GTS 4 - UPDATE

Compared with last three occasions ,response from readers were overwhelming this time.Together in email and as comments ,received more than 400 answers .Out of these , below named readers send the correct answer .. Thanks to everyone for spending your valuable time .Whether you find it or not ,I hope , at least you identified some never known companies which serves the purpose.

1)  TAMAL SARKAR
2)  SATHISH KUMAR D
3)  SARAVANAN P
4)  SANTHOSH KUMAR S
5)  REDDY T.S
6)  RAVI VAKAYIL
7)  RASHMI AGRAWAL
8)  RAHUL GUPTA
9)  PHANI M
10)  NISHANT DALMIA
11)  MAYUR NARSUDE
12)  KRUNAL
13)  KAUSTAV SARKAR
14)  KAMAL BABARIA
15)  HARI KRISHNAN
16)  GOPALKR  KRISHNA
17)  DHARMESH JHAVERI
18)  DEEPAK KUMAR PRASAD
19)  AVANI DHRUV 20)  AGR 21)  MAYANK KUMAR 22) SHIVA 23)  M TIRUPATHI RAO
( Hope no one omitted by mistake)

GUESS THIS STOCK -4

Thanks for your overwhelming response to previous questions in this series.This is the fourth one .Try to find out the name of company from the below indications and send it to valuepick@rediffmail.com by Friday noon. Name of readers with the correct answer will be posted on Friday Evening .It is only an effort to stimulate your thought process , stock picking skills and to familiarize some unknown stocks , never take it as a competition .

Clues 

 # Operating in a sector with huge potential with high entry barrier

 # Only Very few companies are listed from this space

# This stock is trading at a P/E multiple of 1/4 th ( Approx) of the average P/E  of the industry( As per FY 13 Earnings)

# Promoters are well experienced and pioneers in this sector.They came out with  IPO for this business even when this industry was at nascent stage in India.

# This is the first  company received ISO 9001 Certification from Asia Pacific Region in its business segment.

# Company having technology collaboration with more than one foreign companies.

# Company’s FY 2013 EPS is between Rs.5 and Rs.10


# Its market Capitalisation is  less than Rs.100 Cr

Few more Clues added  below as per the request of many readers  :

# In Non- promoter Category ,a single share holder/entity holding close to 25 % stake in this company

# On a consolidated basis , Company's Net Cash flow from operating activities in FY 2013 was around Rs.15 Cr ( Positive) 

# On a consolidated basis , Company's Long term Debt  in FY 2013  is even below just Rs.2 Cr

# Stock not recommended earlier

Detailed report on this 'Must Buy' stock -  ( based on current valuation  and future  potential ) - will be posted on next Saturday .

 

ALPHAGEO INDIA ,ORIENTAL CARBON AND CHEMICALS - RESULT UPDATE

ALPHAGEO INDIA

Recommending to HOLD

Old Posting HERE



ORIENTAL CARBON AND CHEMICALS

Recommending to HOLD

Old Posting HERE

OPTICAL FIBRE CABLE - SECTOR TO RE - RATE

Last few years were very tough for OFC manufacturers both locally and globally.In India ,year long unhealthy competition eroded the financial health of many user companies which forced them to postpone their telecom infrastructure expansion programs .On the other side prolonged recessionary situation in developed countries adversely affected Indian OFC makers’ efforts to tide over the difficult situation through export.Lot of consolidation happened in this industry and now only the fittest is surviving.After a long period ,signs of recovery is visible in this industry.In our country National Optical Fibre Cable Network( NOFN) project will be a big boon for OFC makers.NOFN is an ambitious project of India goverment to provide broadband connectivity to over two lakh  Gram Panchayats at a cost of Rs.20,000 crore . A special purpose vehicle -Bharat Broadband Network Ltd (BBNL) - was created for the execution of this project. BBNL has divided the project into 6 packages- East, West, North, South, Central and Northeast , and this project is scheduled to be completed by September 2015. But like the case of any other government projects ,it already delayed and only recently orders for supplying cables and equipments started to issue to various companies. I think it is a huge opportunity for Indian OFC manufacturers and will be an additional push along with the over all revival in industry. Suggesting two low priced stocks from this sector in this week .

  

Aksh Optifibre

Aksh Optifire is a leading OFC maker from India with two manufacturing facilities ,one each at Bhiwadi and Sikar in Rajastan.Company is a major exporter of OFC and earning more than 70 % income from exports .Recently company awarded an order for supplying OFC worth Rs.200 Cr under the NOFN projects .For the first half ended in September 2013 ,Aksh reported a top line of Rs 122 Cr and a net profit of Rs.11.5 Cr .Promoters are continuously buying shares from open market in recent times and stock is currently trading around Rs.15

 Link to Company Website HERE

Birla Ericsson Optical Ltd

It is a joint venture between M P Birla Group of India and Ericsson Cables AB of  Sweden.Company reported good  performance in first nine months of this FY where it reported a Sales of Rs.189 Cr ( Rs.89 Cr ) and a profit of Rs.11 Cr ( Rs.5 Cr) . Currently stock is trading around Rs.23

Link to Company Website HERE

Along with NOFN ,some other major initiatives which will aid the growth of this industry is at various stages of planning and implementation.A project for connecting all locations of our armed forces points through OFC is expected to kick start in near future.Private sector players are keen to tap new  opportunities  through FTTH (Fibre-to-the-home) projects.All together the next few years will be good for this industry and recommending the above two stocks. Both stocks are listed in both exchanges.

GRANULES INDIA - RESULT UPDATE

Granules India  recommended @  Rs.79  ( Click HERE for old posting ) hits its 52 week high today @ Rs.230. Company reported very good performance in latest December quarter . Sales improved from Rs.195 Cr to Rs.284 Cr and net profit shot up from Rs.5.8 Cr to Rs.21.8. Nine moth EPS is Rs.26 which is more than last full year EPS of Rs.16

Recommending to HOLD it for long term.

SAKSOFT LTD - BUY

 

IT stocks are attracting renewed buying interest due to more than one reasons . Possibility of revival in Western economies after a gap of few sluggish years is the major reason for this bullishness .A favorable exchange rate is also helping IT companies  to expand margins.In addition to such factors ,IT is a sector which may not affect much due to any political changes or uncertainties  in the centre, post parliament election.In recent times ,many readers requested to suggest some good IT stocks from small/mid cap space .The biggest challenge in selecting listed IT companies for investment purpose from mid/small cap is the integrity of promoters. During 2000 IT bubble many companies from this sector collected money through IPO and then disappeared even without any trace.Most of the  small and mid size IT companies following asset light business models and only the human resources are their asset which is prone to attrition.Hence promoter integrity is most important in such businesses compared with asset rich business models.So, evaluating a small IT company is more challenging  especially at a time most of them are trading around their highs.Considering all these factors , this week recommending a Chennai based small IT company– Saksoft Ltd.

Saksoft is a company promoted by the erstwhile joint  Indian Promoters of WIDIA INDIA  (joint venture  with Meturit A.G. of  Switzerland-subsidiary of Friedrich Krupp GmbH) .Later they divested their stake in Widia in  favour of foreign promoters and now this company is listed here as ‘Kennametal India’. Thereafter, Saksoft is the second company came out with an IPO from the same promoters in 2005 at a price of Rs.30.While large IT companies operating in different verticals ,small and mid size IT companies co-existing and growing in niche sectors.Saksoft is one such company specialising in Information Management solutions and Business Intelligence .In large size companies ,French MNC Capgemini  is a company specializing in this space.Saksoft offering services for various sectors including Banking,Telecom,Retail,Logistics..etc.Recently company entered into Mobile application development .Company having three development centers one each at Chennai,Noida and Manchester and sales offices in various countries at London, Manchester, New Jersey, Chicago, Pennyslvania, Singapore and in India. Company operating through five subsidiaries and three step down subsidiaries located  in different countries.Last year Saksoft acquired 100 % stake in US based Electronic Data Professionals (EDP) through its US subsidiary Saksoft Inc.

                                                               From an investor’s perspective one interesting fact about this company is the low valuation market assigning to this stock. Even when many mid and small size IT companies promoted by promoters with suspicious background  are getting a P/E of 15 or 20 ,this stock is still trading at a one year forward P/E of  just around 5 .That itself only after recent up move when it came out of periodic call auction.I believe , a major reason for such a low valuation is the working structure of this company. As I mentioned above ,it is operating through various subsidiaries hence only the consolidated result reflecting the true picture of the company . But in many sources where data about company results are published ,only the stand alone result is available which is not attractive prima facie .For the FY 2012-13 ,Saksoft reported a consolidated turnover of Rs.160 Cr and a net profit of Rs.11 Cr where its stand alone sales was only Rs.42 Cr and profit was mere Rs.2.8 Cr.This difference is very huge and only few investors may be aware about this . ( Comparative consolidated yearly result HERE) Another fact is ,it  is a low liquid stock where floating stock is very limited due to high promoter stake.Promoters are holding near the maximum permissible limit of 75 % and large share holders holding another 11 % stake.Mr Ajit Thomas ,major promoter of south based well known AV Thomas group is a director of this company and he purchased 2 % stake in Saksoft from open market in last FY.

                                                                              In the first half of this FY,company reported a consolidated Sales of Rs.112 Cr and a net profit of Rs.7.6 Cr . ( Consolidated qtr results HERE) . I expect ,company will cross the last full year profit figure in this 9 months itself and report a full year EPS of Rs.15 in FY 2013-14. It is consistent dividend payer for the past ten years which paid 20 % in last FY, an increase from 10% from preceding years .In a recent interview , ( Read it HERE ) founder and MD of the company projected a turnover of Rs.1000 Cr in next 5 years.It is not impossible considering company's past efforts through inorganic route . Company also started to merge its subsidiaries and recently merged one of its subsidiary Synetairos Technologies Limited with itself . I believe it is one of the quality IT companies available at cheap valuation even after recent run up from small cap space .One major risk is low liquidity but it may be a blessing too for a performing business.Expecting at least 50 % appreciation from current level and  recommending as a strong buy for risk takers due to its low liquid nature.Stock is currently trading around Rs.82 and listed in NSE and BSE.

Link to Company Website HERE 

Link to company's Subsidiaries  Link1 ,Link2

Link to latest Annual Report HERE

Disc: I have vested interest in Saksoft.