprisesJan 20188591073.5525%837
Galaxy SurfactantsJan 201814801446-2.3%1260
Aster DM HealthFeb 2018190170.95-10%159
HG Infra EngMar 2018270336.3524.6%173
Bharat DynamicsMar 2018428405-5.4%283
Bandhan BankMar 2018375506.4535%380
Hindustan AeronauticsMar 201812151125.8-7.35%746
Mishra Dhatu NigamApr 201890146.4562.7%108
ICICI SecuritiesApr 2018520422.75-18.7%239

The table clearly shows that it has been a mixed bag for investors. Especially after October 2017, there has been 13 listings in green and 10 in red so 40% of the total IPO are in negative since last 6 months. This clearly tells that there is a froth in the primary market offerings.

The one that are in negative or very small gain but looks attractive from investment perspective to me are following:
  • Just Dial
  • Monte Carlo
  • UFO Moviez
  • Pennar Engineered Building Systems
  • Precision Camshaft
  • Quick Heal
  • Advanced Enzyme
  • BSE
  • Music Broadcast
  • GTPL Hathway
There has been listings of many insurance companies including ICICI Lombard, Reliance Nippon, HDFC Standard Life, SBI Life Insurance and I see very high valuations for them currently except for General Insurance.

There has been some good listings such as Sharda Crop Chem, Mahanagar Gas, Manpasand Beverages, CDSL which happened at slight gains to the issue price and then based on performance, stock price ran away. In Warren Buffett's  language, I was thumb-sucking at that time and lost these opportunities. I did buy some like L&T Infotech at around 650, which is below IPO issue price, and now I am handsomely rewarded as the stock price is hovering around 1600.

Among all the companies, the most stellar of them is Avenue Supermart (DMart) which came with issue price of 299, listed at 590 and now trading at 1500. Some of the good returns has happened due to heavy overvaluation such as that in Dilip Buildcon, Teamlease Services, Quess Corp, PSP Projects, Shankara Building Products, Apex Frozen Foods, Astron Paper and many others from the above list including Avenue Supermart too. Many are trading at stratospheric valuation and would give big heartache to investors when the tide turns.

Updated on 27 Oct 2018: I have updated the list with latest price as of today since a lot of action has taken place in two months. I had already mentioned some names which looked overvalued at that time out of which only Astron Paper and Teamlease have not corrected much otherwise Dilip Buildcon has gone down by 70%, Quess by 40%, Apex Frozen by 50%, Shankar Building by 45% and even Avenue Supermart has corrected by 17.5%. Even the one that I found interesting such as Pennar, Quick Heal, Matrimony have gone down by 30% or more. The one which has withstood the carnage have been shown with green color and some of them were already in my portfolio such as Larsen & Toubro Infotech. Some I added in the correction such as Sharda Crop Chem, Precision Camshafts, Bharat Dynamics etc...

Bookmark and Share

Sunday, April 22, 2018

Tale of two IPOs

I typically avoid looking at IPOs but I do visit the companies which come out with IPOs after few years to see what they have done and how the stock prices have reacted. In this post, I will analyze Precision Camshaft and GNA Axles. Precision Camshafts came out with IPO in January 2016 while GNA Axles came out with IPO in September 2016. Following table summarizes the IPO details:

GNA AxlesPrecision Camshafts
Issue Price207186
P/E @Listing17.122.3
Current Price550103
P/E Now29.124
Average Operating Cash
Flow in 3 Years
37 Crore83 Crore
Enterprise Value
(Market Cap + Debt)
(1180 + 117)
(980 + 110)
P/B Now3.571.75

The above table shows that in one company, investors have gained 165% in around 1.5 years and in the other, investors have lost 45% in around 2.25 years. The reason for more enthusiasm in GNA Axles is growth in recent times while flat revenue growth for Precision Camshafts since last two years. In 4 years between 2012 and 2016, Precision Camshafts average revenue (average of 3 years) grew from 260 Crore to 471.5 Crore while that of GNA Axles revenue grew from 349 Crore to 482.6 Crore. The only problem is that GNA this year has increased revenue as well as profits while Precision's revenue topped in 2015 and is decreasing since last 3 years now.

I personally feel that some premium for GNA Axles is justified but such large variation of valuation just due to growth in recent years seems far fetched. If you have to invest right now, I would go with Precision Camshafts.

Bookmark and Share

Sunday, February 25, 2018

Two out of favour sectors - Pharmaceuticals and Banks

People reading this blog must be able to see my recent investment activities and find that I have been selectively investing in two out of favour sectors in the last few months or more than a year I would say. The sectors are

  • Pharmaceuticals
  • Banks
In Pharmaceuticals, there is a clear harakiri where many company saw their share price going down by more than half including Lupin (2100 in Oct 2015 to 800 now), Sun Pharmaceuticals (1150 in April 2015 to 570 now), Dr Reddy's (4250 in August 2015 to 2170 now), Glenmark (1200 in August 2015 to 535 now).

I myself started investing in some of the well run companies such as Divi's Laboratories at 1000+ in 2015 and saw its price going down to 550. Luckily, I had some courage to keep buying at lower prices and average down so my average buying price kept getting lower and settling at 670 when I last bought some shares at 550. Today since the price is again at 1050+, I am having a decent profit.

Recently, I am still investing in some of the well known names such as Abbott, Sanofi, Suven Life Sciences etc... I am not buying them at bargain prices but they are fairly valued or sometimes 20-30% more than fairly valued but I don't think they are as bublicious as their counterparts in consumer space such as Hindustan Unilever or Britannia or Pidilite or Asian Paints.

In Banks, I did buy J&K Bank at 100 and had to sell at 80 to book losses. Today it is trading at 66. But I think I was early and now with NPA numbers of all the banks clearly available, the separation of wheat from the chaff has happened. The clear winners are only few such as HDFC Bank, Kotak Mahindra and Indusind Bank but there are second tier private banks which have got my attention including Karur Vysya Bank, Karnataka Bank, Federal Bank and South Indian Bank. NPAs of these banks are not as high as 10-20% similar to public sector banks but they are not as low as 1-3% which is the case for top run private banks that I mentioned above. There is some valuation measure available from the deal that happened in 2015 when Kotak acquired ING Vysya Bank at around 15K crore. After three years, similarly sized banks like Karur Vysya available at 8K crore, Karnataka available at 4K Crore and Federal Bank at twice the size available at 18K crore does look promising. These are all long term plays on the Indian economy. I hope they turn out to be good bets.

Bookmark and Share
Related Posts with Thumbnails