Serious investors must ask questions to themselves whether 8k have economic moat. What does it do which the other established IT peers can't do in near future. As basically it's doing ims do such high pe justified. As the biggest wealth is created and destroy in pe expansion and pe contraction.
Posts in category Value Pickr
8k Miles Software Ltd, Cloud Computing (27-09-2015)
Serious investors must ask questions to themselves whether 8k have economic moat. What does it do which the other established IT peers can't do in near future. As basically it's doing ims do such high pe justified. As the biggest wealth is created and destroy in pe expansion and pe contraction.
Control Print – Deservers attention? (27-09-2015)
Dhiraj
There is not capex because this is a services led business - world over most of hardware + services companies do not need a lot of capex.
I did talk to a packaging head of a FMCG company and he told me control print is offering much looser credit terms than their competition - look at inventory + receivables days and it's jumped from 232 days in 2009 to 335 by FY 2015 - hardly sign of an increasing moat. Infact, that explains the reason why promoters have to keep bringing in money in what's a high margin,high ROE business. Look at operating cash flows as a % of sales and they are falling too.
ultimately for a Rs. 300 Cr. mcap you are getting 8 cr. of OCF - Even without growth, its about 15-16 cr. of OCF - that's very expensive IMHO. A company that keeps growing EPS without a growth in OCF has a lot of risks - eg., opto circuits, suzlon
I did look at their competitors - their receivables/inventory are not as high.
Look at what munger has to say about such a business -
“There are two kinds of businesses: The first earns 12%, and you can take it out at the end of the year. The second earns 12%, but all the excess cash must be reinvested — there's never any cash. It reminds me of the guy who looks at all of his equipment and says, "There's all of my profit." We hate that kind of business.”
Control Print – Deservers attention? (27-09-2015)
Dhiraj
There is not capex because this is a services led business - world over most of hardware + services companies do not need a lot of capex.
I did talk to a packaging head of a FMCG company and he told me control print is offering much looser credit terms than their competition - look at inventory + receivables days and it's jumped from 232 days in 2009 to 335 by FY 2015 - hardly sign of an increasing moat. Infact, that explains the reason why promoters have to keep bringing in money in what's a high margin,high ROE business. Look at operating cash flows as a % of sales and they are falling too.
ultimately for a Rs. 300 Cr. mcap you are getting 8 cr. of OCF - Even without growth, its about 15-16 cr. of OCF - that's very expensive IMHO. A company that keeps growing EPS without a growth in OCF has a lot of risks - eg., opto circuits, suzlon
I did look at their competitors - their receivables/inventory are not as high.
Look at what munger has to say about such a business -
“There are two kinds of businesses: The first earns 12%, and you can take it out at the end of the year. The second earns 12%, but all the excess cash must be reinvested — there's never any cash. It reminds me of the guy who looks at all of his equipment and says, "There's all of my profit." We hate that kind of business.”
8k Miles Software Ltd, Cloud Computing (27-09-2015)
@aojha, as you understand the business model of 8k, wanted to have your insights on the following:
- What is the kind of customer stickiness in the space where 8K provides cloud data management services and is it repetitive revenue for 8k or one time. Can their customers switch to some other company easily, basically want to understand their strengths in generating revenues consistently.
- Their operating margins are near 30% range - can 8k continue to sustain such margins as they scale up and look for new clients and if you can explain this little more as to what makes them command this margin profile.
- There does not appear to be listed companies exclusively operating in this space, so what is the kind of competition they face. Any other companies to your knowledge which are developing cloud data capabilities. Are Persistent Systems etc not providing similar services. It's not very often that you find small companies quoting at 10x sales that 8k does.
Disc: Not invested.
8k Miles Software Ltd, Cloud Computing (27-09-2015)
@aojha, as you understand the business model of 8k, wanted to have your insights on the following:
- What is the kind of customer stickiness in the space where 8K provides cloud data management services and is it repetitive revenue for 8k or one time. Can their customers switch to some other company easily, basically want to understand their strengths in generating revenues consistently.
- Their operating margins are near 30% range - can 8k continue to sustain such margins as they scale up and look for new clients and if you can explain this little more as to what makes them command this margin profile.
- There does not appear to be listed companies exclusively operating in this space, so what is the kind of competition they face. Any other companies to your knowledge which are developing cloud data capabilities. Are Persistent Systems etc not providing similar services. It's not very often that you find small companies quoting at 10x sales that 8k does.
Disc: Not invested.
POKARNA LTD ( Stock opportunities ) (27-09-2015)
Though the company may not be transparent about raw material cost (they could argue they would keep it confidential to have an edge over competitor), they should let the share holder know what are their arrangements (contracts) to have a uninterrupted supply of Quartz in critical cases just so the production is not stopped because of raw material issue. The company should also disclose how many suppliers they have. We should pursue to gather it.
We should also request the most updated capacities for both Granite and Quartz.
I think its good if they have excess capacity (which I think they do) for the increased demand since they have added more dealers recently. Considering the current OPMs, if they can leverage the current idle capacity to the increase in the demand without additional capex its a boost for the profitability.
@varadharajanr, is there a way if you could find out how much of raw material CaesarStone sources from India , from your hedge fund contact that you have?
I have seen their report on CaesarStone, can you also find out if they know there is any other Quartz exporter from India than Quantra? Because the suggests they have researched most Quartz imports to US.
I think we are all too over concerned about one single "Chettinad" supply while the consensus is Quartz is easily available. But good to understand if they have only one raw material supplier and why Pokarna thinks Chettinad is better, does Chettinad have high quality raw material over others or something else?
With union government's push for make in India and transparency and efficiency in allocating the natural resources, the license for Pokarnas Quartz mine should be processed faster which would have taken longer otherwise.
POKARNA LTD ( Stock opportunities ) (27-09-2015)
Though the company may not be transparent about raw material cost (they could argue they would keep it confidential to have an edge over competitor), they should let the share holder know what are their arrangements (contracts) to have a uninterrupted supply of Quartz in critical cases just so the production is not stopped because of raw material issue. The company should also disclose how many suppliers they have. We should pursue to gather it.
We should also request the most updated capacities for both Granite and Quartz.
I think its good if they have excess capacity (which I think they do) for the increased demand since they have added more dealers recently. Considering the current OPMs, if they can leverage the current idle capacity to the increase in the demand without additional capex its a boost for the profitability.
@varadharajanr, is there a way if you could find out how much of raw material CaesarStone sources from India , from your hedge fund contact that you have?
I have seen their report on CaesarStone, can you also find out if they know there is any other Quartz exporter from India than Quantra? Because the suggests they have researched most Quartz imports to US.
I think we are all too over concerned about one single "Chettinad" supply while the consensus is Quartz is easily available. But good to understand if they have only one raw material supplier and why Pokarna thinks Chettinad is better, does Chettinad have high quality raw material over others or something else?
With union government's push for make in India and transparency and efficiency in allocating the natural resources, the license for Pokarnas Quartz mine should be processed faster which would have taken longer otherwise.
Ambika Cotton Mills (27-09-2015)
Hi Varun,
One of the key concerns some investors like me have is the 2nd line of management - Daughters and other senior management team. It would be good if you can try and assess the same. For example-
Interact with daughters and senior management team to understand their competency level - Asking specific queries addressed to them during AGM or after the AGM, etc.
Thanks for your help
8k Miles Software Ltd, Cloud Computing (26-09-2015)
Thanks a lot for writing
Business seems interesting to me as talking to my friends in the industry, it is becoming clear that most of the companies wants to go on cloud and there is s huge opportunity coming up in this field
My biggest question is that how much of that available opportunity 8k will be able to gain profitability
AOjha
What risks are you seeing in the business model of 8k