In April 2013, when NESCO was quoting at Rs. 769, Daljeet Kohli looked investors straight in the eye and confidently advised them to buy the stock. The stock is quoting at “compelling valuations” and has a 47% upside, Daljeet said, in his usual soft spoken and modulated voice.
Daljeet’s logic was impeccable. He pointed out that NESCO’s star asset “Bombay Exhibition Center” was located in a strategic location and that it was a “cash cow with negative working capital cycle”. He also emphasized that NESCO had an “impressive” balance sheet with zero debt. He also liked the management’s conservative and prudent style of business. The valuations are compelling, Daljeet added, with a sparkle in his eyes.
Today, 14 months later, NESCO is at Rs. 1,109 and Daljeet’s promise of a 45% gain has been fulfilled.
Now, the best part is that there is no need for you to despair if you missed the first 45% gain because there is another 45% gain waiting for you.
In his latest report, Daljeet’s colleague, Y. Santosh, (who also co-authored the original report), has promised another 45% gain from NESCO.
Once again, the logic is impeccable. Let’s take a quick look:
“With new government at centre, we expect revival in the economy. This in-turn would lead to higher marketing spends by business houses, thereby benefiting Exhibitions business. With improvement in Exhibitions business, Nesco would be one of the key beneficiaries. On the back of improved revenue visibility across Exhibitions and IT Buildings business, we have assigned 12% discounting rate to IT Building I, II & III and assigned cap rate of 8% (vs. 9% earlier), to arrive at revised Price target of Rs 1,680/share.
At CMP of Rs 1,160, Nesco is trading at FY15E and FY16E, EV/EBITDA multiple of 9.2x and 4.9x, respectively. We continue to maintain BUY rating on the stock with revised PT of Rs 1,680 (given the 44.8% upside from current level).”
So, there you have it. Simple and clear logic. There is no reason why Daljeet and Santosh would not be proved right this time as well.