Monday, February 27, 2006

Jai Corp Ltd. - ???

There are two striking things about Jai Corp Ltd.'s balance sheet -
a) It has a net current asset of 140.56 crs (i.e. 162.9 rupees per share)
b) It has investments of 57.87 crs (i.e. 67.1 rupees per share)

Add a) and b), you find a Grahamian NCAV at 230.0 rupees per share. The stock is available today (Feb-26) at 109.90 on the NSE - a discount of 52.21% on the NCAV !!!

On further examination of the investments, the company has been a rather decent participant at the stock markets. As of 31-Mar-2005, it held the following shares :
1. Bharati Shipyard - 10728 shares - Today: 383 rupees = 0.41 crs
2. Jet Airways - 8592 shares - Today: 964 rupees = 0.82 crs
3. ONGC - 159975 shares - Today: 1175 rupees = 18.79 crs
4. PNB - 11199 shares - Today: 452 rupees = 0.51 crs
5. Indraprastha Gas - 110000 shares - Today: 138 rupees = 1.51 crs
6. TCS - 33538 shares - Today: 1687 rupees = 5.65 crs
Thus, the total quoted investments itself comes to 27.71 crs i.e. rupees 32.1 per share

A discount of 52.51% on NCAV - seems a cropper !!!

What I dont like about the stock?
a) Reducing Q-on-Q sales and profits
b) The company has charged taxes at -1.30, -1.14 and -0.52 for the three quarters of this year
c) The company is striving to get it's cash liquidity in place

See Chart (you'll be surprised that the stock has not gained much over the last 1.5 years, while the market has gone crazy .. including peers of Jai Corp Ltd.

Im confused on this one !!!

12 Comments:

Anonymous abhijeet said...

you never know what stock market can do to stocks...........bull is mad and it can take along with it anything and leave behind also anything....and we thank you for letting us know about the leftovers....what are ur post budget views.....which stocks or rather sectors do u think can gain..........

5:06 PM  
Blogger Rohit said...

saw your blog two days ago...awesome...keep up the good work....
i wanted to know more about value investing, can you recommend some books on value investing...also how do you find the stocks you discuss on your blog.....
thanks....

5:19 PM  
Blogger Shankar said...

Hi Rohit,

Good question. Tough answer.

Picking a value stock is a process of discovery. I guess, one needs to get rather excited about some metrics which might be an aberration to common patterns. E.g. I'm sure you watch cricket - what do you do when you find that team India is going at 90 runs in 15 overs (@ 6 runs/per) and you come back at the 20th over, to find India is at 100 runs. You curse, and try to know WHO WASTED SO MANY BALLS. (for the opposition, it's WHO BOWLED SUCH A BEAUTIFUL SPELL)

A number of people have gone through my blog and have seen various instances where value can be seen such as low P/E ratios, generous dividend yields, surplus unaccountable assets (like land), undervalued investments or the simple NCAV approach. These are just techniques used to derive plausible conclusions to these aberrations.

So the trick is to keep looking with a magnifying glass at every number that comes by you.

Warm Regards
Shankar

9:56 PM  
Anonymous moolchand said...

Hello shankar,
Having followed ur blog from a long time i can nothing but thank you for sharing all the information and analysis.
Yaar of lately i have BOUGHT GRASIM at 1800 levels on recommendation by one of my friend who happens to be stock broker.I have gained alot working with him but on this one i am not to sure,I will really like if you can devote ur precious time to analyse GRASIM.

best regards,
moolchand.

12:03 PM  
Blogger Shankar said...

Hi Moolchand,

Thank you ..!! Devote your precious time ..!! .... ???? Whats with the adulations ???

Anyways, Grasim is on a P/E of 20.68. Excellent cash flows and management. The industry is also booming which is a very good sign of things to come. The only hitch is the decreasing Q-on-Q profits - Q2 and Q3.

Hold on to the stock and keep a stop loss at 1650 rupees.

PS: Moolchand, if you have a broker who gives you tips which more often than not, are correct and very profitable ... do explore sharing it on the blog. I made this blog on a definite proposition that i'll be totally unselfish to the cause and will contribute by researching numbers.

You can explore the same for the bigger cause. Ofcourse, you have the final say on this.

7:23 PM  
Blogger Ravi Purohit said...

Hi Shankar,

Isnt a P/E ratio of 20+ pretty high for a company like Grasim Industries (essentially a commodity co. with interests in cement and viscose staple fibre). While the cement industry is doing well, the same cannot be said of the VSF industry. Infact, VSF is the cash cow for Grasim. And currently the cow is not in the best of healths. Infact, none of the index stocks are looking great investments, barring an odd MTNL or VSNL. Shankar, What's your take on index stocks at current valuations ? I think you can look at Subros and Tinplate as value plays in this kind of a market. They may be dull on the charts but can deliver handsome returns for patient investors.

Regards,
Ravi.

8:58 PM  
Blogger Shankar said...

Hi Ravi,

I did go through Tinplate Company of India, post your comment. Its has an excellent fwdP/E of 5.71 and wonderful credentials in it's line of business.

Just a couple of hiccups I found - a) the sales for the quarters have been decreasing which can never be a good sign and, b) there is no margin of safety (the NCAV is negative 52.65).

Inspite this, I would advise investment in this scrip on the basis of the P/E. Look out for the decline in sales/profits on a Q-on-Q basis.

Warm rgds,
Shankar

4:36 PM  
Anonymous Anonymous said...

Dude..Your work has been really good..it was interesting going through your words..What do you see about KRBL at CMP200..compared to Lakshmi Overseas at 900...But having better sales than it..
Let me know your view..Where can I read more about NCAV..

Cheers
Siva

9:54 AM  
Anonymous Anonymous said...

Hi, I was out blogging and found your site. It certainly got my attention and interest. I was looking for Cash Transfer information and even though this isn't a perfect match I enjoyed your site. Thanks for the read!

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