Tuesday, December 22, 2009

Stock Idea: Balmer Lawrie & Company

Balmer Lawrie & Company: Bargain Hunt begins!
21 Dec 2009
Balmer Lawrie & Company (BLC) is a diversified PSU having Mini Ratna status. Its business spans across
Industrial packaging – Manufacturing barrels and drums
Logistics Infrastructure – Container Freight stations and warehousing activities
Logistics Services – Air and related logistics activities
Travels and tours – Ticketing, tours and money changing activities
Greases and Lubricants
Tea blending and packaging
Leather Chemicals
Engineering and Technology services
Stock data (18 Dec 2009) BSE
Share Price (Rs.) 543
52 week high/low (Rs.) 600 / 204
Market Cap (Rs million) 8843
P/S (x) 0.54 P/E (x) 8.75
No. Of Shares (Million Nos.) 16.29
Average Daily Volume (6month) 13,471
The company is aiming to achieve Rs. 2000 crores revenues and Rs. 200 crores in PBT by the end of FY2010.
Amongst the segments, it can be seen that travel and tours contributes ~40% of the total revenues and Logistics Infra and services contribute ~24% of the total.
Considering profit margins, despite tours and travels contributing maximum to the revenues, bulk profits come from Logistics Infra and services (contributing 63% of PBT). This segment has the highest profitability (26% margins) and also the fastest growth whereas travel segment contribute only 14% of PBT and has very low margins of ~3.4%
Greases / lubes and Industrial Packaging segments are moderate growers with growth of ~7% and together contribute ~32% of the revenues.
Tea blending and engineering services are the least contributors to the revenues and profits. As tea blending division is a commodity product their returns are quite low and does not justify the capital allocation, especially for this segment. Even the revenues from this segment have declined by 15% in current financial year. The company may be planning to exit the tea business if these returns do not justify the investments
BLC has grown its sales by 13% CAGR since last 5 years and its net profits by 35% CAGR. The sales and net profits in FY09 were Rs.1636 crores and Rs.101 crores respectively. The company wants to push the sales to Rs.2000 crores by end of FY10 and is also making efforts to achieve PBT of 10% during that time frame.
Since last 5 years, Balmer Lawrie has been able to maintain ROE greater than 22% because of proper cost controls, effective working capital management and better utilization of resources. The company is also an effective cash generator and this can be seen from the fact the cash from operations is equivalent to net profits with minimal capex.
The company also has strong balance sheet with zero debt and has net worth of ~Rs. 390 crores in FY09. It also has substantial cash balance of ~Rs. 248 crores which it can use for expansions or it can payback its shareholders by increasing the dividend. BLC post an attractive dividend yield of ~3.5% and with impressive record increasing dividends.
BLC is setting up a lube and grease manufacturing plant in Indonesia through a 50:50 joint venture with a local company by investing ~US$5m (~Rs. 24 crores)
Key concerns:
BLC is diversified to various businesses and it seems that it requires focusing on its key growth drivers i.e. focusing especially on logistics infra / services, tours and travels, and industrial packaging.
The company also needs to reorganize its business units for better allocation of capital. For example: The returns generated by the tea business do not generate adequate returns on capital.
Valuation:
BLC seems fairly valued with P/E of ~9x, P/S of ~0.6x and P/B of 2.4 (the margin of safety is not there), but when the company is evaluated on segmental basis the stock is valued cheaply especially when the travel business is contributing ~40% (Rs.662 crores) of the revenues. The current IPO of Cox and Kings whose revenues were just ~Rs.155 crores is valued 17 times its sales and similar is the case of Thomas Cook also (5 times its sales). If those companies are getting valuations at this level then Balmer Lawrie should also fetch some decent valuations in the travel business. The price / sales ratio of the whole BLC is ~0.6 indicating that it is largely undervalued.
Other segments like Logistics infrastructure and services, Greases and lubes, and Industrial Packaging should be atleast valued at P/E 10-12 (Gateway Distriparks has P/E of 14, Castrol is available at P/E of 26). So by adding up the numbers, we get the fair value of ~Rs.1500 crore vs. mcap of Rs. ~900 crores for the whole company making a stock at really attractive “BUY”.
Source: Internet (Valuenotes by Rathin Shah)

Stock Idea: Bombay Dyeing

The stock has been buzzing on the bourses since the past week and this has nothing to do with the core business of the company – polyster and textiles. It is more on account of its amobitious realty foray which has turned the company into a milch cow.
Its realty arm, Bombay Dyeing Realty is developing two projects in Mumbai. One is located in Dadar, Naigaum. This is spread over an area of 45 lakh sq.feet and it is being developed as a mix of both residential as well as commercial properties. The present value is around Rs.8000/sq.feet. This means, the property is Naigaum is valued at Rs.3600 crore. And here, Bombay Dyeing is selling flats at Rs.16,000 per sq.feet. The other property is in Worli and this is measured at 48 lakh sq.feet. Valued at Rs.12,000/sq.feet, the total value of this Worli property is Rs.5600 crore. For both the properties, contract has been given to L&T, which was 12 months ago and the total deadline for completion is 48 months.
Apart from development, there is really nothing too encouraging happening in the company’s core business. Its financial performance for Q2 ended 30th Sept 2009 continued to remain in the red on the net levels. The only gratifying part was that the net loss had come down and it managed to post profit before interest, depreciation and taxation. Net loss was at Rs.11.05 crore v/s 19.69 crore loss in Q1FY10 and much better than Rs.103.97 crore loss in Q3FY09.
Polyester continues to remain its main fray though the income earned from realty is also getting to be quite substantial. In Q2FY10, realty contributed 33% to the topline, which in Q1FY10 was at 31% and in Q2FY09 was at a meager 6%. Polyester in current Q2 contributed 48% to the topline while textiles contributed 19%.
Realty is giving the fillip to the stock as well as the company. It is expected that the company by 2011 or 2012, would demerge its realty arm and consider listing it too.
Source: Internet (by S P Tulsian)

Intraday Trading Calls for 22nd December

Indian Stock Market may open good positive and remains positive for the day today with very high volatility.

Today's Intraday Stock Tips / Trading Calls (Keep strict Stop Loss for Each Trade):

SCRIP NAME

TRIGGER

PRICE

TARGET 1

TARGET 2

VOLTAS

Buy Above

164.20

168.45

172.00

Sell Below

162.55

159.40

156.00

VIDEOCON INDUSTRIES

Buy Above

221.75

226.70

232.00

Sell Below

219.50

215.20

210.00

IDFC

Buy Above

148.70

152.35

156.00

Sell Below

147.35

144.20

140.00

IDBI

Buy Above

121.25

124.50

128.00

Sell Below

120.10

117.40

113.00

KPIT CUMMINS

Buy Above

132.10

136.50

142.00

Sell Below

130.40

126.55

122.00

APTECH LTD.

Buy Above

177.80

183.55

190.00

Sell Below

175.00

172.40

168.00

ADSL

Buy Above

224.60

230.45

236.00

Sell Below

221.45

216.35

210.00

GOOD LUCK

Disclaimer

The information in this publication is provided by http://www.moneybazzar.blogspot.com/ is intended for use for Readers & Traders . Every effort is made to provide accurate information, but http://www.moneybazzar.blogspot.com/ cannot guarantee the accuracy of the information or of the market analysis. This is a newsletter and is for informational purposes only. It is not a solicitation or offer to buy or sell futures. There is a high risk of loss in trading futures. You should not trade with money that you cannot afford to lose. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this newsletter. The past performance of any trading system or methodology is not necessarily indicative of future results.



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