ANSWER FOR THE QUESTION IS .....

It is happy to say that the response for my request to find out a company with the given specifications in last weeks posting was overwhelming.Out of the received responses 26 readers send the correct answer.Answer for the question is SIMRAN FARMS LTD.I believe none of  other companies listed in BSE satisfying all the mentioned conditions .

Congratulations for all who spend time to find out  the answer.

 All those who send correct answer  accepting  that the valuation of SIMRAN FARMS is very cheap and at the same time expressed their  opinion about the reasons for such a low  valuation.So let us look into its details.

For my old posting on this same company click HERE

THE INDUSTRY

The Indian meat consumption statistics as follows -   Buffalo meat about 23.33 percent, cattle 17.34 percent, sheep 4.61 percent, goat 9.36 percent, pig 5.31 percent, poultry 36.68 percent and other species 3.37 percent.The Indian poultry industry is estimated at USD 3.6 billion and it is growing at a CAGR of 10%. Currently India is the third largest egg producer and one among the six largest producers of broilers in the world.chicken meat production grew from 939 thousand tons in 1999-2000 to 3 million tons in 2011-12 and going forward  it is expected to increase sharply  due to shift from consumption of other meats to chicken on account of health concerns.

LISTED COMPANIES FROM THIS SPACE

On a standalone basis three listed companies are operating in this sector viz,Venky’s India , Srinivasa Hatcheries and Simran Farms.On the basis of turnover Simran ranks the second next to Venkey’s India .Due to the sheer size and fully integrated operations no meaning in comparing Venky’s and Simran.So only a comparison between Simran and Srinivasa make some sense.The second largest company Simran is valued at just Rs.10 Cr market cap but the next player trading with a market cap of  Rs.64 Cr !.

 WHY LOW VALUATION ?

IMPACT OF INSUFFICIENT MONSOON

Even the company posted an EPS of Rs.5/- in first quarter alone, its share price didn’t move anywhere.The major reason for this (in my and many of the readers’ opinion ) is the expectation of a sharp rise in feed prices in the coming quarters .The two major components of broiler feed is Maize and Soya and its farming area may shrink due to insufficeient  rain  in this season.On account of this reasons prices of this commodities already shot up and this will surely impact the profitability of Simar in coming few quarters.

LOWER PROMOTER HOLDING ?

Some investors shared their concern over the low promoter holding of 35%

WHAT WE CAN EXPECT AHEAD

The first reason is a reality and there is every chance for a lower profit or even a loss in next few quarters .But on the other side this fact is known to all market participants and to a great extent it is  already discounted in the current market price. I am not sure  how much the recent revival in monsoon will help , if it is significant one can even expect some positive surprise.As I mentioned in last posting ,this company have already seen these type of up and downs and one of the few listed companies  surviving and growing over 22 years in this industry which is not a small thing.Regarding the stake of promoters – 35%  promoter stake in a company is neither bad nor aggressive.Before we thinking about why they are not hiking their stake even it is available at a cheap valuation we must look at the recent change in their attitude too.Even this company is existing for the past 22 years it never paid dividend for 20 years.But in last year it paid a 10 % and surprisingly even on a lower profit it decided to pay 8% in this year too.This clearly indicating their changing attitude and I believe in near future they will merge their privately owned companies one by one into the listed entity.In such a case they can easily hike their stake and need not buy it from open market.Also.a  higher price due to open market purchase will not help them to ensure a favorable merger ratio even if it is not decided only on the basis of stock price.If such a move happens that will be a game changer  for Simran .Company will become an integrated entity with   feed production and production of medicines and vaccines for chicks along with core activities .Value added products from chicken may also a possibility at a later stage which will surely increase profit margins going forward..

At present market is ignoring many positive factors and projecting only the near term hiccups and valuing the  company at a throw away price of less than Rs.10 Cr for the entire company . I am looking this price rise of feed and occurrence of some bird flue cases  in the past as a natural entry barrier and this will help to weed out small players from the business .Such cases will ensure survival of only the fittest.It is a fact that ,only very few companies surviving even in organized sector mainly because of such uncertainties and it is one of them which is here for last 22 years and increasing their business at a rapid pace .If any sharp fall happens from here due to any knee jerk reaction to the next quarterly result ,true value investors  can look into it. It is one of the very few stocks from small cap space giving comfort even at current price level  based on minimum downward risk and decent dividend yield .Remember , contra decisions and sufficient patience is the father and mother of multi baggers.

LINK TO THE RECENTLY LAUNCHED WEBSITE OF THE COMPANY HERE

Notes :

 This same stock   once recommended in June 2010 @ Rs.30 and thereafter hits a high of Rs.86 in November 2010 and now back to the previously recommended level.

 I have vested interest in this stock , hence my views may be biased ,do own due diligence before investing.

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ONAM WISHES TO ALL MY FRIENDS

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GUESS THIS STOCK

 

' ONAM ' – The harvest festival of Kerala is celebrating  during this week.This is the time of enjoyment ,celebration , and friendly competitions.During this week I am not recommending any stock for you , instead you just try to find out a stock based on the following clues.

# This stock is listed only in BSE and not an ‘A’ group stock. 

# This is the second largest stand alone listed company ( based on turnover)from the sector in which it is operating.

# The industry in which it is operating is highly fluctuating one and passes through many up and downs in the past , but this company is successfully operating for the past 22 years.

# Company having very low,negligible debt and not a single share is pledged by the promoters.

# It never posted a loss in last five years on an annualised basis.

# It is a dividend paying company.

# Its 52 week high price is below Rs.52
 
#For the past six years, company is reporting an increase of at least 50% in its turnover in every two years.

# During the latest June quarter company  posted an EPS which is 100% higher than the EPS posted in the entire FY 2011-12.

# The most important point -  surprisingly this entire company is available for just Rs.10 Cr ( Market Cap) which is almost  1/20 of its last year turnover.
  

* Data taken directly  from BSE web site for your easy calculation .
Try to find it out and send the answers to me@ valuepick@rediffmail.com. 

This is not a competition and not any offers for anyone on the basis of the right answer,but I know ,at least few of you will re check the numbers of some mid-small cap companies which will help you at least in future.Correct answer will be posted along with company details on next Saturday.

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VADILAL INDUSTRIES - BOOK PARTIAL PROFIT

I have recommended this stock just two months back @ Rs.105 ( For old posting click HERE) which today  closed in the upper circuit @ Rs.209 , an appreciation of 100 % . Recommending to sell 50% of the holding and keep the balance cost free.

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BLUE STAR LTD - BUY

Passing through tough business environment  during the life cycles of any company / business  is common.Some managements will learn new lesson from such experience ,take corrective measures and grow even faster.In some rare cases ,such down trends will help managements to open up new business opportunities through diversification or act as an eye opener to look beyond their conventional businesses. On the other hand some others will surrender their business even without a fight.We ,as investors, always interested only in the  first case.So let us look into BLUE STAR Ltd. Till few years back It was a star in Indian Air Conditioning Industry .Its main expertise was in Centralised Airconditioning and Commercial Refrigeration. In FY 2010-11 ,company posted a turnover of Rs 2888 Cr and a net profit of Rs.155 Cr .From there ,just after one year in FY 2012 company posted a loss of Rs.90 cr ! .Sharp slump in commercial real estate developments including the construction of shopping malls severely affected company’s performance during this period.Some communication gaps and lack of integration between the marketing and project execution wings of the company added fuel to the fire .The marketing wing accepted fixed rate orders without accurately assessing the possible increase in raw material cost which ultimately ends in a bleeding bottom line.Realising the seriousness of the situation management  accepted their fault and  has taken corrective actions which include concentrating in bottom line rather than increasing top line,strict measures to ensure profitability in a case to case basis,concentration in home air conditioning business to beat the slump in commercial segment ..etc.With all these efforts, company back to black in latest June quarter with a pre tax profit of Rs.13 Cr( excluding other income ). Actually , the business of air conditioning having good potential at a time of global warming,need of cold chains to preserve food and vegetables..etc.Blue star is India’s one of the largest air conditioning companies with vast marketing and service network and good brand value.I feel ,company will back to its past glory supported by  the initiatives taken by the management and it is the right time to enter in this stock with a long term view. From the peak of Rs.548 ( post FV split)  stock is now trading around Rs.192/-

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EPC INDUSTRIE' LTD - UPDATE

I have recommended this Mahindra Group company at least five times in the past .In a big positive development ,today company decided to amend its object clause of Memorandum of Association to enable it to diversify into other agri related areas like seeds, fertilizers, pesticides, agri chemicals, tractors implements, pumps, greenhouses, power, fruits and vegetables, meat and poultry, dairy, aquaculture, marine culture, grains and fast moving consumer goods. Recently the top officials of Mahindra indicated that their next important concentration will be in sun rise industries like Agriculture .I believe EPC Industrie' will be a key beneficiary of their decision and their latest plan to amend the object clause is the first step in this direction.

Happy investing ...

Discl : I have vested interest in EPC

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10 mistakes that can derail your financial life and ways to avoid them..

COURTESY : ECONOMIC TIMES

To err is human. But some mistakes can completely derail your financial life. In fact, managing your finances and making smart money decisions can be a challenge and it is inevitable that mistakes will be made.

However, "sometimes even a single financial mistake may be detrimental to your financial goals. In fact, for so many aspects of financial planning, there is no going back, at least without some sort of penalty", according to Harminder Garg, a certified financial planner for Financial Planning Standards Board India.

Let's take a look at some of these mistakes and ways to avoid them:

Mistake #1: Having No Financial Plan

Too many people put financial planning on the backburner until they get older, when panic starts to set in. But having no financial plan or putting off financial planning may be the biggest mistake of all.

"People generally only seek the services of an accountant, for example, when they need to file tax returns. Financial planning is something you can put off easily as there is no requirement for instant gratification - unlike if you have a pain in your body. However, just as putting off visits to a doctor can lead to huge complications, so can delaying an annual check-up with a financial planner.

Therefore, if you want to adequately save for your family and your future or simply retire rich, you first need to get your financial house in order and that can be done only through proper financial planning.

"Financial planning requires thinking through and setting of lifetime financial goals which enable one to determine the appropriate asset allocation required for oneself and one's family. If this asset allocation is followed in a disciplined manner, goals can be achieved without the uncertainties of the market," Lovaii Navlakhi, MD & Chief Financial Planner of the Bangalore-based International Money Matters, says.

Therefore, figure out where you are, where you want to be and put in place a realistic plan for getting there.

Mistake #2: Not Starting Early In Life

Even if some people want to plan for their future, they generally think they need not plan early. Depending upon their individual time frame, thus, they do not like planning for more than three weeks or three months or, rarely, three years in advance.

"Let's imagine that we are kicking off from the centre in a football match. We need to score a goal more than the other team to win. You can't hope that you will defend your goal for 89 minutes and then attack in the last minute and score the winning goal," Navlakhi says.

It is just like planning funds for retirement about a year before the actual retirement date, or even taking a life insurance policy a month before one's death, according to Navlakhi. Having a goal and starting early to meet that goal are absolute musts.

Mistake #3: Not Investing Slowly & Systematically

The problem for many people is that they live month to month and don't develop healthy saving habits until they are in their thirties or forties.

"Contributions to a savings plan should be recognized as the first of your necessary monthly expenses, so that money saved will never be thought of as money that can be spent. Even if you start saving in small amounts now, you can always increase in the future," Navlakhi says. 

 Mistake #4: Putting All Eggs In One Basket

Another common mistake is non-diversification of portfolio. In this case, a major part of the portfolio is invested in a single or same type of financial instrument which increases risks, resulting in high losses/profits.

"Individuals should, therefore, diversify their portfolio, i.e. all your money should not be invested in the same asset class. Investment portfolios should be diversified in accordance to one's risk appetite," Garg says.

There are two primary reasons to diversify your portfolio - one is to take maximum advantage of the market conditions, and the other is to protect yourself against downturns. The basic concept is to divide your investments among asset classes where returns are inversely proportional to each other.

Mistake #5: Having Unrealistic Expectations

There's nothing wrong with hoping for the 'best' from your investments, but you could be heading for trouble if your financial goals are based on unrealistic assumptions.

For instance, lots of stocks have generated more than 50 per cent returns during the bull run in recent years. However, it doesn't mean you should always expect the same kind of return from the stock markets. Similarly, if your property prices more than doubled during 2004-07, it doesn't mean you should expect at least 30 per cent annual return from real estate in the future. The bursting of stock market bubbles is a case in point.

Therefore, when renowned investor Warren Buffett says earning more than 12 per cent in a stock is pure dumb luck and you laugh at it, you're surely in for trouble!

Mistake #6: Not Sticking To The Budget

You are more likely to face financial problems if you have been extravagant in your expenses. However, in a bid to tide over the current crisis and also avoid such crises in the future, you need to adhere to some financial discipline -- making abudget  and sticking to it is one of them. However, to do that it is important to keep track of your spends on a day to day basis to ensure your money is going to the right places. If you are already in the habit of making budgets, then you can also readjust your budget to suit your aims.

Always remember that a rupee saved is a rupee earned. Therefore, stick to discretionary budgets so you can handle the uncertainty in non-discretionary expenses.

Mistake #7: Having No Rainy Day Fund

The need for having an emergency fund, particularly keeping some cash at home or in a bank account, has always been emphasised by investment planners.

"Even standard financial principles suggest that you should keep aside cash to cover three to six months of living expenses, which would also be able to cover most emergency expenses," Garg says.

In real life, however, very few people see the importance of keeping an emergency fund in their portfolio. Forget those who can't afford it. It's true even for those who heavily invest in stocks, real estate and other assets - and sometimes pay heavily for their mistake.

 Mistake #8: Not Having Adequate Cover

It is pretty evident that an economic recession , a pay cut or higher interest rates on loans would all have much less of a negative impact on your family's financial future than the death of the bread winner of the family. However, few people realize the importance of having sufficient risk cover as most people look at insurance as a no-return investment. Also, as the financial needs of individuals have evolved over time, there is heightened importance of risk protection combined with wealth creation.

"Insurance products can help provide an important protective shield around one's financial goals and retirement savings. They also help in effectively managing a diversity of risks and allows one to enter their retirement years with more confidence," Atul Surana, CFP at Catalyst Financial Planning, says.

Mistake #9: Counting on Tomorrow's Income

Counting on tomorrow'sincome to spend today is a big mistake which has already been proved by the current crisis. In fact, until the financial meltdown hit us, the spending levels of individuals, especially in the 25-35-year age group, have been almost equal to their income, if not more.

"With easily available loans and credit cards, they were tempted to indulge even without being able to afford the expense. Now with pay cuts and job losses, they are facing the worse. However, even if you keep your job now, the prevalence of pay cuts makes it clear that you can't count on an ever-expanding paycheck to make up for your spending," Navlakhi says.

Therefore, you should avoid counting on tomorrow's income as far as possible.

Mistake #10: Being Guided By Fear & Greed

Many investors have been losing money, particularly in stock markets, due to their inability to control fear and greed. In a bull market, for instance, the lure of quick wealth is difficult to resist. Greed augments when investors hear stories of fabulous returns being made in the stock market in a short period of time.

"This leads them to speculate, buy shares of unknown companies or create heavy positions in the futures segment without really understanding the risks involved," Ashish Kapur, CEO, Invest Shoppe India, says.

Instead of creating wealth, such investors, thus, burn their fingers the moment market sentiment reverses. In a bear market, on the other hand, investors panic and sell their shares at rock bottom prices, thus losing money again.

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KAVERI SEED COMPANY - RESULT UPDATES

 KAVERI SEED COMPANY


Recommended @ Rs.272  and currently trading @ Rs.803 /- posted an increase of 114 % in net profit for the June quarter (Rs.101 Cr ) . Company's sales also  jumped 100% to Rs.480 Cr .June quarter EPS is Rs.74

For old posting ,Click HERE

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ION EXCHANGE (INDIA) LTD - REPEAT

ION Exchange is one of my old recommendations @ Rs.135 ,which is now trading almost 5 % lower @ Rs.126/-. In my previous posting I clearly mentioned that ,attitude of its promoters towards this listed entity  is  the major cause of concern for this company even if it is operating in an industry with huge potential.We know ,the potential of water/waste water treatment  business is huge and scope is increasing with decreasing availability and increasing demand of water.Even this company is a pioneer in this sector and one among the few listed players from this segment ,till now investors are not enthused  mainly due to the conflict of interest factor.Promoters of this company having some privately held companies in the same line of business.But now , after a long wait there is some early signs of a change in their attitude.Now they decided to merge one of their biggest privately held company ION Exchange Services(IESL) with the listed entity.IESL is operating  in water/waste water treatment plant construction ,operation  and   allied services.Company having 27 offices across India and 2 abroad with an  employee strength of 1200.Even the current turnover of  of IESL is close to Rs.100 Cr,company having  concrete plans to increase its business by 5 fold mainly through acquisitions and expansions to other territories like South Asia, Middle East and African nations.On merger of this company with ION Exchange , these plans will materialize through the listed entity.This merger will also increase the promoter stake in ION exchange and chances are there for higher promoter commitment. In another important development ,company decided to aggressively concentrate in the Rs.4000 Cr retail water purifier market with its flagship brand ‘Zero-B’. Even if this brand is the pioneer in this segment ,company lost its market share to Aquaguard,Pure it..etc.Now it is planning to revive its marketing network and spend more for advertisement. In the financial front too company is showing better performance in recent times.For the FY2012 ,company posted a turnover of Rs.651 Cr and a net profit of Rs.18 Cr compared with Rs.573 Cr and Rs.12 Cr in previous year. Promoters are currently holding 41% stake (pre-merger) and big investors including  Rakesh Jhunjunwala holding another 12 % in this company .I  believe the management at last realized the potential of the company they are possessing (Listing of VA Tech Wabag may acted as an eye opener) and decided to correct their past mistakes.If it happens so ,ION Exchange which is operating in an industry with huge potential and with  well experienced promoters  may turn as  a multi bagger  even from current level of Rs.126/-


Related Readings :

 1)  Ion Exchange Services Ltd. launches Remote Monitoring of Water Treatment Plants
  2 )  Zero B plans comeback in water purifier market
   3 ) Ion Exchange (India) Limited signs a joint venture with Safic

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NITTA GELATINE , WPIL , GRANULES INDIA - UPDATES

NITTA GELATINE

Recommended @ Rs.86 / - and currently trading @ Rs.150 /- posted an increase of 847 % in net profit for the June quarter .

For old posting ,Click HERE

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WPIL 

 Recommended @ Rs.187 / - and currently trading @ Rs.412 /- , posted an increase of 30 % in net profit for the June quarter .
 For old posting ,Click HERE

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 GRANULES INDIA
 Recommended @ Rs.79 / - and currently trading @ Rs.145 /-

For old posting ,Click HERE

 Mr. Vijay Ramanavarapu (  Head - Strategic Sourcing in the Company) purchased 15000 shares from open market at an average rate of Rs.145/- per share.
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TAYO ROLLS - LONG TERM BUY

Tayo Rolls is a Tata Group company manufacturing Cast Iron,Steel Rolls, Forged Hardened Rolls and Engineering Forgings and Pig iron.This company is a joint venture between Tata Group and Yodogawa Steels of Japan.Tata Steel holding about 55% stake and the foreign promoter holding about 15%. Company having technical collaboration with Austria based  ESW and Sheffield Forgemasters International Ltd. of UK.About 40 % of company’s turnover is from exports to countries like Australia, Austria, Bangladesh, Belgium, Canada, Egypt, Germany, Indonesia, Kazakhstan, Nepal, Norway, New Zealand, Oman, Quatar, Saudi Arabia, Sweden, Singapore USA..etc. Company went through massive capacity addition in past few years but at the time of the  completion of this projects its user industries including Steel Industry slipped into lower demand mainly due to lower construction activities and general slowness in  many Industries.Lower demand for its products and higher interest outgo due to spending for capacity expansion resulted pathetic performance in past few quarters. To address this problem,recently  company raised about  Rs.85 Cr from its promoters through a preference share issue at lower interest rate. Now company is showing some initial signs of revival.In the latest quarter company increased its turnover from Rs.29 Cr to Rs.49 Cr and reduced loss substantially from Rs.13 Cr to Rs.3.5 Cr .I feel ,the worst time of TAYO will end soon and it will back to black in near future.After touching a high of Rs.465/- in 2008 its share price is now quoting  around Rs.77/-. Recommending a BUY only for those having patience to hold it more than one year @ CMP of Rs.77/-

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DE- NORA INDIA - RESULT UPDATE

DE-NORA INDIA (CMP Rs.110)  NET PROFIT UP 469 % IN JUNE QUARTER

 For Old posting on this company ,click HERE

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INDIA GELATINE / KALE CONSULTANTS - RESULT UPDATES

INDIA GELATINE AND CHEMICALS NET PROFIT UP 355% IN JUNE QUARTER

COMPANY DECLARED A DIVIDEND OF Rs.2.5 per share (25 %)

For old posting Click HERE

 KALE CONSULTANTS  NET PROFIT UP 327 % IN JUNE QUARTER

COMPANY DECLARED A DIVIDEND OF Rs.10 per share (100 %)

For old posting Click HERE

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