The first thing you must note – because it will give you confidence – is that several savvy investors with a proven track record for finding winning stocks have entrusted a large part of their wealth to Ashiana Housing. Among these are well-known names like Prof. Sanjay Bakshi, Ashish Kacholia and Westbridge Capital/ Jwalamukhi Holdings.
Prof. Sanjay Bakshi is an authority on value investing. He has an impeccable reputation for practicing what he preaches. He only buys stocks with strong fundamentals and reasonable valuations. His stock picks Relaxo Footwears and Thomas Cook are a classic example of how picking stocks with strong fundamentals and staying with them can lead to enormous gains with low risk.
Prof. Sanjay Bakshi is also the author of two educative articles ((1), (2)) which explain why we should give up our obsession for “cheap” stocks and instead focus on finding quality stocks, even if they are quoting at premium valuations.
Prof. Bakshi sent out a subtle buy call in December 2013, when Ashiana Housing was quoting at Rs. 62 (adjusted for splits). In a brilliant analysis, the Prof. explained that there are several unique features about Ashiana Housing which distinguish it from other real estate companies. Well, at today’s CMP of Rs. 177, Prof. Bakshi and his vast legion of followers are sitting on gains of 182%.
The next savvy investor to be interested in Ashiana Housing is Ashish Kacholia. Ashish Kacholia’s stock picking prowess is proved by the dazzling multi-bagger stocks like Gati, Neuland Labs, eClerx etc in his portfolio. Even in JB Chemicals, Ashish Kacholia exhibited superb timing and is sitting on huge gains.
Interestingly, Ashish Kacholia appears to be earlier than Prof. Sanjay Bakshi to latch onto Ashiana Housing. Kacholia started with a chunk of 1,90,000 shares in March 2013 and now holds a truckload of 9,78,060 shares, worth Rs. 17.31 crores.
The next savvy investor in Ashiana Housing is Westbridge Capital a.k.a. Jwalamukhi Holdings. Their portfolio reads like a whos-who of multibagger stocks. Westbridge bought 2,30,183 shares in March 2013 and has increased it to the present holding of 26,42,587 shares.
(Incidentally, Westbridge’s latest stock purchase is La Opala RG. They bought a chunk in July 2014 at Rs. 1165. Today, just a few weeks later, the stock is at Rs. 1668!)
It is also noteworthy that the savvy investors have substantially increased their holdings in Ashiana Housing in a short period. This gives you a hint of the confidence that they have in the stock.
Now, we have to turn to the latest “Initiating coverage” report on Ashiana Housing by Daljeet Kohli and Y Santosh. The duo has, as always, kept the analysis clean and simple. The caption “All set for multifold growth over next 2 years…” itself tells you everything.
The several points made by Daljeet and Santosh can be summarized as follows:
(i) Ashiana Housing has a “unique asset-light business model” where it does not own the land;
(ii) It consistently generates >30% pre-tax Internal Rate of Return (IRRs), >25% RoE & RoCE and generates strong cash flow;
(iii) It has zero/ marginal debt (Debt:equity ratio is 0.03x);
(iv) FY15-16E will see strong earnings growth with a ~149% top-line CAGR on the back of 3 projects entirely getting completed and some phases of remaining 7 projects getting completed. The PAT CAGR is expected to be ~192% during FY14-16E while the PAT margins are expected to expand from 19.8% in FY14 to 27.1% in FY16E;
(v) Ashiana is presently trading at FY15E and FY16E EV/EBITDA multiple of 18.1x and 5.9x, respectively, which is attractive. The target price (probably conservative) is Rs 202.
Daljeet & Santosh also ask the pertinent questions “Is this growth Sustainable?” and “Where will the growth come from?” and answer it with conviction.
If you want more information about Ashiana Housing’s future gameplan, you have to read their “Investors presentation”. It gives you all the information about their past and the future.
Personally, I think it would be naïve for us to ignore a stock that has the backing of savvy investors like Prof. Bakshi, Ashish Kacholia, Westbridge/Jwalamukhi and now Daljeet Kohli.