Friday, January 27, 2006

Bhagyanagar Metals Ltd.

The last time I told someone about this stock, he quirked a remark - "Yeh stock lo, aur Bhagya pe chod do" ("Buy this stock, and leave it to destiny"; bhagya in hindi means destiny). As destiny would have had it, this is one stock which can fit the Graham radar. Please explore the enclosed stats -
Share capital - 6.3 crs
Loans - 14.47 crs
Investments - 1.6 crs
Net CA - 70.13 crs (22.2 rupees per share)
FV per share - 2.00 rupees
Dividend per share - 0.5 rupees
CMP = 30.20 rupees

Observations -
1. NCAV (Net Current Asset Value, net of all debt) comes to 17.66 rupees per share (0.56 times of CMP)
2. Dividend payouts for last 5 years (avg payout being 15%) have been good. The cash available is 2.71 per share so another payout of 0.5 rupees is defintely on (maybe more).
3. Debt recapitalisation (on an interest coverage of 4) is a cool 67.4 crs. The m-cap is 108 crs which makes me very comfortable.
4. The company works on a P/E ratio of 3.51
5. Growing sales and profits for last 3 years.

Some things to look out for - 1. The company is trying to work on a restructuring plan - a possible demerger; 2. Promoters are buying shares - a possible buy-back; 3. The quaterly results over the last one year have many an ups and downs - ???

I would suggest a buy for this stock. And be vary of the news on demerger, this may create opportunities in the pricing and valuation of the business.

4 Comments:

Blogger Prasanth said...

Shankar,
One thing that nags me is that the company is also diversifying into housing and IT parks development. Are they following the flavour of the season? What is the synergy? They were declared the highest bidder for some housing scheme of AP housing department and are also into developing an IT park. This could be a postive or negative - will check furthur.

7:35 PM  
Blogger Aditya Ramachandran said...

nice blog. Have you had a chance to check out Precision Wires (being in the same business area as this company)? Found it to be fairly valued.

7:53 PM  
Blogger Shankar said...

yes prasanth, i too noticed the news and was rather stumped by it trying to find out the synergies. From Cable equipment to housing - ??? (im bamboozeld).

for some reason, again couldn't find any annual reports. the only p-factor here is that the company is owned by the Surana Group which has diversified holdings in a number of sectors.

see if u can come up with some dope on this.

hi aditya, welcome to my world. let me put precision wires in a blog for you.

rgds, shankar

10:50 PM  
Blogger Shankar said...

Hi Aditya,

My first striking feature about Precision Wires was it's P/E (11.99). Also, growing sales and dividend over last 4 years. PW also has growing profits over the last 5 years. (must get a fundamentalist smiling)

Im putting it to the Graham test -
a) NCA of 3.63 per share against a CMP (27-jan) of 171.85 rupees [x]
b) Dividend yeild of 1.94% [x]
c) Debt recaptilisation of 38.3 crs against m-cap of 183.05 crs [x]
d) P/E = 11.99 [tick]

Aditya, the ticks are lower than the crosses. See, here how Graham would look at it. From a level of 171 rupees, i have a fairly larger probability for a fall. Even if the price remains the same, i would get only 2% max as div yeild. Is it worth the capital? Maybe i can get more money from other stocks?

I strongly advice to put your money to other uses as the pitfall seem higher .. tread with caution.

Warm regards
Shankar

11:52 PM  

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