Today was a particularly good day for Daljeet Kohli because several of his stock picks notched up hefty gains. While Lumax Auto Tech spurted 11%, OnMobile Global surged 8.81%. Pennar Industries notched up 5%.
However, Mastek and Majesco, stole the show by rocketing 13%+ in unison.
It is worth recalling that Daljeet recommended Mastek in July 2014 when it was quoting at Rs. 190 on the basis that there would be “value unlocking”. Today, after the demerger, the combined valuation of Mastex (Rs. 193) and Majesco (Rs. 652) is Rs. 845. This translates to a magnificent gain of 345% for an investment of about 16 months.
The interesting part is that Daljeet is still gung ho about Majesco’s prospects. In his latest interview, he said it has “lot of potential” and called it a “safe bet”.
HDFC Securities has come to the same conclusion about Majesco. In their latest research report, they have succinctly advised as follows:
“A Majestic opportunity!
In Jun-15, Indian software services firm Mastek spun off its US insurance product arm (Majesco Mastek) as a separate listed entity (Majesco Ltd). Further, a subsidiary of this newly listed entity reverse merged into the US-listed Cover All Inc, rebranding itself as Majesco US Inc (now a 70% subsidiary of Majesco Ltd). Additionally, Majesco US acquired Agile, a consulting outfit for US$ 9mn.
These corporate actions were part of a conscious strategy to create a software product business in a niche vertical (P&C insurance). This vertical is on the cusp of a transformational shift in its usage of IT systems. Addressable market is US$ 9.25bn, with only 10-15% penetration by third-party vendors.
We believe Majesco is in the early stages of a multi-year flowering. Initiate coverage with a BUY. Our TP of Rs 800 is based on a 2x EV/sales multiple, implying 39% upside and is at 70% discount to rival Guidewire’s EV/sales multiple. We have built in a 30% holdco discount for the Majesco US stake.”
Interestingly, the target price of Rs. 800 projected by HDFC Sec matches the target price predicted by Daljeet. We will have to see how long it takes Majesco to reach this target price!
Leave a Reply