Tuesday, July 05, 2011

JB Chemicals - Special Situation - Cash due to slump sale

JB chemicals

Though little late in the posting of this idea, the stock fell sharply over uncertainity over cash utilisation when the deal got announced to  ~115 Rs.
Have made some notes from the conf call transcript given by management ....
A
Valuation - As per CMP downside appears limited
Particulars

Amt
Cash in books
Rs per share
102.4
40% discount ('coz investing in pharma business)

40%
After cash
Rs per share
61.42854208
Total Business Revenues before deal
Rs crs
800
Remaining business revenues
Rs crs
615
EV (assuming a price/sales multiple of 1)
Rs crs
615
Net Debt
Rs crs
-22
Equity Value
Rs crs
637
No of shares
Crs
8.45
Per share value (assuming a price/sales multiple of 1)
Rs per share
75
Total Value in case of non payment of dividend
Rs per share
137
CMP on date of analysis
Rs per share
120
B
Calculation Of net debt
Debt as on Mar 2010
Rs cr
136
3 yr avg operating cash flow for 2010-11
Rs cr
80
Cash as on mar 2010
Rs cr
78
Net debt
Rs cr
-22
C
Remaining Business revenues as per mgt in concall
ROW
m$
28
Russia Prescription
m$
22
j&J
m$
20

m$
70
Exchange rate
Rs/$
45

Rs cr
315
Domestic
Rs cr
300
Total
Rs cr
615
D
Cash in books
Cash recd
Rs cr
1160
Escrow acccount (payable 15 months later)
15%
174
Balance receivable after 1 month
Rs cr
986
Discounting with 12%

977
Discounting of escrow money with 12%

147
Present Value of total money receivable

1124
Tax Rate

23%
Final in Domestic
Rs cr
865
Per share cash
Rs
102.4
E
Some +ve developments
1
Ashish Dhawan holding ~7% and buying additional 5.6 lakh shares @128 Rs in NSE after deal
Industry
: Pharmaceuticals & Drugs
House
: Private
Trade Price(Rs.)
Value
 (Rs.in Lakhs)

Deal Date
Client Name
Tran
Qty (000's)

25-May-11
ASHISH DHAWAN
BUY
565446
128.02
72388397

2
Sale of Russia business seems like good riddance as it was not returning funds anyways
3
Mar 2010 consolidated P&L sales roughly ~ Rs740 cr ...almost    half of which is stuck as sundry debtors of Rs 340 cr,
out of which    almost half is debtors more than 6 months i.e. Rs 172 cr....

Historically good dividend payout ratio
F
Possible setbacks
1
Management going back on their words like GeeCee Ventures/ Gwalior Chemicals.
Went back on their word of investing in pharma,  went back on giving dividend, announced buyback and
went ahead with NBFC.  Probability of the above event appears to be low
2
The presence of a savvy investor Like Ashish Dhawan need not ensure that minority share holders interest
is taken care of, as was seen in the Indo asian fusegear where Ashish holds 8%
G
Links:
1
Conf call transcript
2
Money control Vidoes


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Thursday, June 23, 2011

GTL Infra - Mkt Overreaction or Deeper Malaise

Did some back of the envelope calculations ...
   
plz share your comments/suggestions ....
   
  1. No GTL Infra Shares are pledged as per shareholding pattern
  2. Some rough calculations
    1. GTL has 32000 towers (http://www.gtlinfra.com/towerportfolio.asp)
    2. Recent transactions in the space at ~Rs 0.45crs
      1. ESSAR – ATC (http://articles.economictimes.indiatimes.com/2010-02-24/news/28400846_1_etipl-xcel-telecom-atc)
      2. GTL- Aircel (http://www.business-standard.com/india/news/gtl-aircel-tower-deal-confirmed-for-rs-8400-cr/382725/)
  3. Assuming 30000 operational towers and a per tower value of Rs 0.32crs (30% discount), you get 9,500 crs Rs as EV, Debt of ~7000 cr Rs – Equity Value of 2500 crs Rs vs Mkt cap of 1700 cr Rs….(http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/gtl-debt-management-of-arm-remains-crucial/articleshow/8932317.cms)


Clarifications by mgt

    

Some concerns on the mgt front - GTL used to be a part of the ketan parekh stocks (http://www.moneycontrol.com/news/business/gtl-at-63-month-lowfallrisefallthe-co_558689.html )
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Timken India As a delisting candidate

Had started investing in the counter from 180 levels, didnt get an opportunity to post it....

Please share your comments and suggestions regarding Timken India

had a look at the counter as a delisting candidate vis-a-vis phenomenal spurt in the volumes in month
  • Global experience – Annual report shows List of subsidiaries showing ~69 subsidiaries worldwide out of which only 2 of them incl India are listed 
  • 80% sh holding has to be brought down (because of the 25%  public float norm)
  • 3 yr window for companies to comply with 25% sh holding norm - No hurry for mgt, however with their expansion plans they might have to shell out more later
·         http://www.ias100.in/news_details.php?id=158
·         http://www.moneycontrol.com/news/cnbc-tv18-comments/25-min-listing-norm-effective_453110.html
  • Shifted entire India holding via Mauritius in 2010
A few unanswered questions - Mgt shareholder unfriendly or other plans ???


Valuations - as per relative valuations it is the most expensive among its peers SKF and FAG

                       
Sh Holding Pattern - easily doable
  • 80.02% holding - so out of the balance open offer of 19.98, they will require to get atleast 50% i.e. 9.99%
  • 4.72% with Institutions
  • 1.57% body corporates
  • 0.64% individuals holding >1 lakh Rs
  • ignoring 0.19 held by NRI's - they can mop up - 6.93% from smart investors
  • out of the balance 12.86% (held by public <1 lakh) +.19 clearing membes - 13.05% - they require 23% tender to get balance 3.06%
  • HDFC, DSP Blackrock (acquisition price ~175 in nov-dec 2010) and UTI are invested
If you analyse the share holding distribution given in 31st Dec 2010 report
  • A reverse cumulative calculation will show that holders between 500-1000 shares will almost complete the required ratio of 90%
  • Balance <1% can be easily got from retailers holding b/w 1-500 shares
Movement in top 100 shareholder list in last one month
Previously top 100 shrhldrs held 86.4% shares whereas the number has increased to 86.9%. Moreover, if we look at the top 50 shareholders, very few have actually sold out
New names who have bought over last 1 month include Citigroup Mauritius with 2.9 lakh shares, Puneet & Yadu Dalmia of Dalmia Bharat Cement group holding 75k shares…

In a nutshell,
Unlike Binani - no significant group of shareholder alone can lead to delisting - without a good price on offer - delisting unlikely to happen
however Share price might continue to languish incase delisting gets delayed for the period of 3 years (more of time risk than event risk).

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