Stocks for the long and short term portfolio
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Helios & Matheson
1) The outstanding feature is that it spends in proportion to what it generates from core business. It has around 1 Cr of left over free cash. While it spend 46 Crore is Capex.
2) Last year it spend 32 Crores on purchase of fixed assest. All of this was for, the annual statement put it... for future growth...
"the company incurred capital expenditure of `. 32.61 crore during the year and major part of capex is in the nature of plant and
machinery consisting of investment in computer equipment, software products, high end servers, net work solutions, infrastructure and
communication facilities connecting our global and domestic offices. this increase in capital expenditure has been necessitated by
routine need for replacement / renewal and support anticipated business growth. this capital expenditure has been funded out of our
internal accruals."
I like these words "support anticipated business growth" and "internal accruals".
3) The company is using these internal accruals to purchase other companies. This generates additional revenue while putting the cash-pile to good use. More importantly, these companies help strengthen the core operations. They have not bought any oil-wells thus far, so thats good news.
4) The exec salaries are leveled. Around Rs.13 lakhs for top execs.
5) Bad debts could be an issue in services industry. But with HM, debts more than 6 months old are 2% of total. So its a green.
===============
All in all, this is a good company and is here to stay. It is bullish about its future and is investing heavily in it, to the tune of 40 to 50 Crore each year. It is not debt laden, has home base in California, USA, generates strong cash flow and most importantly it is mid-sized and has clients spread in the most important sectors requiring IT serivces, viz Banks, Heathcare, capital market institutions, insurance businesses.
Even read the report from Crisil, which marks its fair value at Rs.97.
1) The outstanding feature is that it spends in proportion to what it generates from core business. It has around 1 Cr of left over free cash. While it spend 46 Crore is Capex.
2) Last year it spend 32 Crores on purchase of fixed assest. All of this was for, the annual statement put it... for future growth...
"the company incurred capital expenditure of `. 32.61 crore during the year and major part of capex is in the nature of plant and
machinery consisting of investment in computer equipment, software products, high end servers, net work solutions, infrastructure and
communication facilities connecting our global and domestic offices. this increase in capital expenditure has been necessitated by
routine need for replacement / renewal and support anticipated business growth. this capital expenditure has been funded out of our
internal accruals."
I like these words "support anticipated business growth" and "internal accruals".
3) The company is using these internal accruals to purchase other companies. This generates additional revenue while putting the cash-pile to good use. More importantly, these companies help strengthen the core operations. They have not bought any oil-wells thus far, so thats good news.
4) The exec salaries are leveled. Around Rs.13 lakhs for top execs.
5) Bad debts could be an issue in services industry. But with HM, debts more than 6 months old are 2% of total. So its a green.
===============
All in all, this is a good company and is here to stay. It is bullish about its future and is investing heavily in it, to the tune of 40 to 50 Crore each year. It is not debt laden, has home base in California, USA, generates strong cash flow and most importantly it is mid-sized and has clients spread in the most important sectors requiring IT serivces, viz Banks, Heathcare, capital market institutions, insurance businesses.
Even read the report from Crisil, which marks its fair value at Rs.97.
Of the above companies Helios and Matheson is the best.
Jyoti has very low net profit margin of 1.5% or so. Needs more and more debt to grow as profits are dull. Is mainly India centric.
Kores India does not have focus. Its into Textiles, Eng, foundry etc... and office supplies. Makes it tough to understand.
Gati does seem like stable business. But numbers look funny. Would've given a closer look, but it has increased several folds now.
Jyoti has very low net profit margin of 1.5% or so. Needs more and more debt to grow as profits are dull. Is mainly India centric.
Kores India does not have focus. Its into Textiles, Eng, foundry etc... and office supplies. Makes it tough to understand.
Gati does seem like stable business. But numbers look funny. Would've given a closer look, but it has increased several folds now.
Just a correction for Jyoti structure (JSL):-
Net profit margin is 1.27%, my guess is you took Net profit from money control which is wrong, it shows 44.16 crores there. whereas in actual Net profit is 38.4 crores *consolidate as per company's annual report.
*this is 5th time I have spotted wrong figure in moneycontrol. don't no what they have adjusted under accounting rules.
Net profit margin is 1.27%, my guess is you took Net profit from money control which is wrong, it shows 44.16 crores there. whereas in actual Net profit is 38.4 crores *consolidate as per company's annual report.
*this is 5th time I have spotted wrong figure in moneycontrol. don't no what they have adjusted under accounting rules.
I refer to 3 websites to confirm the bottlenecks like freecash flow, net profit margin, eps etc... those websites are morningstar.com (very nice), equitymaster (also good), moneycontrol (nice).
Jyoti did not seem dear because it needs a lot of capital to get the wheels moving. Engineer's india also takes up turnkey projects but does not have so much debt and nor does BHEL.
Jyoti did not seem dear because it needs a lot of capital to get the wheels moving. Engineer's india also takes up turnkey projects but does not have so much debt and nor does BHEL.
Again, about Helios and Matheson.
It is trading at a an agreeable PE of 3.9; Simply because it has not attracted the interest of FIIs, they have 0% in SHP. Plus, IT sector currently does not have the investor fancy. So the prices are subdued.
This company is a possible candidate for PE upgrade. And whenever that happens it is going to pay its investors really well.
However, there is debt on the balance sheet. In its defense, I'd say that its GPM is 20% plus so 1% interest rate should not be a problem. However, I would like to see better EPS in the quarters to come, else debt will increase and could spell trouble.
It is trading at a an agreeable PE of 3.9; Simply because it has not attracted the interest of FIIs, they have 0% in SHP. Plus, IT sector currently does not have the investor fancy. So the prices are subdued.
This company is a possible candidate for PE upgrade. And whenever that happens it is going to pay its investors really well.
However, there is debt on the balance sheet. In its defense, I'd say that its GPM is 20% plus so 1% interest rate should not be a problem. However, I would like to see better EPS in the quarters to come, else debt will increase and could spell trouble.
Indorama Synthetics Ltd.
An average company in a capital intensive business. But, with a good vision and is here to stay. Looks like a family managed business and is important in this field as the experience must be passed down.
The numbers are average. The cash generation is decent and has Free cash Flow, though not in the strictest sense. IRSL makes good quality yarn, the name "Indorama" is a brand in textile circles.
Making a post on it is worthwhile, because if the shares are available at a stiff discount, then I would like to buy and hold. And this is likely to happen because the company has posted a negative EPS this year due to various factors (sub-optimal capacity util, fx, fluc raw-mat prices). This may continue in the quarters to come.
An average company in a capital intensive business. But, with a good vision and is here to stay. Looks like a family managed business and is important in this field as the experience must be passed down.
The numbers are average. The cash generation is decent and has Free cash Flow, though not in the strictest sense. IRSL makes good quality yarn, the name "Indorama" is a brand in textile circles.
Making a post on it is worthwhile, because if the shares are available at a stiff discount, then I would like to buy and hold. And this is likely to happen because the company has posted a negative EPS this year due to various factors (sub-optimal capacity util, fx, fluc raw-mat prices). This may continue in the quarters to come.
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