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My stock picks for 2008 !!!!!!!!!
Monday, 06 Oct, 2008Voith Paper Fabrics Ltd.Current Market Price : Rs. 106.20 (52 Week High / Low : Rs. 285 / Rs. 93.50; Market Cap : Rs. 60 Crores) Earnings Voith Paper Fabrics is the only company in India supplying an entire range of high quality paper machine clothing. It sells its products at Net Profit Margins of greater than 20% for many years now. Note that its ‘Operating Profit Margins’ are about 30%. It has shown continuous growth over the past many years and taking a very subjective look at the business and industry, there is no doubt to my mind that it would – on aggregate – continue to grow in the years to come. The company earned Rs. 22.87 per share last year, discounting the current price at a mere 5.90 times. Its average earnings over the past 6 years is about Rs. 18.00, once again discounting the current price at a very modest 7.50 times. Dividend This is pretty much the only disappointing figure in this company. It pay a regular, albeit miserable, dividend of Rs. 3.00 per share for the past many years now. This – in light of the fact that the company earns way in excess of that amount, has humungous cash reserves and almost no major and specific expansion plans – seems almost inexplicable to me. The management must realize that such dividend policy manifests itself as a permanently understated market price for the company’s shares. Until of course, this is something they want. I am not the one to be cooking up conspiracy theories, but haven’t you ‘older hands’ in the markets seen this before. Multinational owners, 75% stake, huge cash reserves, negligible dividends, no market price ‘friendly’ action. Does anyone else smell an impending open offer / delisting… Negatives The trend of the quarterly results is a real downer. There has been a continuous declines in net profits for about 5 quarters now. But this simply does not shake my faith in the long term economics of this company. The company is way too well managed, has too much of goodwill, a major market share and most importantly has way too much financial muscle to flounder way off its long term earning power. Its principle market of paper is just growing way too rapidly to leave too many players unhappy in the longer term (especially the biggest and the best). The company is still earnings Rs. 20.00 per share on a rolling four quarter basis. I honestly feel that this is just one of those years where the company will maybe consolidate its earning power. Nothing to scream and shout about. ‘Worst Case’ Intrinsic Value Let us forget the goodwill and brand equity the company has built over forty years here. Let us ignore its pedigree. Let us take no notice the Rs. 117 in cash realizable assets the company holds. Let us also, for a moment, forget the 20%-25% Net Profit Margins the company works on and assume that all the physical assets (except land) the company holds is just worth nothing – nil, nada, zip. How about just 10 times long term earnings or just about the impossibly pessimistic land value of the Company’s works. I cannot get more pessimistic than this. Rs. 180.00 is the ‘Worst Case’ Intrinsic Value Please, atleast give me Book Value. I promise not to pull on my hair the next time a fresh MBA graduate explains the ‘Efficient Market Theory’ to me. But I must atleast be given Book Value here – something to keep my faith alive. My Target Price over the next few years is not a penny below Rs. 275.00 (100% above current market price). Once the market does decide to get ‘efficient’. Zen Technologies (33% above current market price) that I can come up with. Zen Technologies:-The scrip to watch out for in the year 2008 Buzz on the bourses:- Scrip:Zen Technologies Bse code:590032 Cmp:131.05
Target:210 Duration:4-6 months Returns expected:50% Story:-Finally "Zen tech" is into the radar of several investors
again.More importantly India"s most renowned investor Rakesh
jhunjhunwala has approached the company and is taking 450000 shares at
a price of 125rs through issue of warrants.These is indeed a great news
for the shareholders of zen tech and one can expect the company to give
significant upsides in the coming quarters.It should be important to
note that Mr jhunjhunwala apparently approached the company couple of
years ago and was in advanced stage to have the stake in the company at
a price of over 300rs.But that never materialized because of the bad
blood between the promoters and Mr Jhunjhunwala.Infact after the news
the price of zen tech crashed severely to below 100 levels from 300 odd
rs.Its of no intelligence what happened then and for the power of money
and supremacy who did what....hehehe...Thankfully things have change
for good and now both the promoters and the raring bull are in good
terms.Valuation wise too, Zen tech is quoting cheap at 7 P.E of its
expected 08 eps of 20rs.One can buy the counter for a target of over
200rs in a horizion of 4-6 months. Recently
The company has declared its quarterly results for quarter ending
December 2007.It has reported quarterly sales of Rs. 4.64 crores and
net profit of Rs. 2.53crores. On an equity capital of Rs. 7.64 crores,
the quarterly EPS is Rs. 3.5 (Rs.14 annualised). The NPM has been
maintained at 50%. ZEN Technologies Ltd Issue warrants
(convertible in to Equity Shares 4,50,000) and Equity Shares 4,50,000
at 135/- to Rakesh Jhunjhunwala and Rekha Jhunjhunwala & Peomoters
(3,50,000) on preferential basis on 18 Jan 2008. Check the bseindia
site for this this company Annoncements. This
stock should not be looked at 2-3 days point of view. My suggestion to
every investor would be to remain invested for very long term or dont
repose the faith in this company. Management is a good enterprising
team with good values and you can rest be assured they will start
getting orders very soon. They may announce some big orders in march,08
but that is not the end of the stock. This stock is a 4 figure stock at
some point and when is something elusive. But with global spend on
DEFENCE this kind of innovative companies products will be in demand
and lot of scope for exports, primarily to african countries and middle
east as well. They may open office in africa as well at some point if
its financially viable. they have invested a handsome amount in middle
east office for a definite reason. one needs to understand that. They
are just growing in size at a moderate pace now and when they get the
big orders in the coming years they will expand to many countries and
thats when you would see the real valuation coming up. My take is if
someone can hold for 4-5 years this stock should touch 4 figure mark.
Just visit the website of zen technologies and also see the global
potential of such simulator companies and their market capitalization
and you will be flabbergasted at the gross undervaluation. If you look
at the previous fii investments
some leading names have entered and exited because the delivery did not
happen in the anticipated time. Now with their expansion kicking off as
per schedule very soon you will see fii's again buying in a big way and
this stock will catch the fancy of some good savvy investors and this
time it will zoom to unchartered territory where it will be continuosly
locked in upper circuit after upper circuit, because their intellectual
capital is worth more than 1,500 crores. ZEN
TECHNOLOGIES LIMITED (ZEN), incorporated in 1993, is a pioneer in the
design, development and manufacture of world class, (DEFENCE)
state-of-the-art training simulators. Our mission is to provide to our
customers, the highest level of products and services in our areas of
expertise. ZEN is an ISO 9001:2000 (QMS) and ISO/IEC 27001:2005 (ISMS)
Certified Company. Zen Technologies Ltd has
CRISIL has assigned 'SME 1' rating to the Company on April 24, 2007.
This rating indicates 'Highest level creditworthiness' adjudged in
relation to other Small and Medium Enterprises. ZEN
has been at the forefront of applying new technologies and developing
new products and is actively involved in indigenization of
technologies, which are helpful for Indian security forces. ZEN was the
first company in India to commercialize PC-based visual simulation
technology for small arms training simulators. ZEN has
developed an advanced version of ZEN iFATS- Advanced Weapon Simulator
(ZEN AWeSim), which comes in two versions, one integrated with
un-tethered weapons and other one with tethered weapons. ZEN AWeSim can
train up to 8 firers simultaneously and provides for 3D based targets
and video-based scenarios for developing judgmental and reflex skills. This
company has a great future.Here are the estimated financial
projections:FY2007-08 & FY2008-09Sales Revenue 20.00 Cr. &
50.00 Cr.Profit After Tax 10 Cr. & 25 Cr.EPS Rs.15 & Rs.34.5.Even if we give a conservative P/E of 10, It should be trading
at Rs.350+ based on FY 2008-09 earnings. Note: EPS was calculated based
on the current equity.Will not disclose my one and two year targets for
this scrip as it may make your eyes pop out!Enter current price at
135/- Short term Target 250/- Long Term Target 1000/-.
Please do your individual research before investing in any of the above stocks... |