Monday, December 24, 2012

U.P. Hotels Ltd

7 years high / low ( Rs.) : 548 / 113

5 years Revenue & PAT figures in Rs.cr:
2008: 63  / 11
2009 : 59 / 9
2010: 62 / 11
2011: 72 / 13
2012 : 75 / 10.5

Snapshot:
4 hotels – 645 rooms
Manpower: 714
Equity : 5.4 cr
Debt : 4 cr ( short term)
MF investments: 10 cr
Bank FD’s : 16 cr
Promoters : 88.39%

Hotel Assets:

1) Khajurao: 18 acres
104 rooms / banquet facilities for 80-7000 people – on the banks of river Khuddar

2) Jaipur : 26 acres
Hotel Clarks Amer Jaipur is situated in a green residential area, in the heart of the city. It lies at a distance of 2.5 kilometres from the airport and 12 kilometres from the railway station. Has 211 rooms. One of the most beautiful and enchanting property of U.P. Hotels Ltd.
Clarks Brij Convention centre @ Jaipur : 50000 sq ft + attached lawn for 5000 persons

3) Agra: 8 acres
Located 2 km. from the Taj Mahal, in the heart of Agra, and yet free from its din and bustle, The Clarks Shiraz is just 7 km. from the Airport and 3 km. from the Railway Station.
This 5-star resort, spread over 8 landscaped acres, has 237 well-appointed and fully renovated rooms, with maximum Taj facing rooms in the city
 
4) Lucknow : approx 3 acres ( not confirmed )
Conveniently located right in the side of the palace of the Nawabs and on the bank of river Gomti, Hotel Clarks Avadh Lucknow is only four kilometers from the railway station, 15 kilometers from the airport and just 1 km from the Main Shopping Area – Hazratga.
Hotel Clarks Avadh Lucknow features 98 rooms and is located on Mahatma GandhiMarg in Lucknow.

Valuation:
@ CMP of about Rs.278, the company trades at a m/cap of about 150 cr & EV of about 128 cr.
Promoters will have to dilute their stake to 75% in the next 6-7 months or delist the company. Considering that they own a little less than 89% ,if they opt for the delisting option, even if the same were to happen @ 2X current market price, i.e say Rs.550, promoters won’t have to shell out more than 35 cr. 

If one thinks from the promoters point of view, it makes sense for a company sitting on about 20 cr of net cash equivalents & hotels located on prime land in 4 locations.
Should be interesting to watch the developments here over the next few months.
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.


Monday, December 3, 2012

Standard Industries Ltd

Standard Industries Ltd @ CMP of Rs.17.10 ( Market Cap : Rs.110 cr )

Cash & cash equivalents ( nett of debt of 11.53 cr ) : approx 80 cr
Equity : 32.16 cr ( FV: Rs.5)
Promoters : Pradip Mafatlal group
Promoter holding : as per exchange disclosures: 20.12%. Another 38.86% is held by Satin Ltd ( under non promoter shareholding ) which appears to be a promoter related entity.

The company has no major operational business to speak of and is purely an asset monetization play.

Land assets:

1)  Thane - Belapur Road , near Ghansoli station : 62.25 acres.As per lastavailable  information ( may stand corrected), as per prevailing  land usage norms, this can be developed as 20 % residential + 30% commercial + 50% IT park.

They had entered into a MOU for this land which was reversed in the last quarter due to insufficient progress from the opposite party.

In 2008, the company had sold a 30 acre plot here to a subsidiary of Capita Land  Commercial Ltd , Singapore for Rs.230 cr

http://www.capitalandcommercial.com/inITPark.html

2)  Prabhadevi , Mumbai  : Stanroze apartments with a built up area of approx, 30,000 sq ft. This is a sea-front location in one of Mumbai's most prime areas. The building is largely vacant and can be redeveloped. My sense is, if redeveloped, saleable area should be approx 75,000 - 80,000 sq ft. Rates here are approx Rs.30,000 psf.

3)  Sewree - Mumbai : approx  58,275 sq ft plot , wherein the Municipal authorities have notified reservation as a recreation ground. There is some dipute with the municipal authorities regarding the compensatory TDR available against this. This should be about 16,825 sqft  in the worst case scenarion and about 23,300 sq ft in the best case scenarion.

4) Bharuch, Gujarat " approx 10 acre plot . The company has already sought and received shareholder approval for sale of this plot.

5) Surat ( Salt pan land ) : 3200 acres  consisiting of two parts of 2000 acres & 1200 acres. These have been with the company for a long time through its wholly owned subsidiary Standard Salt Works Ltd  though each lease has been for a short period of 5 years. Till now, the company has not faced any lease renewal problem.

Contingent liabilities are about 35 cr which include disputed rent of about 13.64 cr, excise / customes duty of 5.53 cr, & electricity duty on captive power plant of about 13.75 cr.

Management performance leaves a lot to be desired and is a major negative. The stock trades on the BSE & NSE in the Trade to Trade group currently.

Notwithstanding the above, at current valuations, the stock seems to offer a favourable reward to risk ratio. Moreover, dividend yield ( assuming they maintain a dividend of 15% i.e. Rs.0.75 / share) is about 4.5%. 

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.

Sunday, October 28, 2012

Alfred Herbert (India) Ltd: an update



I had written on Alfred Herbert (India) Ltd about 22 months back. Here’s the link to the post :

The stock price has hardly moved during this period. There have, however, been 3 developments:

Development No.1:

Real Estate developer Brigade Enterprises & the Government of Singapore Investment Corporation  jointly bought a piece of prime land admeasuring 9.5 acres in Bangalore's Whitefield from HUL for 125 crore.
 The bid for the property opened in April this year aqnd saw total seven bidders including Prestige,  Mahindra Lifespaces, CapitaLand and RMZ Corp.Bids offered by Prestige Estates and Mahindra Lifespaces for the property are speculated to be  around Rs 111 crore.
Some of the related links to this are herebelow:
http://www.bseindia.com/xml-data/corpfiling/AttachHis/Brigade_Enterprises_Ltd_270612.pdf
So basically the transaction has gone through @ Rs.13.15/acre.
I must clarify here that I’m using the above information purely to lend a valuation perspective and there is NO information whatsoever in public domain that the Alfred Herbert ever intends to monetize or develop their  11 acre land ( of which manufacturing facilities are estimated to be on about 2.5 acres).
Also I’m not privy to land usage restrictions, if any as also other factors which may bear on the valuation.So, since we are calculating on the basis of a purely hypothetical scenario, it is but prudent to value at a substantial discount.
We’ll value the land parcel @ Rs.8 cr/acre which is a little less than a 40% discount to the HUL-Brigade deal. The value of Alfred Herbert's Bangalore land can be pegged at about  Rs.88 cr.or so.

Development No.2:

Promoter shareholding has gone  up from 62.39% as of Sept 30,2010 to  70.39 % as on Sept 30, 2012- an increase of  8% over a 24 month period- a good sign.

Development No.3:

During the quarter ended June 30,2012, the company has been able to recover Rs.0.98 cr out of doubtful advances of Rs.2 cr. The Rs.2 cr advance had been already provided for in the books and hence the Rs.0.98 cr featured as an exceptional income.

It must be noted that for the year ended March 31, 2012, its subsidiary Alfred Herbert Ltd ( which operates from the Whitefield plant)  posted a loss of about Rs 0.40 cr on a turnover of about Rs.14.2 cr due to pressure on margins

Besides the above, there have been no noteworthy developments. 

Value of quoted equity investments ( market value)  + MF units was  about Rs.25 cr as of March 31, 2012.
The company continues to be nearly debt free.

Market capitalization at current market price of Rs.210 is about Rs.16.1 cr.



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.


Thursday, October 18, 2012

Multibase India Ltd -the beginning of a new beginning ?



I had written about Multibase India Ltd about 20 months back. The stock has gone nowhere in the interim period.

The link to old post :


Maruti Suzuki announced the launch of the Alto 800 two days back. In what can be construed as a path breaking move, the company has given the buyers of the top end version a choice to opt for company fitted Driver Air bag at an additional cost.

We might see, most other car manufacturers too following suit and offering the Driver seat Air bag option for the Micro ( A) & Mini ( A1) segment cars too.

Annual Car sales in India are approximately about 25 lakhs.Though there are no confirmed official figures available, it is expected that not more than 3.5 to 4% of the cars sold are with Airbags.

Of the total car sales mentioned above, the Micro & Mini segment sales are about 8 lakhs. Assuming over a period of time, even 4-5% of the buyers in this segment opt for the Air bag option, it should provide a decent impetus to Multibase India’s revenue growth.

A key point to bear in mind is that Multibase India currently operates at 1/3rd of installed capacity.

Total staff strength is about 45 which includes 10 shared services staff for their business process outsourcing service for the parent and group companies.  Production staff number is about 15 and even to scale up the production to 2 times or 3 times the current utilization should not require an addition of more than 10-12 production staff. So the scale economy benefits shall not be insignificant.

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.

Friday, October 12, 2012

Jollyboard Ltd-Interesting times ahead



 Jolly Board is the largest fiberboard company in India offering a comprehensive range of products .

The Company was incorporated on 10th December,1956 in Mumbai The comprehensive product range manufactured includes Bitumen Impregnated Softboard, Plain Softboard, Laminated Softboard, Painted Softboard in various thickness and multiple surface textures. The company also offers exclusive products like non-combustible and acoustical ceiling tiles. This is basically a coating given under the concrete cement in bridges/airports/construction to prevent it from cracking.
Nearly 70% of the production is exported.

The company has four mills for the production of Softboard, Bitumen Impregnated Softboard and mineral wool board. These four units produce 100,000 cubic meters of Soft Board annually..
The Company had issued Bonus Shares in the Ratio of 4:1. In the year 2008

Manufacturing :
Sangli plant: located on a plot of 100 acres
Aurangabad plant: located on a plot of 25 acres
Kanjurmarg plant :  was located on a plot of  30 acres ( this is in the process of being co-developed with Lodha developers)
Number of employees: 195
Promoters: 89.89%
Non promoters: 10.11%
Of this 10.11% , 2.13% stake(97.038 shares) is held by Nansha Trading Pvt ltd. Nansha Trading Pvt Ltd has no held less than 2% stake post Sept 2004 ( nearly 8 ½ years).

Balance Sheet:
Paid up equity Capital : Rs.4.55 cr
The company also has outstanding Cumulative redeemable preference shares  worth Rs.2.05 cr
Debt: Rs.4.35 cr ( approx 3.08 cr sales tax deferement loan & balance cash credit facility)
Cash & cash equivalents (liquid MF): Rs.17.2 cr ( as of March 31, 2012)
Market price: Rs.330
Market Cap: Rs.150 cr
Financials  ( 2011-12)
Revenue : Rs.75 cr
PAT: Rs.10.18 cr
EPS: Rs.17
Dividend: Rs.10 per share
Q1 2012-13
Revenue: Rs.21.95 cr
PAT: Rs.3.17 cr

Promoters:
 Mr. Arvind Jolly is at the apex of the Jolly Group of Companies, a Group with varied interests -
 The genesis of the Group can be traced back to post India’s Independence in the construction field.  As builders of repute the Group is responsible for many landmarks in Mumbai and the prestigious Koyna and Bhatsa dams in India (Shah, Salzgitter and Jolly were the Contractors appointed to construct the Koyna Dam. )
Mr. Jolly is one of the earliest collectors of contemporary Indian art and has a collection of over 400 paintings.  As a private collector his must be one of the finest collections of paintings held by any private collector in Mumbai.  In his bungalow at Malabar Hill every inch of space is occupied by paintings of leading masters like M.F. Hussian, Brota, Kishen Khanna, Ram Kumar, Manjit Bawa, Satish Gujral and numerous other artists.  Mr. Jolly’s acumen of collecting art can be gauged for the fact that most of the paintings were bought 30 years ago when these artists used to sell these paintings for a few thousand Rupees.
Source :
http://www.excampionites.com/newsandmore/view.asp?ID=115&CID=8

Dividend record for the last 8 years:
2005: Rs.1.20
2006: Rs.2.50
2007: Rs.5
2008: Rs.20
2009: Rs.10
2010: Rs.13
2011: Rs.15
2012: Rs.10

Key challenges in the core business & the  steps taken to address them :

The board business for any company anywhere in the world is a challenging business and a profit of 10% p.a. is considered a great performance.   Besides the banning of wood, the company has had to face major challenges like new environmental and pollution laws.
 The company manufactures  by the ‘wet’ process and has to treat all the water they discharge.  The re-use of water has helped them to meet the environment regulations, but has caused quality problems, as the board does not have the white finish which is required for the local furniture market and has odour in some seasons.  In order to circumvent this problem the company has invested in a 100 tonne per day evaporator from Praj Industries which will treat the water and the company will not have to re-use it. This is likely to result in a board better in looks and also odourless.
In the past 3 years the company has not been able to increase prices neither in the export market nor in the local markets.  At the same time  manufacturing  cost have  increased by 10% p.a.  In order to meet the challenges, the company is trying to produce more and have invested in a new energy efficient 18 tonne boiler from Thermax at a cost of Rs.7 cr and a pulping machine at a csot of Rs.3 cr to improve the quality and reduce energy cost. 
The company has  two types of customers:
·         The first type are the ones who use it for furniture and pin boards, and they want the boards to be as white as possible. 
·         The second type of customers are those who use it for expansion joint fillers and construction and they want the boards to be as black as possible.
The company has modernized the Sangli plant with new boiler, pulping equipment, & evaporator with the intent to improve  quality ,reduce the manufacturing cost and double  production. 

Kanjurmarg Realty:
The company had entered into a co development  agreement with Lodha Developers for its land at Kanjurmarg under which the developed area would be shared by the developer and the company.The cost of construction and development of the project would be borne by the developer. An IT Business Park which will occupy an area of 2 million sq.ft has been completed in  the first phase.  Another 1 million sq.ft. in the second phase at an adjoining premises at Kanjur Marg is in progress.
As per the 2010-11 Annual Report,The total built- up area that will be developed under Phase-II will be about 10 lakh sq.ft. Of the total developed area, Jollyboard will get 4.50 lakh sq.ft. area but will
have to hand over 1.00 lakh sq.ft. area to the Government for amenity blocks as per the terms of Government approval leaving net developed area of 3.50 lakh sq.ft.  for the Company.

Annual Report of 2011-12 does not provide much clarity on the above except saying that the Phase II has been delayed due to various permissions and that Municipal Corporation of Greater Mumbai has formulated new DCR regulations under which 35% areas which were available as free FSI will now be charges under fungible FSI. It goes on to say that as property owners in the joint development agreement, some of these costs will have to be borne by the company. The capital work in progress include Rs.67.53 cr being expenses incurred towards FSI premium, TDR purchases and cost of amenity block to be handed to MCGM.

Valuation:

Though there is not much clarity on the current status of the company’s share of 3.50 lakh sq.ft of developed space in Phase II, one can safely assume the realizable market price of the same to be not less than Rs.300 cr ( assuming a Rs.3000 psf discount on the prevailing rate of about Rs.11,000 psf).

From Phase I, the company has leased out office space from which it has earned annual lease rent of around Rs.3.75 cr last year. Wearing the conservative hat, even if one considers a higher rental yield of about 5%, the property price should be in the range of Rs.75 cr.

Promoters will have to dilute their stake to 75% in the next 9 months or delist the company. Considering that they own a little less than 90% ,if they opt for the delisting option, even if the same were to happen @ 2X current market price, i.e Rs.660-700, promoters won’t have to shell out more than 30-33 cr. If one thinks from the promoters point of view, it won’t be such a bad deal for a company sitting on about 17 cr of cash equivalents, realizable property value of about 375 cr plus an existing business in which the company is the market leader domestically and operating out of 100 acres of land at Sangli & 25 acres at Aurangabad.

Should be interesting to watch the developments here over the next few months.

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.