Mastery over micro-cap multibagger stocks
Nobody can dispute the proposition that Mudar Patherya has a deep understanding of micro-cap stocks and of what makes them tick. He has mastered the art of buying these stocks when they are at an inflection point.
In the past, we have benefitted enormously from Mudar Patherya’s stellar recommendations such as Caplin Point Labs (the next Ajanta Pharma), Mercator, Max Ventures, Alphageo, APL Apollo, Navin Fluorine, GHCL, Jubilant Life Sciences, Star Paper etc.
His last stock recommendation, Adani Transmission, also looks like a powerhouse stock in the making.
So, it is obvious that we cannot afford to turn a deaf ear to any of Mudar’s sayings.
In the latest episode, Mudar has recommended five small-cap stocks that he assures are “gems in the making”. Let’s quickly get familiar with these stocks:
Emami Infrastructure – a simmering volcano
It is a matter of common sense that when a behemoth promotes a minnow, hefty gains will gush out from the minnow.
We saw this happening in Astec Lifesciences (Vijay Kedia’s favourite stock) where under the benign guidance of the blue-chip Godrej Industries, the shareholders are strutting about with bulging bank balances.
Another example is that of Arvind Infrastructure which was spun off by Arvind Ltd. While big-ticket shareholders bailed out in a hurry, Porinju Veliyath and Ashish Chugh smuggled into the stock, knowing from experience that a minnow like that has to shine sooner or later.
A third example is that Nirvikara Papers (now renamed as Balkrishna Papers) which was taken over by the blue-chip mid-cap Balkrishna Industries.
Porinju Veliyath was amongst the few who had the foresight to realize that such opportunities do not come everyday. He is sitting pretty on a massive chunk and smiling at the huge gains that are gushing into his portfolio.
A fourth example is that of Emami Infrastructure.
Mudar assures that Emami Infrastructure is a “simmering volcano” which is likely to erupt and shower hefty gains owing to the facts that:
(i) The sum of Rs. 394 crore presently shown as customer advances will become revenues in FY17,
(ii) A merger with Zandu Realty is impending. This will enhance the net worth of Emami Infrastructure with a disproportionately lower increase in equity capital,
(iii) The business model is asset-light. There are a number of pan-India project launches,
(iv) The market cap is only Rs. 165 crore while the illustrious parent is valued at Rs. 23,500 crore.
Emami Infra’s top brass has confirmed that the Company holds big chunks of land in Madurai and Jhansi which are ideal for smart city projects. Both cities have been selected by the union government under its ‘Smart Cities Mission’.
Shilp Gravures – management deserves to be backed
Shilp Gravures is an ultra micro-cap or a nano-cap with a market capitalisation of only Rs. 53 crore.
The stock is presently out of favour with the masses because of poor Q3FY17 results.
However, Mudar assures that the management is top-notch and deserves to be backed. They will sooner or later be able to turn around the fortunes. He also emphasizes that the Company is sitting pretty on Rs. 10 crore of cash on the books which is huge in the context of the puny market capitalisation of Rs. 50 crore.
Haldyn Glass – JV with German behemoth will turn fortunes
Haldyn Glass has been meticulously analyzed by Nigel D’Souza of CNBC TV18 and he has explained all of its salient features. One does not have to go further than this to understand the mechanics of the stock.
Mudar has done a lot of number crunching and looked at factors like revenue growth, interest cover etc to emphasize that Haldyn Glass is “funds-flush in a capex-intensive business”.
He also points that the joint venture with Heinz Glas International GMBH, Germany, is the “new twist to the story”.
The benefits of the JV will reflect in the financials from 2017-18 and may result in a re-rating of the stock.
Webel SL Energy – only profit maker in loss laden sector
Mudar has systematically set out the virtues of Webel SL Energy and one can do no better than to reproduce that:
(i) The company is engaged in the manufacture of solar photovoltaic cells and modules;
(ii) Ebitda increased from ~4.58 crore in Q2 to ~7.97 crore in the third quarter;
(iii) Capacity increased from 120 Mw to 200 Mw effective December 2016;
(iv) The Company is virtually zero-debt following financial restructuring;
(v) it is adequately de-risked from sectoral price meltdown;
(vi) interest outflow was negligible, order book is multi-month, production take-off has commenced and this is perhaps the only listed presentable post-restructured balance sheet in a loss-laden sector passing through its biggest expansion phase in its history.
Asian Oilfield Services – 6-bagger gains already
Few have heard of Asian Oilfield Services, a company engaged in the oil drilling and exploration sector.
Yet, the stock has given magnificent 6-bagger gains over the past year.
Prima facie, Asian Oilfield appears to be engaged in the same activity as that of Alphageo and is prospering due to the increased interest in crude oil drilling and exploration.
It was recently awarded a Letter of Award (LOI) worth Rs. 109 crore from ONGC for 2D seismic data acquisition in unappraised on land area of Sedimentary Basins of India for sector 6 (Ganga).
Mudar has explained that there are three factors that will lead to increased prosperity to Asian Oilfield, namely, bullish downstream prospects, dearth of listed seismic exploration players and a hefty inflow of maintenance orders.
Basket approach required
It goes without saying that when one is dabbling with nano and micro-cap stocks, a “portfolio” or “basket” approach is required to be adopted given their high mortality rate. Some stocks will sink without a trace while other will turn out to be magnificent mega baggers. So long as the gains exceed the losses, we should have a smile on our lips and a spring in our step!