Multibase India Ltd-sound growth prospects

Multibase India Ltd ( BSE Code :526169) is currently in its 20th year of operations.

Primary products:  Thermoelastic Elastomers, Thermoplastic master batches.

Plant location: Daman

Market positioning : Market leader in its category of products.

Parentage : 75% subsidiary of Multibase SA, France which in turn is a subsidiary of Dow Corning, USA

Multibase India  is a specialty and technical chemicals manufacturing company. It is engaged in the manufacture and distribution of thermoplastic elastomeric compounds and silicon enhanced products. The company offers a wide range of polypropylene compounds, thermoplastic masterbatches, thermoplastic elastomers, and siloxane masterbatches. Its product rangeincludes TPSiV, a thermoplastic silicone vulcanizate; Siloxane Masterbatches, Multibatch, Multi-Flex, Nylex, Multi-Pro, and Multi-Flam.

User industries for primary products of Multibase:

Automotive

Asthetics: Car mats, IP/DP center console skins, control panel knobs, seat belt housing, hand brake, cup holder, A/C grills and components

Fluid Transportation:Air Duct Housing, Window cleaning duct

Safety: Driver Airbag covers,Passenger Airbag Covers, Knee Airbag Covers , Side Airbag Covers, curtain Airbag Covers

Weather Seals: Static & semi dynamic glazing seals, Acoustic Seals, Asthetic seals, Thermal seals

Structural parts: Dash board, Door panel, centre console,Wheel trims

Consumer:

Health, Personal Care, Cosmetics: Tothbrushes, Razor handles, Hairbrush handles, cosmetic packaging

Houseware:kitchen utensil,small appliances ( irons,kettle), washing machine

Sports: swimming accessories ( flippers,mask, snorkel)

Personal electronics: Mobile phone housing, ear buds,key board

Industrial:

Wire & Cables:Optical fibre,pipe extrusion,HFFR  wire & cables

Electrical protection:Electrical switch,Electrical housing, Electrical contactor

Fluid & product delivery:gaskets and seals,water cooler seals,flexible plumbing,hose & tubing

Packaging: Carrier bags, woven sacks,Stationery (interleaf sheets, folder covers), thermoformed food trays, Corrugated PP boards

Window seals & gaskets: window seal, door seal, refrigerator seal

Financials:

Paid up Equity Capital : Rs 12.62 crore

Debt: Rs.0.93 crore

2009-10:

Revenue: Rs.32.84 cr

Profit before tax: Rs.3.50 cr

Net profit: Rs.2.70 cr

EPS: Rs.2.13

Dividend: Nil

6-months ended Sept 2010:

Revenue: Rs.19 cr ( 10% growth yoy)

Profit before tax: Rs.1.53 cr ( 25% de-growth yoy)

Net profit: Rs.1.02 cr ( 48% de-growth yoy)

Key Catalysts:

1)   Increased volumes/sales :The company has been increasing its presence in the Automotive sector in India. It offers  a wide gamut of applications to this sector, as detailed above. Increased volumes will have a high positive impact on bottomline.

2)   The current installed capaicity is 6000 TPA. Current capacity utilization is less than 30% of the installed capacity. So, Multibase can  over the next 3-4 years comfortably reach a 100 cr plus turnover without any capacity expansion.

3)  Delisting – though this is more in the nature of optimistic speculation, it canot be ruled out considering the growth prospects.

4)  Mandatory Air Bags in 4 wheelers: It is expected that over the next 3-4 years, Air bags as a safety feature  may become mandatory for all new 4 wheelers , just as seat belts were made mandatory a few years back. The proposal is currently with the Ministry of road  transport and highways and may come up for consideration when the amendments to the Motor Vehicle Act are notified.

At the current price of Rs.29 per share, the company may seem overpriced on the traditional PE scale. However if one considers the growth prospects for its products , market leader status and strong parentage, it appears a good investment.

At the time of writing this report, the author /his family have an investment interest in the stock mentioned above. Under no circumstance does the information in this report represent a recommendation to buy or sell the above-mentioned stock.  This report has been prepared and issued on the basis of publicly available information, internally developed data & other sources believed to be reliable. This is just a suggestion solely for information purposes and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Readers using the information contained herein are solely responsible for their actions and are advised to satisfy themselves before making any investments.

5 interesting stocks with paid up equity capital less than 1 crore

Welcast Steels Ltd ( BSE Code :504988) is in its 39th year of operations.

Business segments: Manufacture of Hykrom grinding media balls for the cement and mining industry.

Manufacturing plant: Bangalore ( Peenya Industrial Area)

Equity: 0.64 crores (6,40,000 shares of Face value of Rs.10 each)

Debt : 6.57 crores

Market price: Rs.464

Market cap: Rs.29 crores

Promoter Holding: 71.59%
Year ended March 31, 2010:
Revenue : Rs.137 cr
NP: Rs.1.27 cr (after paying Rs.1.12 cr in tax)
EPS: Rs.19.53
Dividend per share: 20% (Rs.2 per share)
9-Months ended Dec 2010 :
Revenue: Rs.149 cr
NP: Rs.- 2.47 cr

The performance in the current year has been very good with revenue rising by 50% and NP by more than 150% on the back of strong export orders.

AIA Engineering Ltd owns the entire 71.59% promoter stake in the company. The strong parentage makes Welcast Steels an interesting stock to keep on the watchlist and buy on dips.

Triton Valves Ltd (BSE Code:505978) is in its 35th year of operations.

Business segments: India’s largest manufacturer of tyre tube valves, valve cores and related accessories.

Manufacturing plant: Mysore

Equity: 0.99 crores (9,90,000 shares of Face value of Rs.10 each)

Debt : 26.49 crores

Market price: Rs.736

Market cap: Rs.72 crores

Promoter Holding: 50.12%

Year ended March 31, 2010:
Revenue : Rs.91.54 cr
NP: Rs.4.81 cr (after paying Rs.2.28 cr in tax)
EPS: Rs.48.50 ( adjusted on post bonus equity)
Dividend per share: 200% (Rs.20 per share)
9-Months ended Dec 2010 :
Revenue: Rs.93.81 cr
NP: Rs.- 5.85 cr

The performance in the current year has been very good with revenue rising by 40% plus and NP by more than 70% on the back of strong demand in line with the trend in overall Automotive sales.

Triton Valves had capitalized free reserves in 2009-10 by declaring a bonus issue of 2 share for every one share held. The paid up equity capital pre-bonus was Rs.0.32 crores.

The company is investing Rs.45 cr over the next one year at its Mysore plant to increase Valve manufacturing capacity to 15 crore pieces and Valve cores to 19 crore pieces per year to meet the expected demand from tyre companies which will see additional capacities coming on stream in all sectors.

New Development:

Last year the company launched TyreProbe TPMS ( Tyre Pressure Monitoring system) for passenger cars, SUV’s and light trucks. This device is fitted in a vehicle and monitors the health of tyres on a real-time basis in terms of temperature and pressure and warns the driver of abnormalities. The product , conceptually provides a huge safety cover as a large number of accidents happen due to tyre blow out and punctures. It costs about Rs.8000-10000 per kit.

The market leadership which the company holds in a critical component of tyre as a product and also how TyreProbe as a product settles down in the market make it an interesting stock to take a small exposure to and keep on the watchlist for developments.

Kaycee Industries Ltd ( BSE Code:504084) is ints 68th year of operations.

Business segment: Electrical (Rotary switches, Micro switches, Counters, Water Meters)

Manufacturing plant: Mumbai

Equity: 0.51 crores (51,000 shares of Face value of Rs.100 each)

Debt : 2.17 crores

Market price: Rs.5920

Market cap: Rs.30 crores

Promoter Holding: 62.11%

Year ended March 31, 2010:
Revenue : Rs.25.64 cr
NP: Rs.1.05 cr (after paying Rs.0.36 cr in tax)
EPS: Rs.206
Dividend per share: 10% (Rs.10 per share)
9-Months ended Dec 2010 :
Revenue: Rs.20.12 cr
NP: Rs. 0.80 cr

The company’s performance has generally been lacklustre and  nothing to talk about. The management is with the Grovers who also own CMS Traffic systems & CMS Computers.

Last year,through postal ballot, the company obtained shareholder approval for including real estate development in the company’s activities.

The company owns a little more than 2 acres of land on Lake Road  in Bhandup, Mumbai where its plant is currently situated. It employs about 100 workers there.

The only possible catalyst for the stock seems some activity related to this land. Prevailing rates in the area are about 30-35 cr per acre.

Gujarat Automotive Gears Ltd (BSE Code:505712) is ints 40th year of operations.

Business segment: Auto Components ( Transmission gears, axle shafts,propeller shaft components,king pin units, wheel spanners)- all sold under the brand names KAP & KAG

Manufacturing plant: Baroda

Equity: 0.35 crores (3,50,000 shares of Face value of Rs.10 each)

Debt : Nil

Market price: Rs.402

Market cap: Rs.14 crores

Promoter Holding: 70.62%

Year ended March 31, 2010:
Revenue : Rs.15.43 cr
NP: Rs.1.34 cr (after paying Rs.0.75 cr in tax)
EPS: Rs.38
Dividend per share: 30% (Rs.3 per share)
9-Months ended Dec 2010 :
Revenue: Rs.12.65 cr
NP: Rs. 1.80 cr

95% of the company’s sales are from exports. Main markets are USA, UK, Italy, Singapore, Africa, Egypt & Sri Lanka.

There are no immediate visible catalysts in the stock.

The Ravalgaon Sugar Farm Ltd ( BSE Code: 507300) is in its 77th year of operations.

Business segments: confectionery & sugar

Manufacturing plant: Ravalgaon ( near Nashik, Maharashtra)

Equity: 0.34 crores (68,000 shares of Face value of Rs.50 each)

Debt :17 crores

Market price: Rs.6500

Market cap: Rs.44 crores

Promoter Holding: 52.88%

Year ended March 31, 2010:

Revenue : Rs.61.33 cr
NP: Rs.6.15 cr (after paying Rs.3.06 cr in tax)
EPS: Rs.904
Dividend per share: 150% (Rs.75 per share)

Of the above revenue, Confectionery business had achieved sales of Rs.26.12 cr & Segment profit of Rs.2.86 cr
9-Months ended Dec 2010 :
Revenue: Rs.20.62 cr
NP: Rs.- 3.27 cr

Of the above revenue, Confectionery business has achieved sales of Rs.19.38 cr & Segment profit of Rs.2.54 cr.
The company’s sugar division has been struggling this year  in line with the trend in all companies in the sugar sector.

Ravalagon has strong well entrenched confectionery brands like Pan Pasand, Mango Mood, Coffee Break, Choco cream besides the all time favorites cherries & che( strawberry, orange, lime flavours ), Supreme (cardamom, rose & butterscotch).
The confectionery division has been operational since 1942 and has a strong pan India presence.

Acquisitions in the confectionery business over the past few years:
4 years back Godrej/Hersheys had acquired Nutrine for around Rs.270 crores while around 4 years back Lotte bought 60% in Parrys for Rs. 65 crores valuing the company at Rs.108 cr.It is important to note that Parrys was making loss/negligible profit when it was acquired by Lotte.

Around 3 years back there was speculation that ITC will acquire Ravalgaon’s confectionery division for Rs.350 cr.

Though this valuation seems unrealistic, given its strong & profitable confectionery brands ,Ravalgaon re-presents a delicious opportunity for takeover candidates. A back of the envelope calculation makes a price of Rs.100 crore plus /minus 15% very probable.which translates into around Rs.14500- 15000 per share.

Rs.3750-4250 shall present an ideal entry point with a 2 year perspective.

At the time of writing this report, the author /his family have an investment interest in some of the stocks mentioned above. Under no circumstance does the information in this report represent a recommendation to buy or sell the above-mentioned stock.  This report has been prepared and issued on the basis of publicly available information, internally developed data & other sources believed to be reliable. This is just a suggestion solely for information purposes and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Readers using the information contained herein are solely responsible for their actions and are advised to satisfy themselves before making any investments.