Microsec financial

I buy Microsec fin @80. Please evaluate the stock for long term view.

 

@Meenakshi mam and other experts: Please advise on following stock at CMP 1. Kesar terminal. 2. Fluidomat 3. Mayur uniquoter and as above query 5. Microsec fin. Thanks.

 

What was your reason for buying microsec ?

 

This stock is a e commerce play.

 

Are you sure about that?It's name has financial services, so I thought maybe a financial company. What kind of business model does it follow in ecommerce? What are revenues from the same and does it generate any profits from the ventures? What competitors does it has and does the company has any significant advantage over them?

 

Stock idea:-

Scripscan:Microsec Financial Services Ltd
Traded in:Nse-Bse
Cmp:74rs
Target:No targets(can be multibagger)
Duration:3-5 years
Portfolio allocation:5%

Quote:I have covered the company earlier at 20 bucks.Its already been a multibagger.Can well be a multibagger from present levels too.

Verticals:The company got three business verticals which are: 1)Financial Services 2)Innovative Digital Media of Consumer Engagement - www.foreseegame.com 3)Innovative Digital Pharmacy and Healthcare Store - www.sastasundar.com 1)Financial services:It provides financing and investment, investment banking, broking and wealth management, insurance broking, financial planning and related service.

Quote:Simply not interested in this business.The company is much more than a boring RBI registered NBFC.Read on:-

Ecommerce:Tailwinds are blowing in ecommerce with almost a dozen deals happening everyday.Unfortunately, in the Indian stock markets the numbers of ecommerce plays are limited.We have a handful of companies with the likes of Just Dial and Info edge,both valued at over billion USD. Who actually cares to buy them though?Then the micro caps follow with average business models-Intrasoft technologies,Istreet network to name a few.Now let's talk about the probable best ecommerce play which is yet to be noticed by markets.Not only its debt free with innovative Ecommerce verticals but the company also posses a lot of cash in its book.

2)FORESEEGAME.COM:Foreseegame.com has become no. 1 consumer engagement platform in India with Alexa ranking of 270 at India level.The company as on date is having over a million users and is growing at a very rapid pace. It is a value innovation in marketing media which offers complete engagement cycle to brands. It is value additon to Digital Media – beyond impressions and clicks and providing 360degree engagement through games of prediction engagement around TVC, feedback,Co-creation and Social Responsibility.Foreseegame.com has more than 15 million page views per month and the average time spend per user at foreseegame.com is 28 minutes which is far ahead from any other website.Yes its even higher than Facebook or any site that you may surf daily.The most interesting feature is that the user spends maximum time with brands while on foreseegame.com.It provides brands engagement with their target audience through age-wise, gender-wise and location wise games and capable of bringing customers to stores/websites of the brands.The digital Advertising market size in India is around Rs.4000 crs and which is expected to increase at a 30% growth rate. The Management is foreseeing tremendous growth opportunity in this business.

Business in simple words:It's kind of an online lottery portal.Users predict and they win cash prizes,discount vouchers from several brands.Foresee gets 10 bucks from brands per engagement/game.For example if 1 lakh users play a game daily,the revenues will be 3crs monthly or 36crs yearly(1*10*30).A portal offering "cash prizes" in a cash starved country with population of 125crs. Relax and fathom the potential members.I too won some discount vouchers and cash rewards.

3)SASTASUNDAR.COM: Sastasundar.com is an innovative Digital Pharmacy and Healthcare Store.Within a very short span of time,it has received tremendous response from the customers. "At present, the services of sastasundar.com is available in Kolkata and nearby suburb area and it is processing on an average 1600 plus orders on daily basis.The company is catering to over 1 lakh customers with average daily addition being a highly impressive 400-500."

Business in simple words.They simply sell medicines online.From generic to the daily needed necessities.Retail medicine shops make 20-30% on an average. Sastasundar aims to capture that segment by offering 15% discount to its customers.Since the volumes would be way higher,the margins for the company would be superior than the average retail shops.The company aims to have double digit EBITDA in this segment.They are also into trading through their healthbuddy products which ranges from coconut oil to herbal Ayurvedic stuff.

Think about the integration:Through foreseegame the company would have access to millions of users,migrate them to sastasundar with impressive discounts and they are yours.With foresee the cost of branding sastasundar is minimal.

Even 500crs revenues for sastasundar ain't a big deal.Think about the service period of medicines.So if you clock 42 crs in your monthly sales,you will hit 500crs easily (42crs*12 months).Additional new customers will further fuel revenues.They have got some retail sastasundar stores and is also offering franchise based opportunities at minimum costs.

Sastasundar is becoming a rage in our part of the country simply due to the fact of offering genuine medicines at discount of 15-20%.Its already into the alexa top 500 portals of the country which vindicates my point.Till 2500 bucks of medicine purchase you get 15% discount and above that 20% discount follows.

The company is also about to start high margin innovative segments like" Make to order ". You order the chef how to make the foods and they will deliver it to your doorsteps.

Reference:My family got a monthly recurring expenses of 2500 bucks in medicine.We used to buy from nearby retailers previously.Since last couple of months we switched to sastasundar.They are delivering timely to home with no additional logistics cost.We are saving about 500 bucks with added satisfaction of consuming "genuine medicines".Presume the scalability of the business with over 9crs of population in the state alone.Company has a vision of going pan India but only after creating profitable zones.

Recent deals:Healthkart.com,a company into nutritional supplements recently raised around 130crs from Intel capital at a talked about valuation of over 1000crs.Another customer engagement firm freecharge is in news of late with reports of snapdeal acquiring the company at 2800crs.

The private equity way to value ecommerce players:They range from 3x to 150x revenues.

Endorsement of Phaneesh Murthy:Murthy, who previously held senior positions at Infosys and was the CEO of Igate, has started PM Health and Life Care, an online pharmacy. He is raising $10 million for the venture, which is expected to start operations in September in 10 Indian cities.As per him,"The Indian pharmaceutical market is estimated to be worth $56 billion by 2020".“Buying medicines online is a different culture altogether. There is great scope as consumers are increasingly shopping online,” he added.The Indian pharmacy market is fragmented with unorganized players accounting for over 95%.Indian spending on healthcare is expected to nearly double to 13% of disposable incomes by 2025, according to PWC.

9 month results:The financial services segment delivered 21crs of sales vs 19crs.Foresee recorded 28 lakhs vs 8 lakhs.Sastasundar saw a massive rise in revenues with sales increasing from just 8 lakhs to over 11crs. Sastasundar is well on course to hit 9crs sales in the last quarter which will make it clock 20 crs.Both the ecommerce portals delivered losses to the tune of around 8crs each.The financial services division clocked a profit figure of around 9crs in the 9 months period of the present fiscal.It will end up with 12crs of PAT.

Loaded with cash:Company has investments and cash of about 90-100crs in book which if you subtract from the Marketcap provides an EV of 120crs.

Risks:The financial services business will continue to do well as long as equities perform.In any case, cash flows would be robust owing the fee based in nature. Ecommerce segments though are sun rising but are far from making profits.It will take a while before both the segments make any meaningful profit.

Conclusion:Microsec has been a laggard post it's listing in 2010.The issue priced at 118 was oversubscribed by 12 times.With a sound strategy and new Sunrising verticals in place,company is about to see a change in its fortunes.Both the ecommerce portals would grow at 80-100% CAGR for coming few years.As the segments attain scale,it would probably be demerged into three entities.At present valuation,market is valuing the company at 10x EV.God fearing management has a vision in place to make wealth for themselves and the minority shareholders.They are transparent in their dealings.The promoters including microsec trust and associates own around 80% stake in the company 'officially'.You are actually getting the ecommerce divisions for free.No sane investor can presume or pen a target here.Floating stocks are negligible,even average buying interest in the counter will make it hit the sky.
Btw:You don't need to interact with the management.Just keep track of the Alexa rankings.The lesser the rank the higher the growth of the company.

 

hi , how to find out the ranking. do we need login id and password. can you please put screen shot of the raking screen. and how much should the ranking be..Thanks
Ramesh

 

Regarding the pharma website where its said that they are providing 15-20%. There are various competitors in the market which offer similar service. I think apollo pharmacy does provide a 10% discount as well.
Regarding valuations which other ecommerce player gets.Honestly I feel some of the valuations are too rich and needs some factoring in. But the companies that do get rich valuations are well known brands in ecommerce. Both Freecharge and Healthkart are well known brands although I am not sure if they are profitable too. The valuation of these companies would depend on how well they create their brands.
As you could see in the segment revenue of its result for year end the financial services division was the only profitable divison with around 9 cr of profit while the media/gaming and pharmacy/healthcare store both were deep in losses of around 10.29 and 13.42 crores respectively.
Although according to your information(which I haven't checked personally) it said that company has around 90-100 crs on books but one has to be aware at the extent of loss that these two ecommerce ventures are making. If they keep making these kind of losses then the cash would soon disappear. If the company can turn around these two ventures into green then it would be fantastic for the company. But a lot needs to be seen how that would happen and how much more loss they could make on these two ventures and if they would be able to turn these ventures into profitable
Your fundamental behind investing into this company was that it is an ecommerce play. But that ecommerce play currently is not profitable. Even if it grows at 80-100% as mentioned in your report the key would still be to turn those divisions into profitable ones.

 

@rameshkare Alexa is a subsidary of amazon.com and it is into providing web analytics for commercial websites. Below are the rankings for these two websites that you mentioned.
https://www.alexa.com/siteinfo/sastasundar.com
https://www.alexa.com/siteinfo/foreseegame.com

 

Thanks , but how do I know the rank is less or more. Because you said "The lesser the rank the higher the growth of the company.". Thanks..Ramesh

 

I didn't said lesser the rank higher the growth. Its wrote in that information which was posted by @Anil . The general sense is that the lesser the rank the more popular the website is in that country. So Google India is like ranked number 1 in India so its the top website visited over the country. So in general the lesser the rank the more people would have visited the site

 

Thanks