Gwalior Chemical Industries is a small cap stock which has garnered lot of market attention over the last couple of weeks. The stock has shot into prominence with one of the funds of Goldman Sachs Mauritius turning aggressive buyer in the counter over the last week. Goldman Sachs fund has acquired close to 1.6 million shares from the open market during the last week (almost on all trading days) at an average price of close to Rs95. This bulk deal has been reported in various business newspapers in the bulk deals section.
There is also a rumour that this company is going to be acquired by Bayer Life Sciences at the rate of Rs190/- per share but it has not been confirmed.
When we look at their financials, the topline has grown by 43.50% this year and the net profit has grown by 33.32%. The EPS per share works out to Rs9.85 compared to Rs9.43 for the last year. It means that there is a big equity dilution on the way. The share has today closed around Rs94 resulting in a PE of close to 10. Though it is not very cheap, the large accumulation by FII's may warrant some closer examination of the company, future business prospects.
Keep a close watch on Gwalior Chemical Industries!
Wednesday, June 25, 2008
Thursday, June 19, 2008
Mysore Cements - Investment Idea
Mysore Cements is a SK Birla promoted company with a cement production capacity of 2.1 million tonnes across 3 production facilities in Karnataka, UP and MP. The SK Birla group has recently off-loaded its entire stake of 54.38% to Hiedelberg Cement Group of Germany. Now, Mysore Cements is a subsidary of Hiedelberg Group. The company is expanding its capacity to 5.9 million tonnes per annum subject to approvals from regulatory authorities. The Board of the company has been re-cast with the nominees from Hiedelberg group taking over the Birla held board positions. The company is merging Indorama cement and Hiedelberg Cement India P Ltd with itself w.e.f 01 April 2008.
The company follows Jan-Dec accounting year and for the y.e 31 Dec 2007, the total production of Cement and Clinker stood at 2.201 Million tonnes companred to 1.610 million tonnes for the y.e. 31 Dec 2006, implying a production increase of 36%. The net realisation per tonne of cement during 2007 stood at Rs3271 compared to Rs2954, again showing an upward bias in price realisation.
Positives:
1. The company revenue and profits have been raising continuously over the last 4 quarters. Of course, the cement cycle is doing good being the primary reason, the company's association with Hiedelberg may be a positive in the long run. The net profit of the company has increased to Rs97.65 crores for the y.e 31-12-07 compared to the loss of 2.19 Rs34.31 crores in y.e. 31-12-06. For the quarter ended 31-03-08, the company has reported an EPS of Rs 2.59.
2. The company holds cash to the extent of Rs180.73 crores in the Balance sheet as at 31-12-07. This works to per share value of Rs11.43. The total market capitalisation of Mysore Cements at the current rate of Rs32 works out to Rs506 crores.
3. The company has generated cash of more than Rs.80 crores for the year ended 31.12.07.
4. The company holds 12 lakh shares of Cimmco Birla Ltd., in its books valued at Rs12 lakhs. The market price of Cimmco Birla is Rs25 per share and there is already a proposal of takeover by Titagarh Wagons. Since Cimmco Birla is under BIFR purview, the promoter company can not sell the stake now.
5. In addition to this, the company holds investments in listed entities which are valued clost to Rs2.50 crores. (As per the last balance sheet it was valued at Rs5.45 crores. Considering the erosion in value of securities over the last few months, I have reduced the market value of investments by more than 50% to Rs2.50 crores)
6. The company has accumulated losses of Rs269.83 crores in the books which will help the company to reduce the tax burden over the next couple of years.
7. The company is quoting at an attractive valuation of less than USD65 Economic Value per tonne compared to the industry average of USD105 per tonne.
8. The company has an expanding operating margin over the last 3-4 quarters.
Negatives:
1. Cement being a highly cyclical industry, the fortunes may swing wildly. The per tonne realisation may not be sustained, there can also be a drop in the demand for cement due to economy slowdown. The company may also face difficulty in managing rising input costs, in-adequate limestone mining facilities, coal availability and increasing railway freight charges.
2. The company being located in the hinterland, the exports may not be an viable option at all.
3. The accumulated losses to the extent of Rs269 crores will stop any dividend pay-out for the next couple of years atleast.
4. Increasing cement capacity across the industry leading to fall in price.
Our take on this company:
The company looks interesting to us at this price of Rs32 considering its parentage. We are being very conservative in estimating the full year EPS to be around Rs7.50 (instead of Rs10 thats what you will get if you just annualise the first quarter ending 31 March'08). It is quoting at 4 PE but since it is a turn-around story and zero-debt company (very important in a rising interest rate scenario) it is destined to do better.
We would ideally look at a price of Rs45 over the next one year at the minimum for this scrip, which presents a possible upside of around 50% from the current price levels.
The company follows Jan-Dec accounting year and for the y.e 31 Dec 2007, the total production of Cement and Clinker stood at 2.201 Million tonnes companred to 1.610 million tonnes for the y.e. 31 Dec 2006, implying a production increase of 36%. The net realisation per tonne of cement during 2007 stood at Rs3271 compared to Rs2954, again showing an upward bias in price realisation.
Positives:
1. The company revenue and profits have been raising continuously over the last 4 quarters. Of course, the cement cycle is doing good being the primary reason, the company's association with Hiedelberg may be a positive in the long run. The net profit of the company has increased to Rs97.65 crores for the y.e 31-12-07 compared to the loss of 2.19 Rs34.31 crores in y.e. 31-12-06. For the quarter ended 31-03-08, the company has reported an EPS of Rs 2.59.
2. The company holds cash to the extent of Rs180.73 crores in the Balance sheet as at 31-12-07. This works to per share value of Rs11.43. The total market capitalisation of Mysore Cements at the current rate of Rs32 works out to Rs506 crores.
3. The company has generated cash of more than Rs.80 crores for the year ended 31.12.07.
4. The company holds 12 lakh shares of Cimmco Birla Ltd., in its books valued at Rs12 lakhs. The market price of Cimmco Birla is Rs25 per share and there is already a proposal of takeover by Titagarh Wagons. Since Cimmco Birla is under BIFR purview, the promoter company can not sell the stake now.
5. In addition to this, the company holds investments in listed entities which are valued clost to Rs2.50 crores. (As per the last balance sheet it was valued at Rs5.45 crores. Considering the erosion in value of securities over the last few months, I have reduced the market value of investments by more than 50% to Rs2.50 crores)
6. The company has accumulated losses of Rs269.83 crores in the books which will help the company to reduce the tax burden over the next couple of years.
7. The company is quoting at an attractive valuation of less than USD65 Economic Value per tonne compared to the industry average of USD105 per tonne.
8. The company has an expanding operating margin over the last 3-4 quarters.
Negatives:
1. Cement being a highly cyclical industry, the fortunes may swing wildly. The per tonne realisation may not be sustained, there can also be a drop in the demand for cement due to economy slowdown. The company may also face difficulty in managing rising input costs, in-adequate limestone mining facilities, coal availability and increasing railway freight charges.
2. The company being located in the hinterland, the exports may not be an viable option at all.
3. The accumulated losses to the extent of Rs269 crores will stop any dividend pay-out for the next couple of years atleast.
4. Increasing cement capacity across the industry leading to fall in price.
Our take on this company:
The company looks interesting to us at this price of Rs32 considering its parentage. We are being very conservative in estimating the full year EPS to be around Rs7.50 (instead of Rs10 thats what you will get if you just annualise the first quarter ending 31 March'08). It is quoting at 4 PE but since it is a turn-around story and zero-debt company (very important in a rising interest rate scenario) it is destined to do better.
We would ideally look at a price of Rs45 over the next one year at the minimum for this scrip, which presents a possible upside of around 50% from the current price levels.
Thursday, June 12, 2008
Ranbaxy promoters does an unthinkable act!!
The promoters of Ranbaxy Labs have done an unthinkable act in the history of Corporate India by selling out their 34.8% stake in Ranbaxy at a price of Rs737/- per share to Daiichi Sankyo, a Japanese pharma company. for Rs10,000 crores. In order to further increase its stake to 50.1%, Daiichi Sankyo would be issued equity shares and convertible warrants on a preferential basis and also make an open offer to the existing public shareholders of Ranbaxy for an additional 20% stake at a price of Rs737 per share. At the price of Rs737/- per share, Ranbaxy is valued at USD8.5 billions.
The Japanese company, after acquiring the stake from Ranbaxy promoters would further make an open offer to the share holders for acquiring additional 20% of the share capital. The combined entity of Daiichi Sankyo and Ranbaxy would be the world's 15th largest Pharmaceutical company.
Mr Malvinder Singh will continue to lead the company as its CEO and Managing Director while additionally assuming the position of Chairman of the Board, upon closure.
Sharekhan in its research report yesterday as written that " The open offer price of Rs737 per share represents a premium of 31.4% to Ranbaxy's closing stock price on June 10, 2008, a 53.5% premium to Ranbaxy's average daily closing price for the three months ending on June 10, 2008 and an 18% premium to Ranbaxy's fair price of Rs625 per share. The open offer price is attractively priced and presents an attractive exit option for investors. However, the acceptance ratio in the open offer works out to just ~34% taking into account the free float of 58.9% (on the expanded equity base), which could limit the upside in the short term. Moreover, the complete exit of promoters has come as a surprise and could possibly act as a drag on the stock sentimentally.
For investors with a long-term investment horizon, at the current levels the effective purchase price would amount to ~Rs469 per share considering the possibility of tendering ~34% of the shares in the open offer at a price of Rs737 per share. This price would be at 26.2x CY2008 fully diluted earnings and at 14.7x CY2009 fully diluted earnings".
What would Ranbaxy promoters do with the money?
Malvinder Singh in his interview to Economic Times has stated that he along with his brother Shivinder and Sunil Godhwani of Religare Securities would decide on the future course of action for the Ranbaxy group.
We think that the focus would shift to Fortis Healthcare and Religare, Ranbaxy group listed companies. There can be more buy-outs in the health-care space. Already few months back, Fortis Healthcare bought out the promoters stake in Malar Hospitals, Chennai.
Religare is already on a roll. It has already got a license to float a mutual fund company in association with Aegon. Senior level recruitments have already started in this company. They want build the Religare brand and have a presence in the entire spectrum of financial services. With the banking sector opening up in 2009, Ranbaxy promoters would have possibly felt that more can be done on the financial services industry and for that matter they have already created a war-chest of Rs10,000 crores.
It is very rare to see promoters selling off their entire stake in a profitably running Indian company with global operations. It sounds like the promoters want to get out of the business when the going is good.
The Japanese company, after acquiring the stake from Ranbaxy promoters would further make an open offer to the share holders for acquiring additional 20% of the share capital. The combined entity of Daiichi Sankyo and Ranbaxy would be the world's 15th largest Pharmaceutical company.
Mr Malvinder Singh will continue to lead the company as its CEO and Managing Director while additionally assuming the position of Chairman of the Board, upon closure.
Sharekhan in its research report yesterday as written that " The open offer price of Rs737 per share represents a premium of 31.4% to Ranbaxy's closing stock price on June 10, 2008, a 53.5% premium to Ranbaxy's average daily closing price for the three months ending on June 10, 2008 and an 18% premium to Ranbaxy's fair price of Rs625 per share. The open offer price is attractively priced and presents an attractive exit option for investors. However, the acceptance ratio in the open offer works out to just ~34% taking into account the free float of 58.9% (on the expanded equity base), which could limit the upside in the short term. Moreover, the complete exit of promoters has come as a surprise and could possibly act as a drag on the stock sentimentally.
For investors with a long-term investment horizon, at the current levels the effective purchase price would amount to ~Rs469 per share considering the possibility of tendering ~34% of the shares in the open offer at a price of Rs737 per share. This price would be at 26.2x CY2008 fully diluted earnings and at 14.7x CY2009 fully diluted earnings".
What would Ranbaxy promoters do with the money?
Malvinder Singh in his interview to Economic Times has stated that he along with his brother Shivinder and Sunil Godhwani of Religare Securities would decide on the future course of action for the Ranbaxy group.
We think that the focus would shift to Fortis Healthcare and Religare, Ranbaxy group listed companies. There can be more buy-outs in the health-care space. Already few months back, Fortis Healthcare bought out the promoters stake in Malar Hospitals, Chennai.
Religare is already on a roll. It has already got a license to float a mutual fund company in association with Aegon. Senior level recruitments have already started in this company. They want build the Religare brand and have a presence in the entire spectrum of financial services. With the banking sector opening up in 2009, Ranbaxy promoters would have possibly felt that more can be done on the financial services industry and for that matter they have already created a war-chest of Rs10,000 crores.
It is very rare to see promoters selling off their entire stake in a profitably running Indian company with global operations. It sounds like the promoters want to get out of the business when the going is good.
Tuesday, June 10, 2008
Due dates for filing income tax returns and the relevant forms
The due date for filing income tax returns is fast approaching for various kinds of assessess. The following are the various types of Income Tax Return Forms which needs to be used by assessees for filing their return of income for the Assessment Year 2008-09 (Financial year ending 31 March 2008).
ITR 1 - For Individuals having Income from Salary/ Pension/ family pension & Interest
ITR 2 - For Individuals and HUFs not having Income from Business or Profession
ITR 3 - For Individuals/HUFs being partners in firms and not carrying out business or profession under any proprietorship
ITR 4 - For individuals & HUFs having income from a proprietary business or profession
ITR 5 - For firms, AOPs and BOIs
The due dates for filing return of income is as givine below:
I Where the assessee is a Company - 31st October of the Assessment year.
II Where the assessee is a person other than a company :-
a) where accounts of the assessee are to be Audited or 2.a working partner of a firm whose accounts are required to be audited under the Income Tax Act or any other law - 31st October of the Assessment Year.
b) Where the return has to be filed under the one-by-six criteria - 31st October of the Assessment Year.
c) Any other assessee - 31st July of the Assessment Year
For the salaried employees the due date for filing return of income is 31 July 2008.
ITR 1 - For Individuals having Income from Salary/ Pension/ family pension & Interest
ITR 2 - For Individuals and HUFs not having Income from Business or Profession
ITR 3 - For Individuals/HUFs being partners in firms and not carrying out business or profession under any proprietorship
ITR 4 - For individuals & HUFs having income from a proprietary business or profession
ITR 5 - For firms, AOPs and BOIs
The due dates for filing return of income is as givine below:
I Where the assessee is a Company - 31st October of the Assessment year.
II Where the assessee is a person other than a company :-
a) where accounts of the assessee are to be Audited or 2.a working partner of a firm whose accounts are required to be audited under the Income Tax Act or any other law - 31st October of the Assessment Year.
b) Where the return has to be filed under the one-by-six criteria - 31st October of the Assessment Year.
c) Any other assessee - 31st July of the Assessment Year
For the salaried employees the due date for filing return of income is 31 July 2008.
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