Maharashtra Scooters (Renewed Interest)

I had recommended Maharashtra Scooters (MSL) more than a year ago. It has appreciated almost 100% since then. ( Please note that the market is not in bull phase) Please see my previous analysis here .

When I did further analysis I understood that MSL has done significant investments in different quoted and unquoted scrips. It holds quite a large number of shares of Bajaj companies. As per their management's notes, the total quoted investment's value is about Rs 1350/- per share. All unquoted investments / huge land and plant located at Satara is totally discounted here. If one has to count all this, the actual price per share will be more than Rs 1500/- per share. Today (11/07) it is trading at Rs 359, I had recommended it when it was in the range of 170-230. Whenever WMDC and Bajaj settle on a price, this may touch 4 digit value.

In other words you are getting something like a mutual fund with steep 75% discount on its NAV.

Nifty 12 year Analysis

I was looking at Nifty PE ratio historically. There are amazing observations. You can easily predict how markets are going to move in near future / long term. 

If you look at the chart below, it shows 12 years Nifty values and PE ratio as reported by NSE

The chart clearly shows that there only 3 times when PE ratio have gone beyond 25. Once in Feb'2000 when it hit 28.5, Jan-2008 when it went up to 28.3 and recently in Oct'10 where in it went up to 26. If you see in all these situation Nifty peaked out and started going down. Finally PE ratio went up to 10.

NIFTY 12 years Analysis

As of today Nifty PE ratio is in the range of sub-20. That means market is still overheated. Ideally it should be somewhere between 15-20. If thats true, markets are going to correct by another 20%. That will be the time when you can really buy any stock and will give you decent returns.

If you have lot of money to be invested in stock market for long term, please note that market may correct by another 15-20% in near term based on issues like Greek crisis, inflation, fuel prices or any other such reason. If there is any good news in the market it can still go 25% upside very easily.

I think its better to buy in small quantities to avoid risks at this stage. You can alternatively buy selected scrips based on individual analysis. 

Shriram Transport Finance NCD at 11.6%

Shriram transport is coming up with Non-convertible Debentures with 11%+ interest rate. They are collecting Rs 500 Cr and additional Rs 500 Cr ( if required) for 3 years or 5 years.

Why its to good to go for ?

1. They offer annual 11.6% interest. No banks are offering this high interest 
2. Its for 5 years !!! other banks are offering about 10% for about 2 years
3. Its in de-mat form
4. You can sell it if you want money anytime thru broker. They will trade on NSE. In Banks you will loose a percent 
5.  They dont deduct TDS on it ( although its taxable !!! ) 
6. CRISIL rating of AA. Its High Safety ( http://www.crisil.com/ratings/credit-rating-scale.html) 
7. Shriram Transport Finance company (STFC) is extremely good in position. Many banks in fact loan to STFC because they cant get into the business that STFC is in. They loan to truck owners 
8. Its profit grew from 190 Cr to 1229 Cr in just 5 years. It has to be in good position

Only thing you got to remember is, its first come first serve. Normally this kind of good NCD issues get absorbed within a day. If you want details - 

1. NCD form directly from STFC site - NCD download

2. Details of Prospectus - STFC - Investors

Count Dividend or not ?

Normally people talk about appreciation of the stock in share market. Normally no one counts dividends. Here are some stock where their current year dividend ROI is fabulous. When checking the performance do check the dividend how they increase the dividend.

Type of Stock	Name	Price in Rs. 10 years ago*	Current Year Dividend in Rs.	Dividend ROI for this year	YOY Price Appreciation
Mid cap	Blue Star	18	7	39%	38%
Mid cap	Savita Oil	45	20	44%	32%
Small Cap	GIC Housing	15	5.5	37%	24%
Large Cap	HDFC	45	9	20%	35%
Large Cap	ONGC	20	32	160%	33%
Large Cap	M&M	41	11.5	28%	36%

* Adjusted to bonus/ splits etc.

Their dividend is more than any fixed deposit in the world. The YOY appreciation is also given which doesn’t count any dividends. Also the markets are not at its best toady. Do your own calculation on how much total return would be in 10 years. 

Kansai Nerolac

Just last week I received Kansai  Nerolac's Annual Report. I was impressed while I was going thru it. Lately I havent written on any particular company. I thought this one will be a good one.

This company exists in paint segment for almost 90 years. 70% of the shares are held by Kansai of Japan. Its second largest company in paints after Asian Paints in India. Renowned personalities like Dr. J.J. Irani and Noel Tata are part of the board of directors while J.J. Irani being the chairman of the company

Company has 74 sales locations  with 5 plants from spread across India. While company has grown up by 26% it expects the home paint industry to grow by 22% in India because of urbanization. Besides home paints, company is well positioned in auto segment. They are partners with big names in auto industry. Lately they have implemented  Business and IT Transformation using SAP across the board and management expects to see benefits in coming years.

The company closed the year with Rs 2493 Cr. with 206 Cr in net profit. The company declared Rs 10 dividend post bonus. (It gave bonus1:1  last year) Profits have increased more than 2 fold in last 2 years (100% in 2 years) 4 fold in 7 years.

With such a high growth rates and now implementation of new IT strategy, company is bound to grow more. There may be a slight dent on growth because of slowing down of auto segment but in long run, company will grow by leaps and bounds. Currently shares are priced at Rs 870/- with PE of 26. Compare market leaders like Asian Paints at PE of 37. If one has to compare Asian Paints and Nerolac, it has a room to grow by atleast 30% if not more. The growth in the segment will add separately.

Again compared to Asian Paints Nerolac is more investor friendly. They have issued bonus shares twice in last 6 years. Dividend yield of 1.2 on post bonus isnt bad. It should give decent returns in 3-4 years.

National Peroxide

Just yesterday National Peroxide declared their result. Their half yearly results were already excellent. Now their EPS for  9 months stands at 73.31 compared to 17.90 last year’s 9 months. For entire last year their EPS was 28.19. Last year they paid dividend of Rs 10.00 and book value at FY10 stands at 136.10. It has very low capital (Rs 5.75 Cr) and Debt Equity Ratio is at 0.10. For detail results see http://www.bseindia.com/xml-data/corpfiling/announcement/National_Peroxide_Ltd_080211_Rst.pdf .

Company has said that this quarter have additional income of Rs 1.34 Cr from subsidiary companies, however PBDIT has expanded 4 times in 3QFY11. This is on the back of higher prices of Hydrogen Peroxide. Similarly company has announced the plan to expand the capacity expansion plans.

What to Expect

From these numbers one can expect that their final year EPS should stand at somewhere at Rs 100. It will take their book value beyond 236 which is half of today’s market price.  Expect a liberal bonus or hefty dividend (last year Rs 10) in near term. Since its expanding the capacity and higher Hydrogen Peroxide prices will continue to increase, the company will possibly increasing the profits.

As of yesterday it closed at Rs 502 .

Some additional info ...

Its capacity is increased to 65 KTPA and plan is to increase to 84. It has 26% share from foreign partner. It is the largest H2O2 producer in the country with 38% market share. Major use of H2O2 is for environmental applications and is considered as Mr. CLEAN. In the long term the need of H2O2 will continue to grow. It doesn’t have any loans in their books. It uses natural gas as raw material. Till last year they had to purchase on spot prices, but now they have long term agreement with GAIL and hence price fluctuation will be limited. The down side is  raw material price depends on crude oil and exchange rate, so is with many other companies. Another downside can be, that there is larger capacities of H2O2 coming up in ASEAN countries. 

This is my view on this stock. You should review the performance of any stock before buying

GIC Housing Finance - Safe Bet

GIC Housing Finance (GICHF) is a company floated by GIC- re insurer of the country. Its a small outfit compared to HDFC, LIC Housing etc. It fits in the category of Gruh Finance, Canfin Homes, Dewan Housing etc. GICHF's last year's revenue was around Rs 311 Cr. In first Half year of 2010 it has posted Rs 163. Cr in Sales and Rs 40 Cr in Net profit. It has started expanding. Now it has total 27 branches and its primary focus is tier II cities like Baroda, Nasik, Nagpur. This is where the next growth in housing will take place. It has been backed by one of the biggest insurance companies in India.

Following is the comparison of selected Housing companies.

In Cr.	GIC Housing	HDFC	LIC HF	Gruh Finance
Sales	311	11338	3456	308
PAT	67.09	2826	662	68.96
EPS	12.46	99.08	70.42	20.27
PE	8.4	32.2	13.6	16.7
Dividend Yield	4%	1.1%	1.6%	1.6%
YOY Growth for Sep’10 Half Year	16%	22%	51%	57%

GICHF is available at lowest PE and highest Dividend yield today compared to other HFCs. It has posted modest growth as well on half yearly basis. LICHF has posted very high growth but has been under clouds because of the recent issue.

Today's closing price was Rs. 111, it can further go down slightly because of interest rate concern and housing slow down. It will be the best opportunity to pick this stock. Looking at the current trend it can pay higher dividend this year.

This is my view on this stock. You should review the performance of any stock before buying

Tata Steel FPO

Who needs introduction for Tata Steel. A flagship company of Tata group with revenue of more than Rs 1 lakh crore !!!

Since company bought Corus from Europe, company’s debt has increased considerably. As of Mar-10 the total loan company had amounts to Rs 53,100 Cr. The interest portion is to the order of Rs 350 Cr. In the Sep-10 quarter.

From today the company is issuing additional public shares via FPO in the price range of Rs. 594 to Rs 610. Company is bringing 57 million shares and hoping to collect Rs 3477 Cr. With this funds company plans to expand its Jameshedpur plant as well as partly refund the high cost loans. Once the company pays some of the high price loans, its interest components will go down.

In the coming quarters analysts expect that company will do better. As of today it is available at price Rs 640/- in the market about 5% higher than the FPO price (at the higher end of the band). It hit 52 week high on Rs 740/- just 2 weeks ago. Addition of the new capital will not impact much on the earning per share and other ratios.

In the last few quarters company has turned around significantly. First half year’s EPS is Rs 40  while last entire year’s EPS is Rs 60.00. Company also pays good dividend. Last year it has paid Rs 8/- as dividend per share. This year it can pay better dividend as the profits have significantly.

In the long run Tata Steel will continue to give good returns. In the FPO it is available at 5% discount to market’s price. Its worth accumulating. 

Here is a summary

• Issue Open: Jan 19, 2011 - Jan 21, 2011 
• Issue Type: 100% Book Built Issue FPO 
• Issue Size: 57,000,000 Equity Shares of Rs. 10 
• Issue Size: Rs. 3,385.80 - 3,477.00 Crore 
• Face Value: Rs. 10 Per Equity Share 
• Issue Price: Rs. 594 - Rs. 610 Per Equity Share 
• Market Lot: 10 Shares 
• Minimum Order Quantity: 10 Shares 

Savita Oil Technologies

Savita Oil Technologies (previously known as Savita Chemicals) is in the business of oil based products such as transformer oil, white oil, lubricant oil. However transformer oil is its core business.

Its a medium size company with good prospects. Since electricity generation, transmission is on the priority, transformers and transformer oil also will be in the demand. It also high multiple wind power plants solely for internal consumption. The only downside is the crude prices which is its raw material.

Current PE ratio is barely 8.1. Last few quarter's results are promising. Q'2-11 profit has increased by 38%. The company also have ample reserves. The book value stands at Rs. 219 with capital of Rs 14 Cr. This whole years EPS will be more than 70. They issued bonus shares in 2007. Another bonus can not be ruled out.

Following are the company's financials.

	2Q’11	2Q’10	FY10	FY09
Sales	373.10	275.19	1340	1298
Net Profit	30.01	21.65	86.38	17.23
NPM	8.04%	7.86%	7.31%	1.49%
EPS	20.55	14.83	59.16	11.80
Book Value (in Rs)	NA	NA	218.99	177.32
Dividend (in Rs)			15.00	5.00