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Posts in category Value Pickr

Piramal Healthcare (30-09-2015)

Hi Sai,

First of all, we all are students of investing and try to learn from each other hence shall call each other by first name without any suffixes like sir. I no way deserve it so request you to address me with first name.

To answer your question, you need to look at the Investment entries in AR and see which ones are overlapping and exclude them. Rest of them you can deduct. Many of the Investment entries are already part of NBFC business and hence leads to double counting. Though, it is slightly tedious exercise, one must do it to arrive at true picture.

Also, have you also counted the value of its alternative asset management business in the valuation as I am not able to see it anywhere. Typically asset management companies are to be valued at 6-10% of AUM. Since piramal operates in niche and high yield areas, the valuation will nearer to the ceiling than floor.

Hope this helps.

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US based NRI’s – How do you guys invest in equity now? (30-09-2015)

Hi Bijoy,
Provide me your email id, i shall mail you the details regarding the same

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MPS Ltd (30-09-2015)

@Mahesh

Thanks for taking time and explaining elaborately. Let me take time with an example and understand the above post - may be I will do this with MPS itself.

So far, I have been using EV/EBIDTA as a metric to evaluate CAPEX extensive companies.

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JVL AGRO INDUSTRIES LTD – Cash in books is more than mkt cap (30-09-2015)

Had a look at his company since it looked a little interesting from quantitative standpoint.

A few notes from my analysis of it:

  1. Cash can't really be counted on since it seems they are some FDRs pledged against which there is a margin money account. I don't understand the technicalities of this much, but I have a sense that if short term loans rise (which will happen in near future) this cash will be wiped out.

  2. There is a "Capital Subsidy" income of appx 40 to 50 crores every year - kind of Govt incentives in that sector; so since the company is expanding even foraying into infra for food processing (Mega food park) its getting this incentive. I saw how it should be accounted for, in CAClubIndia and it seems this money should be spread over useful life of assets if they are depreciable assets else they go to P&L as one-time income. Since the AR doesn't talk much about this subsidy we are left to guess!

  3. Remove the above "Capital Subsidy" income and your actual core income is hardly much! PBT of appx 18-20 crore at most? So taxes are in line with that considering some deductions they might be getting in the sector.

  4. Rice segment is hardly material to be reported as a secondary segment, but riding on that they do say they are a "FMCG' now. smile

  5. Most of all what struck me was management is too worried about their "Cheap" valuation! They have actually dedicated pages in the AR to make a case for REVALUATION! Come on now! If you think its cheap, why not quietly buy from the open market and increase your stake?! That would give investors also confidence right?!!
    I guess their motive in getting a price rise in the shares may be - pledging shares or selling them!

Overall, a highly cut-throat competitive industry, no differentiation possibility. Promoters' worry over share valuation is a big red flag!

Also, its an industry where they would have to KEEP RUNNING JUST TO STAY WHERE THEY ARE. (Red queen effect). Can't really expect much here unless we get to buy at MCAP below 100 crores!

That's all based on AR 2015 and IMHO.

Parvin

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MPS Ltd (30-09-2015)

@richdreamz

I use variety of multiples to evaluate appealing quotient of an IO for me.....EV/ebitda and cash conversion % wrt ebitda are two of the important ones.....

This is because EBITDA reflects the real earning potential of the business unless there are some hidden consistent down the line extra ordinaries whereas cash conversion % wrt to EBITDA reflects quality of the earnings of a company......will explain here with a simple theoretical example.....

Say we have a company with CMP 600, 20 cr. equity capital (2 cr. shares of fv 10 each) 500 cr. revenue as of today with 30 % EBITDA margin with 50 % EBITDA to ocf conversion and which has made front ended investments for future growth because of which its net debt on books is say 500 cr......its future potential is 20 % p.a. revenue growth over next 5 years with 1 % expansion in EBITDA margins p.a. with CAPEX requirement at 40 cr. p.a..

With this what we will have is at the end of 5 years its revenue will be ~1242 cr. with 35 % EBITDA margin and a debt free status.

Now as on date at 150 cr. EBITDA, and with 8 % depreciation rate and 50 cr. interest payment and a 34 % tax payment, we will have its EPS at 19.8.......so at CMP of 600 its P/e will be 30.3 which might look expensive but it's EV/EBITDA will be only 11.3 which might be appealing.....

Now calculate its figures 5 years down the line, when depreciation would have got reduced to 6 % of sales, interest pay,net will be 0 because of no debt and tax rate will again be at 34 %......so with an EBITDA of 434.7 cr. it's EPS will be 118.8..........so at 11.3 EV/EBITDA then, it's P/e will be only 20.6 which might look appealing at that point because of company's consistent growth track record......

It's a theoretical example and practical examples are not that simple.

You rightly said lets keep our fingers crossed and hope for the best.

Rgds.

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PTC India – A No Brainer (?) (30-09-2015)

Valuation as per ICICI. I am not sure how logical it is to value EPS 6x to arrive at core business value.

The Ministry of Power has revised the guidelines for Case I bidding, in which it has excluded power traders (like PTC) from participating in LT Power procurement bids. This would negatively impact PTC as the company is yet to sign a power sale agreement (PSA) for ~2,850 MW of capacity for which PPA has already been signed.

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GRUH Finance – mini HDFC (30-09-2015)

Peace ! I think (in my small mind and small brain ) risk to gruh is a repeat of 2006(icici launched teaser loans at 6% and sbi later at 8%) - gruh did not respond on price but reduced it loan book growth % . Why would not banks enter the self employed low ticket space perhaps create focussed teams to do this is a question .Risk of money becoming a commodity in new modi's world where everyone will have a bank a/c and banks will manage to give loans to those without income proof mainly individuals since collateral is safe.Gruh will still grow but can it still get 13 times book in this new brave world is the question.

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GRUH Finance – mini HDFC (30-09-2015)

PP1,

We as moderators appreciate your inputs on the gruh thread. But there is a thin line seperating a rebuttal to someone' point of view and outright inflammatory remarks. You are requested to tone down your comments to unoffensive levels and make sure there are not too many repetitions.

People who have a high allocation to HFCs will have their own logic and have invested their own hard owned money and most likely are highly competent people who know what it takes how to invest. You can at best put forth the negatives and then let them decide on the merits/demerits of the investment thesis.

And the point about subsidiary is being dragged ad nauseum. kindly let it rest.

regards

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GRUH Finance – mini HDFC (30-09-2015)

Don't clutter the discussion with threatening language. That certainly doesnt help the spirit of discussion.

Calling a certain logic silly is perfectly fine in a debate. That is not the same as calling a person silly - which would be personal and offensive.

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GRUH Finance – mini HDFC (30-09-2015)

@PP1 : Yes I am signing out of the discussion too. So will not go ahead with answering your last post. Let's agree to disagree and recognize that "different opinions make market".

I would suggest you to tone down your posts though. You called someone's logic "totally silly". Disregarded other's points including mine. I found few of your last posts offensive. Please keep that in mind.

Hope to keep the spirit of discussion in right place.

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