Sunday, April 02, 2006

Micro Inks - a discussion

An interesting discussion on this stock is on at http://valueinvestorindia.blogspot.com. A few premises have been laid -
1. Is the German parent in attempt to delist the company?
2. Or, has something gone terribly wrong - with directors resigning and selling shares?
3. Significance of an open offer of 675 rupees/share to the shareholders of the company on Jan-13-2006. (the steep slide in the share price of the scrip started from then, when it came down from 625 rupees to 410 rupees in the next 30 days)
4. The analyst presentation is rather low on the business strategy of the company. Infact, more stress has been laid on how MHM Holding GmbH can exploit synergies by making India the production base for all it's subsidaries abroad.

... the company has an NCAV of 126 rupees per share which is excellent and a fwdPE of 16.52. Any insights?

2 Comments:

Blogger Ravi Purohit said...

Shankar,

I think the open offer by the german company simply postponed the decline in the share price given that the profit performance was a complete disaster in the Sept and the December quarters. PAT during these quarters was down by 40-50 per cent.

The decline in PAT can largely be attributed to a sharp increase in interest costs. But this is a little surprising given that the company's overall debt levels have been on a decline in recent years. This is something one needs to investigate.

--
Ravi.

5:04 PM  
Blogger Shankar said...

Hi Ravi,

Here's the date-line of announcements -
Oct 22, 2005: Micro Inks announced Q2 results
Oct 25, 2005: Micro Inks announced acquisition of shares by MHM Holding GmbH

Surprisingly, between 25th October and 25th December, the stock moved in the narrowest of bands (640 to 655 rupees)

The next announcement on earnings was on Jan 31st, 2006. By this time the stock had already started to slip ... from 650 on Dec 26th, the stock had reached 560 on 31st Jan. Ofcourse, the Q3 earnings bolted the stock to an ultra low of 415 rupees to a share.

You know Ravi, what puzzles me ... and correct me if I am wrong ... a stock when it gets pushed to such levels - 1. happens with news (which was not there on Dec 25th when the slide happened); 2. There is not too much of public holding here - so how did the share lose over 30% of value in 60 days; 3. Volumes are pitiful ... such cases are associated with heavy selling volumes (not here).

I can feel bigger forces at play here.. another open offer to the public is round the corner !!!!

Warm Rgds
Shankar

11:07 PM  

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