Spotlight on Panama Petrochem by Nigel D’Souza’s Mid-Cap Mania
First, we have to compliment Nigel D’Souza and his ace team at CNBC TV18 for painstakingly identifying top-quality micro-cap stocks and putting the spotlight on them in the ‘Midcap Mania’ show.
Generally, the spotlight augers well for the stock because it attracts the attention of the intelligentsia, which in turn attracts the attention of the hoi polloi. This ultimately leads to the micro-cap achieving the exalted stature of a multibagger.
In the case of Panama Petrochem, Nigel has presented all the core data about the Company’s business operations, financial data, promoter shareholding, margins, management commentary etc in a simple and easy-to-understand format.
About Panama Petrochem Ltd
Panama Petrochem Ltd is a micro-cap with a market capitalisation of Rs. 480 crore. It is engaged in the manufacture of petroleum specialty products which are used in diverse industries such as inks and resins, textiles, rubber, pharmaceuticals, cosmetics, power, cables etc.
The Company has four manufacturing plants located at Ankleshwar, Daman, Dahej and Taloja. The plant at Dahej is claimed to be a fully computerised plant built on DCS/PLC systems to meet international quality and manufacturing standards.
The Ankleshwar plant is said to have a fully equipped and DSIR approved R&D centre.
Panama Petrochem Ltd also has a WOS in the UAE called Panol Industries RMC. It is claimed that the WOS results in “logistical advantages” because the customers in the Middle East can be serviced by it.
| PANAMA PETROCHEM LTD – KEY FUNDAMENTALS | |||
| PARAMETER | VALUES | ||
| MARKET CAP | (Rs CR) | 482 | |
| EPS – TTM | (Rs) | [*S] | 7.79 |
| P/E RATIO | (X) | [*S] | 15.34 |
| FACE VALUE | (Rs) | 2 | |
| LATEST DIVIDEND | (%) | 25.00 | |
| LATEST DIVIDEND DATE | 20 SEP 2016 | ||
| DIVIDEND YIELD | (%) | 0.42 | |
| BOOK VALUE / SHARE | (Rs) | [*S] | 67.72 |
| P/B RATIO | (Rs) | [*S] | 1.76 |
[*C] Consolidated [*S] Standalone
(Source: Business Standard)
Blockbuster financial performance
Nigel D’Souza has highlighted in his report that the Company enjoys a debt-free status and that the margins are increasing.
The Q3FY17 results are also impressive. The net sales increased 19.77% on a YoY basis from Rs. 198 crore to Rs. 237 crore while the net profit increased 83.23% from Rs. 6.32 crore to Rs. 11.58 crore. The operating profit increased 59.8% from Rs. 13.16 crore to Rs. 21.03 crore.
| PANAMA PETROCHEM LTD – FINANCIAL RESULTS | |||
| PARTICULARS (Rs CR) | DEC 2016 | DEC 2015 | % CHG |
| NET SALES | 237.37 | 198.19 | 19.77 |
| OTHER INCOME | 0.54 | 0.34 | 58.82 |
| TOTAL INCOME | 237.9 | 198.53 | 19.83 |
| TOTAL EXPENSES | 216.88 | 185.37 | 17 |
| OPERATING PROFIT | 21.03 | 13.16 | 59.8 |
| NET PROFIT | 11.58 | 6.32 | 83.23 |
| EQUITY CAPITAL | 8.07 | 8.07 | – |
(Source: Business Standard)
PANAMA PETRO Q3 (YoY)
Net sales at `237 cr vs `198 cr, up 20%
Net profit at `11.6 cr vs `6.3 cr, up 84%
Margins at 8.6% vs 6.5%— Darshan Mehta (@darshanetnow) February 11, 2017
Major shareholders of Panama Petrochem
Despite its diminutive size, Panama Petrochem has attracted elite investors like Madhukar Sheth, Anil Kumar Goel, Dolly Khanna, Chetan Parikh’s Jeetay Investments, etc.
Let’s take a quick look at the profile of the investors and their holdings.
Madhukar Sheth
Madhukar Sheth rules the roost with a massive holding of 11,10,914 shares as of 31st December 2016.
Not much is known of Madhukar Sheth except that he was a broker on the BSE.
He appears to have got on the wrong side of the law in some trades that he did for his client in Amara Raja Batteries’ stock. It appears that one Harinarayan Bajaj indulged in heavy trading in the Amara Raja stock and that Madhukar Sheth, in his capacity as broker, did not exercise due caution. SEBI and SAT found him guilty.
According to his linkedin and Bloomberg profiles, Madhukar Sheth is a “core fundamental analyst” and that he prefers to “chase scarcity”.
One can see from Madhukar Sheth’s portfolio that he invests only in micro-cap stocks. Perhaps, this is what he means when he says that he likes to “chase scarcity”.
In addition to Madhukar Sheth’s own holding, one Xitij Madhukar Sheth held 244,800 shares as of 31st March 2016. Xitij’s present holding is not known.
Anil Kumar Goel
Anil Kumar Goel needs no introduction to us. We have spotted this veteran value investor on several occasions in the exalted company of Dolly Khanna.
The two wizards are known to hunt for multibagger stocks together. They have several common stocks in their respective portfolios such as Sterling Tools, PPAP Automotive, Srikalahasthi Pipes, TCPL Packaging, Cosmo Films etc.
Anil Kumar Goel holds 5,90,000 shares of Panama Petrochem as of 31st December 2016.
In addition, Seema Goel held 400,000 shares as of 31st March 2016. Her present holding in not known.
Dolly Khanna
Dolly Khanna has been indulging in her trademark modus operandi of stealth buying.
She came to Dalal Street on five occasions between June 2015 and August 2015 to buy small chunks of the stock.
Her holding in Panama Petrochem as of 31st March 2016 stands at 82,653 shares. Her present holding is not known.
One can surmise that she would have bought more and increased her holding given the superior operational performance of the Company.
Chetan Parikh’s Jeetay Investments
Chetan Parikh is a low-profile value investor who is famous for having organized investors conferences in the period from 2000 to 2004. The conferences were addressed by eminent luminaries such as Rakesh Jhunjhunwala, Ramesh Damani, Raamdeo Agrawal, Sanjoy Bhattacharyya, Bharat Shah etc and stock ideas were freely exchanged.
Some stocks which were recommended in those conferences included Titan Industries, CRISIL, Dr Reddy Labs, etc. These are mega multibaggers today.
According to Jeetay Investments’ website, Chetan Parikh has impressive educational qualifications. He is inter alia an MBA in Finance from the Wharton School of Business. He is stated to be amongst India’s best investors. His writings have been published in several leading publications. He is also a visiting faculty member at JBIMS.
Jeetay Investments held 119,595 shares of Panama Petrochem as of 31st March 2016. Its present holding is not known.
Elara Capital
Elara Capital is a well known FII. It boasts of eminent personalities like Lord Meghnad Desai on its board. Elara holds 6,36,542 shares of Panama Petrochem as of 31st December 2016.
Aggressive increase in shareholding by the promoters
As of 31st December 2014, the promoters (Vazirali Essabhai Rayani and his family) held 48.72% of the shareholding in the Company.
By 31st December 2015, the shareholding was increased to 70.21%.
As at 31st December 2016, the shareholding of the promoters is further increased to 71.02%.
Prima facie, the aggressive increase in stake by the promoters sends the signal that good times are dawning on the company.
Mutual Funds are showing interest?
The Company has announced that it is holding meetings with big-ticket investors such as LIC Mutual Fund, Pramerica Mutual Fund Mumbai, BOI Axa Mutual Fund, Principal PNB Mutual Fund etc.
It is evident that if even one of these big-ticket investors decides to have a closer look at the Company, it will send the stock soaring into orbit.
Conclusion
Prima facie, all indications are positive for Panama Petrochem. Now, whether it does take off like a rocket and showers multibagger gains on its lucky shareholders requires to be watched closely!
Looks like Dolly Khanna exited, as her name is not on BSE.
Dolly’s stake is around 0.3% and as such it is not figuring Qtrly SHP.
The company report suggests promoter holdings 48.80%.
Your report suggests 70.21%
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As of 31st December 2014, the promoters (Vazirali Essabhai Rayani and his family) held 48.72% of the shareholding in the Company.
By 31st December 2015, the shareholding was increased to 70.21%.
As at 31st December 2016, the shareholding of the promoters is further increased to 71.02%.
Trident will be a good buy near 40.
Sir is it mean that Trident will be come down near 40?
Panama Petro was good buy at 41 rs in April 2014, that’s the time when majority of investors that I know bought it. Unfortunately it ain’t in my portfolio.
All these investors buy stocks that they have researched and feel would return good value on their investment. At the same time they could also be doing this as they realise that such news would boost the share prices of the said company and in turn create a handsome profit for each one of them. Its very rare that each and every one of these investors would pick the same stock out of the 6000 listed companies.
anil kumar goel also buying star paper mills.It can cross 350