Stocks for the long and short term portfolio

[roketsingh]

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.

Company looks good, however, it is really small cap in IT industry.

I read company's annual report, I must say they need to hire a communication expert. Probably the worst annual report I came across in terms of readability. Their 10k is probably a better read.

I understand that 90% revenue is recurring revenue but they have dependency on very few customers. A negative event could substantially impact their top line and bottom line. As you mentioned debt it is increasing good, but I just cannot get past 250cr market cap.

 

[roketsingh]

What is the ideal price for an entry.

Shelly I cant comment on that. It is function of your risk appetite.

I check my investments once every six months so I am really conservative in terms of price I pay for a security.

 

[jamit_05]

Company looks good, however, it is really small cap in IT industry.

I read company's annual report, I must say they need to hire a communication expert. Probably the worst annual report I came across in terms of readability. Their 10k is probably a better read.

I understand that 90% revenue is recurring revenue but they have dependency on very few customers. A negative event could substantially impact their top line and bottom line. As you mentioned debt it is increasing good, but I just cannot get past 250cr market cap.

A small company has a positive: It is easy for the price to go up multifold, unlike large caps. Need to protect the downside by ensuring that it won't shut operations in the next down-cycle.

Report put across that they are diversified in Banking, healthcare, insurance etc. And I see little reason why an IT company of 20 years of history would close-down.

The threat, however, is that it may acquire poorly and de-grow. Must follow-up on news.

 

[shreeux]

Any one review THEAL (Tree House Education and Accessories)

Its lower than Industry PE...Its time for accumulate or wait for correction..!!!

I think it will be a Multibagger...!!!

 

[manileo]

An Insightful presentation By Ashish Kila CIO of Perfect Research at Flame conference in Pune.

Click here

 

[oilman5]

To AMIT,
Recently i come across DSKulkarni , pune based construction company. Just see its fundamental strength- Nobody advertises- Their profitability high ,as major they completed 2008-9. So now waiting sell flat & make profit. See the bookvalue.

 

[jamit_05]

To AMIT,
Recently i come across DSKulkarni , pune based construction company. Just see its fundamental strength- Nobody advertises- Their profitability high ,as major they completed 2008-9. So now waiting sell flat & make profit. See the bookvalue.

Point #1
Knowing that they are a construction company, I first checked its "Change in Working Capital".... and there you have it.. 177 Crores of inventory on 54 Crores of revenue.

I think that is a huge pile up. Either DSK holds them till demand comes or sell them due to cash-crunch. Either way I see limited upside to its profitability and increased risk.

However, if you see DSK as a strong brand in Pune, then wait for a sharp correction, which will most likely come, and then buy and hold.


Point #2

In 2012-13 DSK doubled its Long term Debt from last year's number! That does not go down well with me. I'd understand a gradual increase. But this feels like a distress move. And makes me think, what if a turnaround does not come for a prolonged period, how is DSK going to service this debt?

 

[oilman5]

Yes ,recently they r making flats in Mumbai- as u understand they took good loan for it, owner is a peculiar guy, unlike others he dont deal in %share, build flat & then sell.
Actually he takes a risky steps, luckily budget helps and Mumbai house price increased , so 2012-13 longterm debt clarified.
( as a business man , by selling flats he should debtfree.)So far construction in limelight , its matter of time to REACH 120/-
( remember our discussion on ENGG India ltd)Same case here

 

[jamit_05]

Yes ,recently they r making flats in Mumbai- as u understand they took good loan for it, owner is a peculiar guy, unlike others he dont deal in %share, build flat & then sell.
Actually he takes a risky steps, luckily budget helps and Mumbai house price increased , so 2012-13 longterm debt clarified.
( as a business man , by selling flats he should debtfree.)So far construction in limelight , its matter of time to REACH 120/-
( remember our discussion on ENGG India ltd)Same case here

You sound confident about it. It'd be nice if i got to see the 2013-14 Annual Report.

 

[Shelly]

Shelly I cant comment on that. It is function of your risk appetite.

I check my investments once every six months so I am really conservative in terms of price I pay for a security.

Yup, you can wait as you have a patience to make an entry at the correct time.Hope i figure the entry times soon.