On a lighter note, don’t read too many articles during a company’s IPO, the ‘nice’ articles about the company would far out weigh the ‘candid’ articles. Too much money, self interest, conflict of interests, bakra making is involved in media, Investment bank circles during this time. The most important moot points are, WHY is the company coming for an IPO and WHY NOW? If the answers point towards genuine reasons, then pick it up.
Posts tagged Value Pickr
INDIGO ready for takeoff :airplane: (31-10-2015)
I think we will have a biased view 
Let the markets decide. Thanks for the link though. Reading it.
INDIGO ready for takeoff :airplane: (31-10-2015)
An enlightening article. Indigo is in safe hands
Economic Value added (31-10-2015)
Hi Saurab, EVA is one of the two methods I use in valuing a company. I think it is among the best methods out there (After Modigliani Miller), the interesting thing with an EVA is that upon performing a discounted EVA valuation, you will (if done correctly) arrive at the exact same answer as that arrived at through a DCF.
A simple explanation of EVA as a concept – The main point here is that growth by itself does not add value. It is only valuable if its incremental returns are higher than it’s incremental cost of capital.
Example – Company XYZ has a cost of capital (WACC) of lets say 12%. It’s return on capital employed = 15% and it employs 1000cr of capital. the value added therefore = 3% (15 – 12) * 1000cr = 30cr.
An interesting point to note here is the same company XYZ, if it earns an incremental return of let’s say 11% on growth, that growth is actually value destroying. Why would companies do that, you may ask? Simple – because they are transfixed on EPS.
Example – Company XYZ can borrow at 9% (cost of debt let’s say) and can earn a return of 11% on that borrowed capital by investing it in the business. So if a company borrows let’s say 500 cr. their EBITDA will increase by 11% x 500cr & their net profit, EPS etc will also optically appear to grow at some % of that incremental 500cr.
So while optically their earnings look great, EPS growth, EBITDA growth etc. they are actually destroying shareholder value. You will be surprised how often this happens (In my reckoning nearly 30% of all companies in the NIFTY (Supposedly blue chip) companies) indulge in this, and their managements are hailed as great.
Take RIL or any other company of your choice as an example. They barely earn 9% on their capital employed. Clearly the cost of debt itself is itself 8 – 8.5% + the cost of equity (let’s say 15%) With a D/E ratio of 0.6 , WACC is approx 12 – 13% (All numbers are approximate)
So does it make sense for RIL to grow, by investing in expanding their current business if it only earns 9%? Sure their earnings will grow, their EPS will grow etc. But they aren’t even earning their cost of capital!!
That’s why people use EVA as a metric, because what shareholders care about (or should care about) is not earnings growth , but how much incremental value the company adds.
Hope this helps.
INDIGO ready for takeoff :airplane: (31-10-2015)
I applied on the 2nd day as had some cash.
Just checked and you should take a look at these
easyJet
Southwest Airlines
I’m no expert but if IndiGo manages to keep its cost advantage and gain market share, the stock prices will reflect the same.
Hindistan Media Ventures Limted (HMVL): A mispriced bet in newspaper business (31-10-2015)
Stock at P/E of 12, with sales growth of 11%, Profit growth of 29% in last 3 years (and ROE 20%)
Investment in MF 550 cr = 3x net profit of FY15.
This looks a safe bate. I am planning to take a small position.
Bajaj Finance Limited (31-10-2015)
Bajaj finance should be a growth story for next 10 years. There is a huge market which is still untapped.
I hope the management doesn’t scarifies the credit quality for the growth. Company reported compounded revenue growth of 43% in last 10 years (same in last 5 years). Should not be difficult for a company to grow 20% for next 5 to 10 years
disclosure: invested …2.5 beggar
Gulf oil corporation – the safest way to play coal cycle (forget about coal cycle) (31-10-2015)
I attended the AGM and came out highly unimpressed.The management’s lethargy was clearly indicated by statements such as “This business is in maintenance mode”. Further they harped upon their current state of affairs being an outcome of government policies totally discounting success of their competitors The real estate opportunity that I thought will play out looks delayed (Yelahanka/ Hyderabad land sale) and the explosive division might do better this year due to a strong order book. Further Hinduja Properties owns marketing/development right for Yelahanka project and also for other land banks with a no penalty clause (very much like a family affair). The attitude of Mr. Hinduja present in the AGM was also that of wishing awayinvestor concerns with motherhood statements like “We create wealth in long term and we move slowly.”. No clarity was provided on the investment in Houghton.
Disclosure: Not invested.
Vinati Organics (31-10-2015)
revenue declined from 192 cr to 143 cr quarter over quarter. I had called company secretary last month (when revenue declined in the last qtr). As per him it is because of drop in the crude oil prices. It seems to be believable as company is able to pass the price benefit by keeping its margin intact (in fact it gone up a little bit).
So with the sharp decline in oil prices, don’t think revenue are comparable. Will need to check if volume have gone up.
I am little concern about Vinati & Mohit Mutreja (husband wife) with different interest. Mohit has founded a company mainly into trading activity. Obviously, Mohit would focus more energy on his company..I hope it should not result into any conflict.
KDDL (Ethos Watches) – Scalable business model at an inflection point? (31-10-2015)
Investor Presentation
http://www.bseindia.com/xml-data/corpfiling/AttachLive/F38F8553_E867_4CF1_ABCB_D94584393C80_200608.pdf
Board Meeting Outcome
http://www.bseindia.com/xml-data/corpfiling/AttachLive/4589B54D_CF60_4922_B668_9A642CAA12A2_200742.pdf
Consolidated Q2 comparison YoY
Revenue growth – 14%
PAT growth – 73%
Operating profit or EBITDA is actually down 15%
As you look deeper, it’s all on account of higher other income and lower tax expense.
Thus, H1 numbers also look fabulous YoY based on the artificial boost of other income and lower tax expense.
Not sure what to make of the numbers,
Disc – Invested