Stocks for the long and short term portfolio

[jamit_05]

wait for earlier lows when IDFC was around 70 and Axis around 700. I understand buying cheap, but IF govt delivers and we are in a multi year bull market are you willing to sit it out?

If modi can implement what he is saying india may transform into a much better country in 5-10 years.
Why not do conservative SIP and add more in corrections rather than just waiting? It may increase your price but for long term investing you will still do good. The risk of waiting outside seems more to me.

Anyway, i dont have as much skill (or rather none for this kind of stuff) as you do but just a suggestion.

All along, the intent has been to get a clear and visible opportunity. This will happen when nifty corrects 20%. This will cause weaker stocks (but with good managements) to fall twice as much; for ex. IDFC, BHEL, cairn, pfc, infy, ING vyasa. In that scenario I shall start SIP. On the flipside, if Nifty ensues a major bull run and leaves me out of it, its a risk I am willing to take as it is really not a risk. Risk would be in getting into an investment with low confidence.

On the brighter side, I see opportunity in precious metals. Silver has corrected over 60%. It is now a good long-term investment. I have started SIP.

Earlier I made a mistake of judging the attractiveness of a stock based on the historical PE-levels of Nifty, which acts as a good barometer. But, investment decision must solely be made on the basis of the overall strength and price attractiveness of the individual company.

 

[jamit_05]

i think you dont like small caps but anyway would like your opinon if possible.
i got few stock recommendations from a seemingly reliable source who i follow. i m trying to make small equity portfolio (but with most of my investments in MFs)

One company is - Madhucon Project.
It has some roads and power plant funded with quite a bit of debt. Each project has its own debt and they dont overlap. If road is in trouble, power plant should not get affected. Power capacity is expanding as they are close to completing Phase-II and will later start with Phase 3. They also have a coal mine in indonesia which i think they intend to use for a power plant there in future.

Now, he estimates that the current power plant alone is worth around 2k crore after accounting for debt. One trigger is likely listing/stake sale of simhapuri plant in 2015.

The roads are not performing as well as they would want and have high interests on the debt. Even so, they should be worth around 1k crore after debt.

It has run up a bit but still current market cap is ~260 crore. What do you think? There will be some holding discount and simhapuri i think is 90% owned. thanks

Small caps give very good returns. The must form a portion of ones portfolio. I have not done much research on them, but I do have my eye on a few: Helios, Greaves, Gujrat gas (midcap).

I shall look into Madhucon and revert.

 

[jamit_05]

Hi
I was planning to invest in Adani power and IDFC with a holding period of at least a year .
Any thoughts/advice would be highly appreciated.

Why Adani power? Esp now.

IDFC won't give returns in a year, unless speculative. The management has given a 9 year plan to unfold itself into banking sector. Where any noticeable improvement will be seen only in last two years. These are the words of the management.

 

[TracerBullet]

Small caps give very good returns. The must form a portion of ones portfolio. I have not done much research on them, but I do have my eye on a few: Helios, Greaves, Gujrat gas (midcap).

I shall look into Madhucon and revert.

This is what i understand, but note that i have not developed any skills so far in reading fundamentals.

The consolidated results are under pressure because of road portfolio. But for investment, he said to look at only the power plant subsidary as its assets are far more in value than the current market cap.
Possible Near term triggers in next few years are 1) Simhapuri IPO - This can be used to decrease debt and fund Phase 2 of Simhapuri (660mw plant in sub phases). The IPO will probably be of value more than the current market cap 2) Decrease in interest rates which allow road portfolio to breakeven. 3) Phase 1 completion last subphase this year will add to EPS

This is what another guy noted from recent AGM -
"I Attended AGM, below were the highlights

1. Simhapuri Power Plant: Remaining 150mw of Phase One (450mw are already operational) would start commercial production by Oct/Nov 14.
construction of Second phase of 660mw will commence once required approvals are received and it will take 40 months to complete this phase (however I believe the project will complete in sub phases like 165mw each and project would complete much before 40 months as company has established better relationship with suppliers & management gained healthy experience from phase 1)

2. Impact of recent Supreme Court verdict on coal block cancellation: No coal block was allocated to MPL hence no negatives on MPL. As of now MPL is using Indonesian coal, however with recent verdict company could participate in auction and can get coal at cheaper rate.

3. Progress on road projects: Delay in constructing road project are purely because of procedural issues (inactions of state govt) , such as necessary land has not been acquired by West Bengal & Jharkhand Govt. required for the project.

4. Positives of New Policies on MPL: MPL management see positive impacts on getting project clearance, however there are no much positives on MPL, as most of the clearances are stuck due to inactions of state Govt.

5. Impact of Japanese & Chinese investment on MPL: MPL is very confident receiving projects from Chinese counterpart, as MPL has already worked with biggest Chinese infra company and shares very cordial relationship with them. However MPL don't enjoy such advantages against Japanese counterpart.

6. Capital: MPL would not dilute Equity and would not go for any CDR.

7. Hotel and Mall projects: Both projects are stopped as necessary clearances are yet to be received. Although company has already repaid loan obtained for the project and these projects are not generating negative cash flows. MPL would go ahead with these projects once necessary approval received.

8. Business turnaround: As per Management it would take 2 to 3 years to turnaround the business."


Note - I already have decent position in it. May add later if things develop.

 

[jamit_05]

tracer,

I gather that this company is mostly about the powerplant.

Looking at other companies in the field, I see that it is a tough job. Not a clear-cut victory. We have Adani, JP, Reliance and power related, BHEL. None of these companies are currently doing too well and hope is distant.

 

[TracerBullet]

tracer,

I gather that this company is mostly about the powerplant.

Looking at other companies in the field, I see that it is a tough job. Not a clear-cut victory. We have Adani, JP, Reliance and power related, BHEL. None of these companies are currently doing too well and hope is distant.

The powerplant seems to be doing alright. Over here, it states that as of 31 March 2013, simhapuri made 141 crore net on 1102 revenue. The plant generated about 220cr units last year. This year after addition of 150mw unit 3, it has already generated about 147 crore units. Unit 4 150mw should be operational by year end, So we can expect more than 300 crore units for full year. Profit depends, but we should be able to expect ~250 crores for this year.

Current market cap of holding company madhucon is 270 crore. The power plant is doing well, coal is imported from indonesia but they may look at india too at cheaper rates after recent verdict ( as per comment from guy who went to agm).

Apart from power plant, they have roads (which are under pressure), coal plant abroad and more. Power plant itself seems to have value much more than current market cap.

What do you think? thanks

 

[jamit_05]

The powerplant seems to be doing alright. Over here, it states that as of 31 March 2013, simhapuri made 141 crore net on 1102 revenue. The plant generated about 220cr units last year. This year after addition of 150mw unit 3, it has already generated about 147 crore units. Unit 4 150mw should be operational by year end, So we can expect more than 300 crore units for full year. Profit depends, but we should be able to expect ~250 crores for this year.

Current market cap of holding company madhucon is 270 crore. The power plant is doing well, coal is imported from indonesia but they may look at india too at cheaper rates after recent verdict ( as per comment from guy who went to agm).

Apart from power plant, they have roads (which are under pressure), coal plant abroad and more. Power plant itself seems to have value much more than current market cap.

What do you think? thanks

If one is working in that industry and has intimate knowledge of its participants then he could invest in balance sheets that are stretched. Otherwise, investing based on hearsay or articles on the net is not advised.

For ex. I think Indorama will do well. With crude prices falling, its Yarns will be well in demand. It tends to post profit and management likes to reduce debt in good years.

Madhucon is piling on debt, EPS is negative and all of this after almost a decade in the industry. There is little hope for any sharp turnaround.

If the powerplant performs well, then let us first see it in the numbers.

 

[TracerBullet]

If one is working in that industry and has intimate knowledge of its participants then he could invest in balance sheets that are stretched. Otherwise, investing based on hearsay or articles on the net is not advised.

For ex. I think Indorama will do well. With crude prices falling, its Yarns will be well in demand. It tends to post profit and management likes to reduce debt in good years.

Madhucon is piling on debt, EPS is negative and all of this after almost a decade in the industry. There is little hope for any sharp turnaround.

If the powerplant performs well, then let us first see it in the numbers.

1) The links i gave are from BSE annual report and generated units are from cea (government site). They are not hearsay.

2) Consolidated numbers are stretched apparently due to road portfolio, it seems this is how infra companies work in build–operate–transfer. Interest expenses are high and toll collections not growing as projected and hence the trouble. Still roads can be sold off at cost but they seem to be not interested and are waiting for better times. Although not visible near term, interest rate cuts whenver they happen, may help them breakeven.

3) But as i understand the powerplant subsidary is not liable for other subsidary debt.
Power plant is doing well. You can check the first link i posted. Simhapuri Energy seems to be quite profitable (140 cr last year) and may make more this year as unit 3 is already running and unit 4 will start year end. The cea links show they are running fine and have already generated 150 crore units. They import coal from theri mine in indonesia, so dont face coal shortages.

So we have a holding company with 270 cr market cap with one of its subsidary making 140 crore profit last year and likely to make around 250 cr this year. Its (Simhapuri) assets minus debt were estimated by him to be atleast worth 2k crore. One trigger for it is possible IPO/stake sale to fund next Phase.

What i am looking for is another pair of experienced eyes to look over and check if there is anything amiss here. thanks

 

[adityasaraf007]

The powerplant seems to be doing alright. Over here, it states that as of 31 March 2013, simhapuri made 141 crore net on 1102 revenue. The plant generated about 220cr units last year. This year after addition of 150mw unit 3, it has already generated about 147 crore units. Unit 4 150mw should be operational by year end, So we can expect more than 300 crore units for full year. Profit depends, but we should be able to expect ~250 crores for this year.

Current market cap of holding company madhucon is 270 crore. The power plant is doing well, coal is imported from indonesia but they may look at india too at cheaper rates after recent verdict ( as per comment from guy who went to agm).

Apart from power plant, they have roads (which are under pressure), coal plant abroad and more. Power plant itself seems to have value much more than current market cap.

What do you think? thanks

Hi TracerBullet,

I just opened the first link in your post which is for Maducon Projects' March 2014 quarterly press release. Saw the anomaly of Standalone and Consolidated sales which prompted me to have a glance at its 2013-2014 Annual Report and this what I observed during the last 5 minutes.

1. Let's talk about year-end and consolidated figures given in FY2014-Q4 press release. Standalone sales for last year is Rs 1030 crore, whereas consolidated sales is lower at Rs 892 crore. Which implies that there's lots of inter-group sales. (Have a look at the profit figures and try to figure out how did Madhucon post standalone profit and consolidated loss).

2. Now, let's turn to its Annual Report for 2013-2014. Have a look at the Annexure to Standalone Audit Report which is for CARO reporting (read the whole thing). Some of the specific points that I wish to draw to your attention:

• Pg 41 of that PDF - The first table shows arrear statutory dues outstanding for more than 6 months for which there isn't any dispute.. i.e. the company acknowledges it is debt and would make the payments if it continues to act in good faith. Now, look at the dues which are outstanding. Provident Fund and Professional Tax amounting to Rs 1.5 crore. A company that doesn't care about it's employees would never care about creating shareholder value. Besides that, either the company doesn't have enough cash to properly compensate it's employees or not the necessary will to do so. Whatever it be, it screams me to stay away from it.
  
• On the same page, point (xi) of CARO reporting, the company doesn't honour most of it's debt obligations on time. The company has played its role to create NPA for its lenders. And has also arm-twisted them to restructure the loans. You would find some more details in the Notes to Account.

This much is enough for me to form an Opinion that the company is not of Investment grade and I didn't proceed further to waste my time in further analyzing it. If you still wish to speculate, that's your choice.

BTW, also have a glance at the Note for Reserves and Surplus for Consolidated Statements... Total of about -300 crore after receiving 290 crore as Securities Premium (from issuing Shares on cash). Destruction of 600 crore on consolidated basis going as per books.

 

[TracerBullet]

Hi TracerBullet,

I just opened the first link in your post which is for Maducon Projects' March 2014 quarterly press release. Saw the anomaly of Standalone and Consolidated sales which prompted me to have a glance at its 2013-2014 Annual Report and this what I observed during the last 5 minutes.

1. Let's talk about year-end and consolidated figures given in FY2014-Q4 press release. Standalone sales for last year is Rs 1030 crore, whereas consolidated sales is lower at Rs 892 crore. Which implies that there's lots of inter-group sales. (Have a look at the profit figures and try to figure out how did Madhucon post standalone profit and consolidated loss).

2. Now, let's turn to its Annual Report for 2013-2014. Have a look at the Annexure to Standalone Audit Report which is for CARO reporting (read the whole thing). Some of the specific points that I wish to draw to your attention:

• Pg 41 of that PDF - The first table shows arrear statutory dues outstanding for more than 6 months for which there isn't any dispute.. i.e. the company acknowledges it is debt and would make the payments if it continues to act in good faith. Now, look at the dues which are outstanding. Provident Fund and Professional Tax amounting to Rs 1.5 crore. A company that doesn't care about it's employees would never care about creating shareholder value. Besides that, either the company doesn't have enough cash to properly compensate it's employees or not the necessary will to do so. Whatever it be, it screams me to stay away from it.
  
• On the same page, point (xi) of CARO reporting, the company doesn't honour most of it's debt obligations on time. The company has played its role to create NPA for its lenders. And has also arm-twisted them to restructure the loans. You would find some more details in the Notes to Account.

This much is enough for me to form an Opinion that the company is not of Investment grade and I didn't proceed further to waste my time in further analyzing it. If you still wish to speculate, that's your choice.

BTW, also have a glance at the Note for Reserves and Surplus for Consolidated Statements... Total of about -300 crore after receiving 290 crore as Securities Premium (from issuing Shares on cash). Destruction of 600 crore on consolidated basis going as per books.

i dont understand a lot of things that you said so ill get to work on it and come back with questions if i have any later. thank you!