Bambino Agro is a stock
I recommended last year almost at the current rate.Thereafter company altered
its Memorandum of Association to venture into some un related fields .On the basis of this
decision ,later I expressed some negative opinion on this stock.After touching
a low of Rs.24 now it recovered and ruling close to its 52 week high price of
Rs.40 .Now it is learned that ,even the company altered its MOA, it is not in a
hurry to move into these fields and decided to concentrate in its core
business.Hence re-looking into this once
again.
BAMBINO is a
well known brand with pan India marketing
network.Company selling pasta, macaroni , noodles and a number of ready to eat
items under the BAMBINO brand . Company producing almost 75 items
from 4 manufacturing facilities. Even this
company is in operation for the past many years with a good brand recall ,its
financial performance so far not creating any excitement.Higher debt level and a possible
conflict of interest due to more entities owned by the same promoters are the
key reasons for concern.If the promoters are willing to change their mind there
is huge scope for wealth creation in this company .Since they hold almost 75 %
stake in it, it is easy to dilute some stake and raise funds to bring down debt
burden.Considering the brand value and the premium valuations realised in some
private equity deals in food sector
it
is not an impossible task. In the past I have recommended two companies which
faces same situation ( Butterfly Gandhimathi
( to read click HERE)
and DFM Foods -
HERE ) and later we realised what has happened with a change in
the attitude of management .The market capitalisation of both these companies
improved multi fold after some minor proactive steps taken by the management of
both these companies.Here in the case of BAMBINO too this is very relevant and
the same miracle is possible just by some simple initiatives by the promoters.I
believe this will happen in future and they will not waste the big opportunity available
.In recent times
company expanding to
new territories
and introducing various
new products.To ramp up its sales force, company recruited many employees in
recent past. To sell its ready to eat items BAMBINO started to open retail outlets in multiplexes. Earlier company entered into a distribution tie up with Domino's Pizza ( For details click
HERE). Even in the financial front too , company improving its performance
in past few quarters. For the
quarter ended June 2012 net profit rose 91.55% to Rs 1.36 crore as against Rs 0.71 crore during the previous
quarter ended June 2011. Company's year ending is in September and it already posted an EPS of Rs.4.8 in nine months against last full year EPS of Rs.2.34 .I feel , now things are started to move slowly in the
right direction.If management is willing to take some steps like reducing
debt,increasing corporate governance standards ..etc
,this stock will be a multi bagger in long term even from
its 52 week high price of Rs.40/-.
Disc:I have vested interest in BAIL
