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ARROW COATED PRODUCTS - suggested @ Rs.12 ( Link HERE) currently trading around Rs.450 , reported Rs.48 Cr turnover and Rs.22 Cr net profit for FY 2014-15 on a consolidated basis . EPS is Rs.19. Company declared a dividend of Rs.2.5 per
share.High risk investors can still hold.
V2 RETAIL - Suggested
@ Rs.14( CMP Rs.33 ) reported a topline of Rs.287 Cr ( last yesr Rs.229 Cr) and a net profit of Rs.9.75 Cr ( loss of Rs.4.5 in last year) .Full year EPS
is Rs.4.14. Company's value shopping e-commerce platform ( http://www.v2kart.com/) is expected to launch formally in near future .Suggesting to hold it
IL& FS ENGINEERING - suggested
@ Rs.98 ( CMP Rs.90) reported Rs.2771 Cr turnover ( since company's last year result published for 18 months , it is not strictly comparable with this year result) .Company reported a loss of Rs.11 Cr ( last year Rs.145 Cr loss) for FY 2014-15. Though its last quarter result is lower compared with previous one , strongly suggesting to hold for long term. If there is any sharp fall in stock price due to exit of short term players , long term investors may take it as an opportunity.
1. “Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.”
Sounds pretty simple, right? But when you’re buying or selling stocks,
never losing money can seem impossible because prices fluctuate all the
time. Warren, though, believes in buying the value of a company
and not its stock price. He buys value at the right price, he doesn’t
speculate or gamble. He makes sure that he knows a company’s value and
that it will far outweigh the price that he paid for, and that is how he
sticks to rule No.1.
2.“You do things when the opportunities come along. I’ve had
periods in my life when I’ve had a bundle of ideas come along, and I’ve
had long dry spells. If I get an idea next week, I’ll do something. If
not, I won’t do a damn thing.”
Warren is a patient
man. He would never chase prices or force any investment. He waits for
the right moment (dictated by either price or market condition) to
pounce, and pounce he will. This requires a great deal of discipline,
and that is what separates him from the majority of unsuccessful
investors. Indeed, patience is a virtue.
3. “Never invest in a business you can’t understand.”
This Warren Buffet quote is probably an offshoot of rule No.1. He will
only play a game that he is really great at to ensure that his chances
of losing are slim. Understanding a business really well can help you
smell trouble from miles away. Also, you can never have conviction in
something you do not understand, and conviction is what enables you to pounce on a company when the time is right.
4. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
Warren would always put more value in a great company with great
products and management than a mediocre one that can be bought on the
cheap. A company’s stock price moves with the whims and emotions of
traders and speculators, and is never a good indicator of value. Never
mind Wall Street, focus on Main Street and look for a great company that
brings great value to its customers, investors, and industry.
5. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
This is a great criterion in choosing a company to buy. Only buy stock in a company that will thrive, grow, and excel
in the foreseeable future regardless of stock price. I only know one
kind of company that fits that description, and that is the great kind.
6. “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
Warren knows that the stock market is full of folly. He knows that
emotions like hope, greed, and fear dictate stock prices rather than
logic and value. When people are panicky or fearful (as in a bear
market) he takes that chance to buy great companies at cheap prices. As
long as he does his research and knows the real value behind a company,
he doesn’t get scared of its price fluctuations.
7. “It’s better to hang out with people better than you. Pick
out associates whose behavior is better than yours and you’ll drift in
This Warren Buffet quote shows his humility and his infinite thirst for learning and improvement.
He doesn’t have a huge ego; he doesn’t think of himself as superior
than anybody else out there. Nor does he think that he knows everything.
8. “Our favorite holding period is forever.”
plays for keeps. He doesn’t buy a company that he wouldn’t hold or
manage until a very long time. Making amazing gains, like his, takes
time. Start young and go for the homeruns.
9. “Only when you combine sound intellect with emotional discipline do you get rational behavior.”
Investors need these two ingredients to successfully parlay the
investment game. The sound intellect comes from doing your homework. It
is your research and analysis of a company’s business and value.
Discipline on the other hand, refers to your ability to wait for the
proper price to enter. You shouldn’t chase prices in bull markets and
you shouldn’t get scared in bears. Practice emotional discipline and
take your investing to the next level.
10. “Without passion, you don’t have energy. Without energy, you have nothing.”
Be passionate in what you do and do what you are passionate about.
Passion will make you go to the ends of the earth to see a dream
fulfilled. It will be your fuel in your journey. It will make you
unstoppable. It will see you through when times get tough, and it will
make life so worth living.
SAMKRG PISTONS & RINGS LTD - suggested @ Rs.163 reported Rs.1.68 Cr net profit ( Rs.3.26 Cr) in March quarter. Company's full year profit is Rs.12.3 Cr ( Rs.10.7 Cr) and EPS is Rs.12.76. Company declared a dividend of Rs.3 per share.Though its last quarter was below expectation ,on a full year basis , company's performance is satisfactory .It is one of the quality companies from this sector and expecting sector growth linked performance going forward. Stock corrected post result and currently trading around Rs.148.Still it is one decent company from auto component sector and those interested to keep some exposure in this secor can still HOLD it
HINDUSTAN TIN WORKS LTD- Suggested @ Rs.70 reported Rs.1.32 Cr net profit ( Rs.2.02 Cr) in March
quarter. Company's full year profit is almost flat compared with last year as Rs.8.6 Cr ( Rs.8.4 Cr) and EPS
is Rs.8.23. Company declared a dividend of Rs.1 per share.This is one company deviated mostly, from my growth expectations due to my failure to understand the business dynamics ( Metal Packaging)..Stock is currently trading around Rs.60 which implies a P/E of just 7 . Though there is not much down side risk , if interested ,may consider shifting to some other company with better growth prospects .
MOLD-TEK PACKAGING - Suggested @ Rs.78 , reported Rs.4.14 Cr net profit ( Rs.2.19 Cr) in March
quarter. Company's full year profit improved from Rs.9 Cr ro Rs.16.86 Cr and EPS
is Rs.14.40. Total dividend pay out for the year is Rs.4 per share .Recently company raised Rs.55 Cr by issuing shares to well known funds at a price of Rs.220 per share. Company now planning capacity expansion by starting new plants . Current price of stock is around Rs.180 .Suggesting to HOLD this stock and expecting bright future in long term
DION GLOBAL SOLUTIONS LTD -Suggested @ Rs.66 , reported Rs.21 Cr net profit ( Rs.1.44 Cr) in
quarter.Requesting to hold it at CMP Rs.130
TASTY BITE EATABLES LTD -Tasty
Bite Eatables recommended @ Rs.165 ,which is
currently trading around its life time high Rs.1380 .Company reported Rs.3.17 Cr net profit ( Rs.1.46 Cr) in March
quarter. Company's full year profit is Rs.10.7 Cr ( Rs.4.3 Cr) and EPS
is Rs.42. Low risk investors may book part profit .
Be it Apple, Microsoft, Nestle or P&G , If we closely track the history of huge wealth
creating stocks around the globe, in majority cases we can find out one
common factor – the company owns or entitled to use one or more successful brands. Indian market is not an
exception . We have many examples like Page Industries ( Jockey), Jubilant Foodworks ( Dominos) ,Eicher Motors ( Royal Enfield) , Whirlpool ,Laopala ..etc.
The new kid on this block is Pantaloon Fashion Retails. Ltd. Let us look into
this which I consider as a true multi bagger in making for long term investors.
It came into
existence by joining the fashion arms oferstwhile Pantaloon Retail and Future
Ventures .By virtue of its name ,many investors still considering PFRL
as a company belongs to the debt ridden future group led by Kishore Biyani.But
in reality , now this company belongs to Kumar Mangalam Birla led Aditya Birla
Group . Earlier Biyani sold it to Aditya Birla group in an effort to pare the debt
of his future group.
What make this loss making company suddenly attractive is
the scheme of arrangement announced by Aditya Birla Group few days back.To consolidate all its branded apparel business into a single entity AB
Group now bringing many super brands under PFRL’s fold. It will de-merge Madura
Fashion (the branded apparel retailing division) and Madura Garments Lifestyle
(luxury branded apparel retailing division) and merge them with Pantaloons.This scheme of arrangement will bring many
undisputed brands in premium apparel segment with this company which includes -
Louis Philippe, Van Heusen, Allen Solly, People, Hackett London , The
Collective ,Peter England ..etc. I don’t think any extra explanation is needed
to describe the success of these brands in our market and hence not wasting
time for that .
When we consider any business depends on
brands , we should look into the ownership of brands too . If such a company
loose its brand in any circumstances , the entire business may collapse and
hence some understanding about this part is very important for an investor. As
you are aware Page industries is not the owner of Jockey brand but they are
using that brand name as an exclusive licensee of Jockey Brand products from
Jockey International Inc till 2030. Like this ,Jubilant Foodworks using Dominoz brands through
an exclusive franchise agreement with Dominos International which is valid till
2025. Why I bring these examples here is just to point out the fact that these
agreements are made with a time frame and it should be renewed thereafter for
another fixed period, time to time.Though chances are rare for a termination , we
can’t rule out possibility for introduction of more and more covenants by original brand owner at
the time of each renewal. Even in some rare cases, relation between both
parties may go beyond this and ends in never ending disputes.The recent
incident of the dispute between the owner of McDonald brand and one of its
Indian franchise owner Mr Vikram Bakshi is one best example for such
unfortunate incidents.In this back ground let us look into the brand ownership
scenario of some of its major brands viz- Louis Philippe, Van Heusen, Allen
Solly and Peter England . Louis Philippe is a brand currently owned by Madura
itself.Van Heusen is originally owned by Philips Van heusen company ( US )but Madura owns the perpetual right to use
this brand .The world rights of Peter England brand acquired by Madura in 2000.
The brand ‘Allen Solly’ is originally started by a company named ‘William
Hollins & Company’ in 1744and
Madura Garments taken over this company in 1990.In nutshell , uncertainties
surrounding the ownership and usage of PFRL’s( on completion of scheme of arrangement) major brands are nil or less
compared with brands of many of the highly flying listed players like Page or
Jubilant.( I believe brands like Louis Philippe, Van Heusen, Allen Solly ,
Peter England..etcare equal or above
the brands of mentioned other companies in their respective category .More than
that when others own one good brand ,here in this case all these four brands are
extremely strong .Existing brands of Pantaloon ( Byford,Factor,annabelle..etc..etc)
will continue in this company itself.In addition to this branded apparel
manufacturing ,the combined entity will own a retail network of 1,869 stores
across India and a strong e-sale platform - http://www.trendin.com/ .
The First reason for investors and analysts apathy is
the current loss and debt position of PFRL.At present, PFRL’s debt is almost
Rs.1085 Cr and Debt to
EBITDA ratio is 28: 1.I am accepting the fact that any
investor taking investment decisions after analysing the equations and numbers
will avoid any company with such a Debt to EBITDA ratio . But if we closely look at the possible Debt
to EBITDA post merger of Madura units ,
it will sharply improve from 28:1 to 3.8:1. From the present huge loss, PFRL
will turn into a strong company with Rs.400 Cr( approx) pre-tax free cash flow
on merger.Company has said , on completion of
restructuringit would invest Rs 450-500
crore for the next three years, to add 250-300 Madura Garments stores
and 25-30 of Pantaloon stores.
Management already announced their decision
to change the combinedentity’s name
from Pantaloon to Aditya Birla Fashion Retail ( ABFR) .This will help for an image
makeover from the chequered past of Pantaloon( due to debt related issues)
under previous management and remove the misunderstanding of Investors about the
ownership of this company. In a press statement ,Group Chairman Mr.Kumar Mangalam
Birlaclaimed“The new company will be the largestbranded apparel playerin India not only in the listed but also in
the non-listed space," .
Another confusion is about valuation of stock
post expansion of equity .As you are aware ,companies with market leadership
position with excellent brand and decent
growth will always trade at premium valuation at high P/E multiples .( I remember ,99 % analysts suggested to skip
Jubilant foodworksIPO when they offer
shares @ Rs.145 in 2010citing higher
valuation at that price.). Considering the current financial data of listed
company ( Pantaloon) and the companies to be merged with Pantaloon , I hope the
new combined entity will report an EPS of Rs.6.50-7 on completion of merger .
Having said , this will be India’s largest branded apparel player and deserving
premium valuation. Brand recall of Its super duper brands – Louis Philippe, Van
Heusen, Allen Solly and Peter England- is NOT a tad below the single brand of
Page Industries . The most important factor is,these brands are showing very
high growth rate and Madura Lifestyle’s sales have grown at a CAGR of 27% from FY10 to
FY14. In addition to this, company already announced its plans to open 100
Madura Garments stores and 10 Pantaloon stores in every year for next three
years. Operational synergies and cost savings from merger is expected to reduce
the loss of Pantaloon division going forward and excellent cash flow of Madura
divisions will help to ease the debt pressure of combined entity . As a
combined entity ,cost saving opportunities are also possible in case of
sourcing , technology,real estate ..etc.Now let us look into the P/E multiple
of few listed companies who own market leading brands andbusiness depends on consumer spending . See
below Table :
# P/E of PFRL calculated based on the expected EPS post scheme of arrangement
Click on the image for better view
Even if the given small companies( by
turnover ) is not strictly comparable with Aditya Birla Fashion Retail Limited
- ABFRL ( proposed name of merged entity) , considered the same for arriving a
fair comparison in case of P/E multiples. Even the turnover of Page industries
will be only a fraction of the turnover of ABFRL once the merger process
Having said, the brands owned by Page and
Jubilant ..etc not even owned by them( franchise of brands owned by foreign
companies upto a fixed time with renewal option) where there is no uncertainty
regarding the brands owned by ABFRL which is either owned brands or with
perpetual rights . Aditya Birla groups financial muscle and reputation is
another factor to keep in mind while comparing with others . Brand extension
possibilities to other fashion accessories is another possibility. Company
already selling products like Footwear, Belt,wallet..etc under its popular
brands . Creating succefull sub brands is also a possibility and they started the same with Allen Solly Junior . All together ,I believe AB group is capable enough to handle the debt
position and will find out a way to improve return ratios going forward once
the merger process is complete . There is no reason to get a below average P/E
for a company like this which own four super brands (Louis Philippe, Van
Heusen, Allen Solly and Peter England) ,along with2000 retail outlets pan India and a robust
CAGR .Merger process is expected to complete in this financial year itself .
With excellent brands , high potential fast growing
business , financial muscle and business acumen of Aditya Birla group , I
believe , few years from now ABFRL ( now Pantaloon Fashion Retail ) will grow
as the feather in the cap of Aditya Birla Group and it is one future blue chip in making .Being a long term investor ,I am taking it as a rare opportunity to grab a high potential company in Indian fashion
space at its beginning stage and comfortable to buy even at this price .Suggesting my readers to take a call based on own conviction .Stock (PFRL) listed in both exchanges and trading around
SKM EGG PRODUCTS -reported its March quarter and full year numbers today.For the three months ended March , Company reported a topline of Rs.66 Cr v/s Rs.69 Cr and a net profit of Rs.7.8 Vr v/s Rs.3.8 Cr ( including other income - standalone basis) . For FY 2014-15 , company's topline is Rs.290 Cr v/s Rs.264 Cr and net profit improved from Rs.7 Cr to Rs.23 Cr .Full year EPS is Rs.8.85 . A tad lower profit in last quarter was mainly due to increased expense for employee benefits and provision for depreciation as per new standards. Company declared a dividend of 10 % after a gap of 5 years. Company is expected to announce their plans to achieve targetted sales within 6-9 months . Though the overall result is not bad , due to mismatch with expectation and reality of investors , it already corrected more than 10 % . Long term investors can still hold it and I believe this industry will further consolidate in another few years and it will emerge as one of the very few players in India in this business going forward.
MIC Electronics posted better result. Full year result includes the
income from sale of one subsidiary and also company not provided
interest for certain loans . Even after deducting all these , company
done well and reported a profit of Rs.5 Cr (approx) v/s a loss. Those with some risk appetite with long term view can consider even at
Prima facie , the above credentials may not enthuse you . Yes , it is not a stock with enough numbers to attract market pundits at present or widely discussed so far . But I strongly believe it will become a multi bagger in future .
to find out the company from the above clues and send the answer
to my mail id (firstname.lastname@example.org) with subject line ' GTS-9 '
,within next Friday . Name of persons sending correct answer on day -1
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