Wednesday, March 22, 2006

There's something about Aftek

Aftek Infosys stats are enclosed -

Share Capital - 17.06 crs
Loans - 129.54 crs
Investments - 59.59 crs
Net CA - 374.40 crs
FV - 2.00 rupees per share
Dividend - 1.00 rupee per share
CMP (22-Mar; 10:05 am) - 78.45 rupees per share
LY Profit - 59.80 crs

a) The NCAV (excl invt) comes to 28.71 rupees per share, which is quite excellent for an IT company (pl revert to the blog on Visualsoft Tech where Prasanth, Ravi, Rohit and me blew away the NCAV technique for evaluation of IT companies).
b) Sales and profits have been rising at 25-30% every year and this year is also no different.
c) Dividend yield comes to 1.30%
d) EPS comes to 7.01 rupees per share

Some other inferences ....

1. Loans are very interesting. Unbelievably, Aftek Infosys had been debt-free for the last 3-4 years. From nil debt last year to 129 crs this year would raise eyebrows. However, when I look at this number on the basis of capability to service debt ... the company is well on cue. At 129 crs, the interest cost would come close to 13 crs for the year (at 10%) and with the company earning 60 crs of profits per year, servicing this amount is not an issue (at an interest coverage of 4, the company would have a AAA rating with 150 crs of debt). The debt has been raised through the FCCB route.

2. I expect this NCAV to come down in the next annual report due to the major component of this NCAV is cash (328 crores or 38.45 rupees/share). Aftek would ideally be using this cash to acquire other businesses across the world. The fact that Aftek already has enough profits to take care of it's debt servicing, would mean it can deploy as high as 80% of this cash for acquisitions. If I assume 60% deployment, then the outflow of cash will be 196 crs or 23.07 rupees/share of cash. So the NCAV should come down to 14.86 rupees/share in the next annual report, ceteris paribus.

3. Consequently, investments would increase because of the increase in stake with Arexara Information Technologies Gmbh and V-Soft.

4. I expect a stronger dividend payout by the company inspite of the increase in share capital. The dividend payout may well be close to 75% for this financial yr which improves the dividend payout marginally.

5. The financial year has been changed, so it makes sense for us to see quarterly numbers. On this basis, I find that the fwdP/E of the company should come to 10.08 which is truly excellent.

Whats changed? ... see the charting below.

The stock seems excellently priced, a good management, concrete business plans ... all in the making of a good buy.


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