Cranex Ltd : A Material Handling Company and a value buy

Cranex is today at a stage where most negatives are in the price.That said one must adhere to allocation rules since in such ultra small caps the unknowns can be debilitating.Which is why i will advise a 1% type of exposure .More than capital erosion risk the risk one must factor in is more of opportunity cost.

Triggers and events to watch out for

Operational Triggers

1. Composition of Services is just 4% of revenue . Improvement here can
   dis-proportionately improve PAT . Typically this must be 60-40

2. We need to see how the Delhi Metro order gets executed.If properly
   executed this can be a game changer for this company

3. At some stage (i believe when promoters have at least 51% or more
   stake ) this co will have to consider paying dividends ( at least
   1-2 years away i think ) which can lead to immediate re-rating.

Non operational Triggers

1. We need to observe how promoters intend to take control of this co
   considering that m’cap is just about 4 crs whereas promoters have
   lent their personal money of under 9 crs that too over 6 years back
   with no interest (This was done to take the co out of BIFR in 2009
   period ).In the past they have considered allotting sweat /
   preferred equity and then dropped that plan.Since creeping
   acquisition has its limits (5% pa cap & difficulty in getting
   delivery as 65% holding with general public ) we have to consider
   probability of preferential equity shares allotment to promoters
   thro’ warrants .