Radhakishan Damani, the legendary stock wizard, is so reclusive that his visit to Dalal Street on Thursday went almost unnoticed by the punters who throng the area and keep a 24×7 vigil. The veteran investor quietly walked upto the Thangamayil Jewellery counter and placed an order for 244,584 shares at Rs. 278.05 each and handed over payment of Rs. 6.80 crore.
The Billionaire was careful not to use his own name. Instead, he bought the stock in the name of ‘Derive Investments’, one of his investment companies (the other is Bright Star Investments’).
Varinder Bansal, the ever vigilant reporter at CNBC TV18, was the first to break the sensational news.
Derive investment bought Thangamayil Jewellery today
— Varinder Bansal (@varinder_bansal) July 21, 2016
It may be recalled that Varinder Bansal has won rich praise from the cognoscenti for busting the infamous “Rakesh Jhunjhunwala – Surana Solar scam” and also his fearless reporting in the Ricoh India fraud case where he demanded accountability from the management and voiced the angst of thousands of small shareholders who are helplessly trapped in the stock. He has also revealed top-secrets of Bollywood sex symbol Kimi Katkar’s 32-bagger stock pick.
Why Radhakishan Damani bought Thangamayil Jewellery, a micro-cap of Rs. 413 crore market capitalisation, is not difficult to understand. The reasons are similar to those which prompted Brahmal Vasudevan’s Creador / Idrai to buy the stock of PC Jeweller. These reasons include:
(i) The size of the domestic gems and jewelry business is a mammoth Rs. 3000Bn. The market is growing at a CAGR of 16%. The organized players have a 27% market share. Thangamayil Jewellery is one of the large national players and enjoys a lion’s share amongst the organized players;
(ii) Thangamayil Jewellery is on a strong growth trajectory. It has aggressive expansion plan in Metros, Tier I and Tier II towns;
(iii) The soft gold rates augers well for jewellery companies as the margins will increase;
(iv) The Government’s decision to roll back the 1% tax collection requirement on purchases of gold jewellery worth Rs. 2 lakhs and above has removed the hurdle over jewellery stocks.
|THANGAMAYIL JEWELLERY LTD – KEY FUNDAMENTALS|
|MARKET CAP||( Rs CR)||413|
|EPS – TTM||(Rs)||[*S]||7.47|
|LATEST DIVIDEND DATE||19 JUL 2016|
|BOOK VALUE / SHARE||(Rs)||[*S]||100.25|
[*C] Consolidated [*S] Standalone
|THANGAMAYIL JEWELLERY LTD – FINANCIAL RESULTS|
|PARTICULARS (Rs CR)||MAR 2016||MAR 2015||% CHG|
Five point checklist to evaluate micro-cap stocks:
At this stage, we must apply the five point checklist formulated by Peter Rabover, the fund manager of Artko Capital LP, to evaluate the investment-worthiness of micro-cap stocks:
(i) The company must have high Returns on Invested Capital (ROIC):
Thangamayil Jewellery does not score well on this point because its RoE is 5.39 and the RoCE is 5.39.
In contrast, PC Jeweller has a RoE of 19 and a RoCE of 18.97.
However, given the dominant nature of the brands owned by Thangamayil Jewellery and its expansion plans, Radhakishan Damani may be expecting a dramatic improvement in the RoE and RoCE, which will lead to a re-rating of the stock.
The other points formulated by Peter Rabover relating to (ii) quality earnings, (iii) clean balance sheet, (iv) high promoter holding and (v) simple business are answered well by Thangamayil Jewellery. The promoters’ holding is very high at 70%.
It is worth noting that Creador / Idria is already basking in gains of 50% on its investment in PC Jeweller.
PC Jeweller is much larger than Thangamayil Jewellery. While PC Jeweller has a market capitalisation of Rs. 7,113 crore, Thangamayil Jewellery is at only Rs. 413 crore. This implies that the growth trajectory of the latter may be better than the former, if it steps on the gas.
It will be interesting to watch whether Thangamayil Jewellery will be able to match the spectacular performance of PC Jeweller and deliver more gains than the latter has done!
LOW ROE /ROIC REASONS :-
1…All problems created at Thangmayil was due to unplanned expansion( from 9 store 2010 to 26 store 2013)
2..Huge expansions takes toll on operations and caused operating cost to run create lot of troubles
3…Unhedged Gold due to roll back of gold leasing by banks around 2013+Import duty + higher domestic demand + fall of gold prices from 32 k ro 26 k caused company INVENTORY LOSSES
Reason for Turnaround:-
1..2013 No new store added
2..In house Manufacturing increased from 40% to 85%
3..60% of Inventory is hedged
4..Incresed % Silver in sales contribution
5…Per Employee productivity is increased
6..Brand Building activity with controlled Advertising expenses
7..Increased Inventory turn from 3 to 5
I am finding it difficult to find any data about the company. Where did you find such details, especially with respect to the reasons for turnaround?
Download last five years Annual Report and Study
All the above said info is clearly stated in AR
#Niveza #Review ::
Thangamayil Jewellery Ltd is some how over valued at current levels. In last 3-4 months stock has delivered more than 50 per cent even though the results were just all right. Volume is very low. Few times single digit volume is also there. In last few weeks volume pick up has been seen, but there should be some support of fundamentals to the stock.
Visit@ Stock Market Tips
You are almost as perfect as it go but I checked volumes myself and it seems like traded volume for July is almost 2000% more than June that is totally opposite of what you wrote about volumes.
Source : Accord FinTech.
It’s not that hard guys. Damani isn’t taking a bet on the company. He’s taking a bet on some other outcome. Now enough of spoon-feeding for our investors! 🙂