The week that went was volatile, to say the least. It started with the JP Morgan chief saying the sensex could be 30000-40000 in the next 3-4 years and just about ended with Warren Buffett saying the global economy (read US) is still in a shambles. The truth? No one knows, if you ask me. But we are gamblers and long term investors - cyclical events shouldn't affect the likes of us! I was chatting with a friend, and we stumbled upon the topic of penny shares - those unguided missiles that sometimes hit the bull's eye! I am attempting now to bring out the brighter specs of a (i wouldn't use the word "scandalous", although it does seem fit if you understand the manipulation- pun intended!) 1 re fv share going in discount.
And that is exactly why i have decided to bring forward a stock which has some multibagger potential. Kaashyap Technologies is one of those penny shares that one would look at with caution. But when one finds, in the shareholding pattern some names, one starts wondering. Now let us see what we've got here. Ladies and gentlemen, the shareholding pattern of Kaashyap Technologies Ltd:
Promoter holding: 1.33%
Public holding: 98.59%
(DRs: 5.5%)
Out of these 98.59% of public shareholding:
Angel Broking: 1.71%
Religare Securities: 1.24%
Lotus Global Investments: 1.68%
Somerset India Fund: 3.38%
There can be many other holdings that havent been mentioned here.
First, i'll tell the bad things. Promoter holding has been reducing quarter after quarter and also, the promoters have already pledged more than half their meagre holding- they have no interest in the company, it so seems. Now i'll say why i used the word "scandalous". Have a look at the shareholding. Why would Religare or Angel be interested in a company where apparently, the promoters don't hold even 2% of the total shares. A year ago, the same management declared bonus shares 1:6. "Whoa?!" Apparently, the company had done very well the year ended then, as is visible from the balance sheet of that time. It will be announcing the results on monday or tuesday- and if they're good, this stock will sure be moving. But what if it's bad? It'll still be moving! Courtesy the 99% shareholding of the public that doesn't mind which way the company is headed!
Which way, then is the company really headed? From the announcements, one is impressed, really. With near 1% holding in the company, the promoters (read "managment") are taking strides to expand business. It announced the acquisition of Logistics Solutions Inc in April this year. And the company isn't really all makeup. If you google "Kaashyap Technologies Ltd" you'll find adverts in popular sites for SAP training, etc. It focuses on SAP, by the way. According to this announcement, the company has undergone a major restructuring- and we should look forward to more good results as were there last year- although the consolidated figures are slightly less than satisfactory, the final blow may come this monday-tuesday.
I will not speculate on this- just bringing this scrip to the long term investor's attention. Buy it if you feel like, dump it if you feel otherwise. It's a penny, after all!
Edit: If you DO invest, make sure you're never going to need that money that you're putting in here for ANY other purpose. This is the RISKIEST pick that i'm suggesting.
Dhanuka Agritech Ltd: Agri R&D
Again, our stock pick is a company that does R&D. Dhanuka Agritech is into the crop care business. It is a part of the agro-based Dhanuka Group. Dhanuka Agritech has a pan-India presence, with 27 branches injected into rural areas and employs more than a 1000 people. It has 4 manufacturing facilities at Gurgaon, Sohna, Sanand and J&K for making various grades of pesticides, plant growth stimulants, fertilizers and other such products. It also has 2 seed processing units in MP and Andhra.
Dhanuka Agritech Ltd is a company engaged in R&D of seeds and products that aid in agriculture. It also has various business alliances with major companies in US, Japan and Norway. The company's website says:
"India has established its superiority in the field of IT and it is time that it establishes its superiority on its own turf – agriculture. Dhanuka is committed to shoulder its responsibility towards this dream."
Incidentally, this is what I had discussed two weeks ago, that R&D in biotech related fields will be the next driver of the Indian economy. Dhanuka Agritech is one of the many companies engaged in such work at the moment. It is well placed to achieve the desired objectives - although they may not take a 51% market share vis a vis Monsanto, but surely, there is potential for serious growth whenever there is R&D.
Dhanuka Agritech released its quarterly and yearly results two days ago. Total sales for the year ended 31-mar-09 were up around 40% to Rs 336 crores. EPS also increased by around 40% (from 18.43 to 25.28). The share currently trades at Rs 198 (as on 19-jun-09). That gives it a P/E of 8. It recommended a dividend of Rs. 6 per share. The fact that the company is regularly paying its shareholders increased dividends and also is being able to grow with existing funds at a nice pace - confirms the skills of the management of the company. Dividends over the last few years:
Many would find the share price expensive. But the share price of this stock has risen steadily over the years (another example of shareholder value creation):
Although one may wait a bit to invest in this stock (to get it at aroundd 150-160) the current valuations are not unjustifiable. Agriculture in India is a huge industry, and research in agriculture is an almost oligopoly. Dhanuka Agritech, with its position and strong R&D emphasis has a huge growth potential over the coming years- again, the growth of Monsanto in US and worldwide corroborate my emphasis.
Bottom Line: If it's R&D based agri companies that you want to bet on, Dhanuka is one you wouldn't want to miss.
Dhanuka Agritech Ltd is a company engaged in R&D of seeds and products that aid in agriculture. It also has various business alliances with major companies in US, Japan and Norway. The company's website says:
"India has established its superiority in the field of IT and it is time that it establishes its superiority on its own turf – agriculture. Dhanuka is committed to shoulder its responsibility towards this dream."
Incidentally, this is what I had discussed two weeks ago, that R&D in biotech related fields will be the next driver of the Indian economy. Dhanuka Agritech is one of the many companies engaged in such work at the moment. It is well placed to achieve the desired objectives - although they may not take a 51% market share vis a vis Monsanto, but surely, there is potential for serious growth whenever there is R&D.
Dhanuka Agritech released its quarterly and yearly results two days ago. Total sales for the year ended 31-mar-09 were up around 40% to Rs 336 crores. EPS also increased by around 40% (from 18.43 to 25.28). The share currently trades at Rs 198 (as on 19-jun-09). That gives it a P/E of 8. It recommended a dividend of Rs. 6 per share. The fact that the company is regularly paying its shareholders increased dividends and also is being able to grow with existing funds at a nice pace - confirms the skills of the management of the company. Dividends over the last few years:
| (Announcement) 19-06-08 | (Record Date) 25-08-08 | (Type) Final | (% on FV of 10) 50.00 | AGM | |||
| 22-06-07 | 17-09-07 | Final | 20.00 | - | |||
| 26-03-07 | 05-04-07 | Interim | 20.00 | - | |||
| 14-07-06 | 21-09-06 | Final | 20.00 | AGM | |||
| 24-04-06 | 04-05-06 | Interim | 20.00 | - | |||
| 27-06-05 | 19-09-05 | Final | 20.00 | AGM | |||
| 29-06-04 | 09-09-04 | Final | 15.00 | AGM | |||
| 24-03-05 | - | Interim | 20.00 | - | |||
| 16-06-09 | - | Final | 60.00 | - |
Many would find the share price expensive. But the share price of this stock has risen steadily over the years (another example of shareholder value creation):
Although one may wait a bit to invest in this stock (to get it at aroundd 150-160) the current valuations are not unjustifiable. Agriculture in India is a huge industry, and research in agriculture is an almost oligopoly. Dhanuka Agritech, with its position and strong R&D emphasis has a huge growth potential over the coming years- again, the growth of Monsanto in US and worldwide corroborate my emphasis.
Bottom Line: If it's R&D based agri companies that you want to bet on, Dhanuka is one you wouldn't want to miss.
Biocon Ltd
Biocon came out with an IPO in 2004 with a price band of Rs 270-315. It then gave bonus shares 1:1 in 2008. It trades currently at Rs 213.75 (BSE close 12-Jun-09) with P/E of 38. But that should not deter one from looking further into the details. Even if the stock does look expensive currently, much of it is because of bad Net Profit figures for several consecutive quarteres- 3 if i am not wrong. Forex losses reduced its profits.
When the results came out on the 28th of April this year, KM Shaw said that all the forex loss that was going to take place- has taken place. No forex loss (due to the older positions) now. If one looks at the Net Income figures for Biocon, they show an almost 60% growth. From Rs. 1053.7 crore (March 08 cons), it has clocked 1616 crore this year ended March (cons). Business was booming, but unfortunately it could not capitalize on a higher Net Income. And it is due to this fact- this rise in the topline, that i think it trades at P/E of 38- and continues to rise. There are expectations that the new year would be better in terms of both- topline and bottomline.
Apart from the accounts, Biocon announced some interesting things recently.On 29 May, it announced the launch of BASALOG - long lasting basal insulin for Type 1 & Type 2 Diabetics. On 23 May, it announced about Bristol-Myers Squibb and Biocon's Syngene opening new R&B Facility at Biocon Park. Before that, on 9th March '09 it announced an R&D partnership between Syngene and DuPont. And on the 21st of Jan, it announced a partnership with Sapient Discovery to expand integrated drug offerings. Now the common thing here in these announcements is R&D. As the largest biotech company of India, Biocon focuses on R&D which has been the key factor in its growth story. Biotechnology was called the next big thing- which it turned out to be. But it has the potential to be bigger than what it is- and companies that focus its R&D will make it bigger than what it is- commercially and non-commercially. Lower costs in India have already created outsourcing opportunities in R&D. This sector has the potential of doing what IT did recently.
So, what we have here we have a company that is expanding its markets for increased commerce, as well as expanding its product catalog. These are the fundamental characteristics of a well managed enterprise that is sincerely attempting to grow its business. There are companies and stocks of companies that ride on speculations. And then there are companies like Biocon that create real shareholder value.
When the results came out on the 28th of April this year, KM Shaw said that all the forex loss that was going to take place- has taken place. No forex loss (due to the older positions) now. If one looks at the Net Income figures for Biocon, they show an almost 60% growth. From Rs. 1053.7 crore (March 08 cons), it has clocked 1616 crore this year ended March (cons). Business was booming, but unfortunately it could not capitalize on a higher Net Income. And it is due to this fact- this rise in the topline, that i think it trades at P/E of 38- and continues to rise. There are expectations that the new year would be better in terms of both- topline and bottomline.
Apart from the accounts, Biocon announced some interesting things recently.On 29 May, it announced the launch of BASALOG - long lasting basal insulin for Type 1 & Type 2 Diabetics. On 23 May, it announced about Bristol-Myers Squibb and Biocon's Syngene opening new R&B Facility at Biocon Park. Before that, on 9th March '09 it announced an R&D partnership between Syngene and DuPont. And on the 21st of Jan, it announced a partnership with Sapient Discovery to expand integrated drug offerings. Now the common thing here in these announcements is R&D. As the largest biotech company of India, Biocon focuses on R&D which has been the key factor in its growth story. Biotechnology was called the next big thing- which it turned out to be. But it has the potential to be bigger than what it is- and companies that focus its R&D will make it bigger than what it is- commercially and non-commercially. Lower costs in India have already created outsourcing opportunities in R&D. This sector has the potential of doing what IT did recently.
So, what we have here we have a company that is expanding its markets for increased commerce, as well as expanding its product catalog. These are the fundamental characteristics of a well managed enterprise that is sincerely attempting to grow its business. There are companies and stocks of companies that ride on speculations. And then there are companies like Biocon that create real shareholder value.
Opinion: What to do now? Opportunity Lost?
With most of the stocks having rallied from their bottoms by over 100%, the margins for long term investors have shrunk. I remember scouting for stocks with upsides (relative to the historic data) of 10x the CMPs (the then CMPs), and now while some have their upsides shrunk to 5x, many have shrunk to even 3x or 2x. Take for example our stock pick Voltas. I had tracked it to lows of Rs. 30, and was mulling a buy. Then it spurted to the levels of Rs. 50 when I decided it was safe enough, and posted it thus on the blog. Even then, the upside (considering historical stock moves) was 5x. Now it's a mere 2x with the stock trading in the range of 125-150.
So what's pushing up the market? CLSA says the Indian stock market is now on a different road than the US Markets (the S&P). I rather doubt it. True, there has been massive money movement -in and out- that suggests a potential restructuring of positions of FIIs. But that alone cannot support the theory. Much (not all) of the boom that had been heard in 2005-2007 had been created by the growth of companies that were export oriented. The export oriented units have prospects that cannot be separated from those of the markets to which they supply. The domestic companies (whose primary market is domestic) have the risk of saturating their existing markets, and need to go out of the country. So where would they go? They definitely cannot go west if the bad conditions prevail.
What is pushing up the markets is purely speculation. In all forms. People say the speculation is based on great expectations from the new budget. There are two things here. One, the promising ministers can't influence the asian markets. So, why are they rising in sync? There is a larger game being played, and you have to be smart enough to get out at the right time. Take the recent case of Satyam. There was speculation of the offer price being raised. On this base, the share price moved from 50 to 70. When that did not happen, the stock plummetted on Friday by over 6%. A long term investor would care less about this, and what i am trying to convey is the importance of fundamentals. A company which has a good management doesn't get hurt if the government rolls out lesser incentives. A company which is fundamentally strong, and knows what it is doing has prospects that would not be shaken even when there would be a weaker government than there is now. This brings in the second point. Real estate stocks. These have rallied madly over the past few months. To put things in perspective, Parsvanath's share moved up from Rs. 30.55 to Rs. 108. This movement is not attributed to the state of the company- if you would be thinking that (as is conventionally the case) the share price is reflective of the good growth the company has suddenly acquired over the last one month in its business, you cannot be more illusioned. I have seen sites of Parsvnath where the trucks/machines haven't moved since the last 3 months. Smart money, someone said.
So, my advice to you is to not be influenced by market speculation, and use balanced thinking before taking any investment decision. A company with good fundamentals but slow stock movement is better than one with bad fundamentals with multibagger potential.
There is no stock pick this weekend for such understandable reasons. However, i will list out some scrips with good fundamentals as i discussed:
1. TCS
2. Infosys
3. L&T
4. Sun Pharmaceuticals
5. Gateway Distriparks
6. Opto Circuits Ltd
7. Cairn
8. Kesoram Industries
9. Mahindra Ugine Steel Company
Note that the CMPs may not be the proper levels for creating long positions in some of these- but their fundamentals are good and so are the promoter intentions!
So what's pushing up the market? CLSA says the Indian stock market is now on a different road than the US Markets (the S&P). I rather doubt it. True, there has been massive money movement -in and out- that suggests a potential restructuring of positions of FIIs. But that alone cannot support the theory. Much (not all) of the boom that had been heard in 2005-2007 had been created by the growth of companies that were export oriented. The export oriented units have prospects that cannot be separated from those of the markets to which they supply. The domestic companies (whose primary market is domestic) have the risk of saturating their existing markets, and need to go out of the country. So where would they go? They definitely cannot go west if the bad conditions prevail.
What is pushing up the markets is purely speculation. In all forms. People say the speculation is based on great expectations from the new budget. There are two things here. One, the promising ministers can't influence the asian markets. So, why are they rising in sync? There is a larger game being played, and you have to be smart enough to get out at the right time. Take the recent case of Satyam. There was speculation of the offer price being raised. On this base, the share price moved from 50 to 70. When that did not happen, the stock plummetted on Friday by over 6%. A long term investor would care less about this, and what i am trying to convey is the importance of fundamentals. A company which has a good management doesn't get hurt if the government rolls out lesser incentives. A company which is fundamentally strong, and knows what it is doing has prospects that would not be shaken even when there would be a weaker government than there is now. This brings in the second point. Real estate stocks. These have rallied madly over the past few months. To put things in perspective, Parsvanath's share moved up from Rs. 30.55 to Rs. 108. This movement is not attributed to the state of the company- if you would be thinking that (as is conventionally the case) the share price is reflective of the good growth the company has suddenly acquired over the last one month in its business, you cannot be more illusioned. I have seen sites of Parsvnath where the trucks/machines haven't moved since the last 3 months. Smart money, someone said.
So, my advice to you is to not be influenced by market speculation, and use balanced thinking before taking any investment decision. A company with good fundamentals but slow stock movement is better than one with bad fundamentals with multibagger potential.
There is no stock pick this weekend for such understandable reasons. However, i will list out some scrips with good fundamentals as i discussed:
1. TCS
2. Infosys
3. L&T
4. Sun Pharmaceuticals
5. Gateway Distriparks
6. Opto Circuits Ltd
7. Cairn
8. Kesoram Industries
9. Mahindra Ugine Steel Company
Note that the CMPs may not be the proper levels for creating long positions in some of these- but their fundamentals are good and so are the promoter intentions!
Update on Previous Pick: Bharati Shipyard
Open Offer to the shareholders of Great Offshore: (from BSE Website)
This Offer is made to all shareholders of the Target Company in terms of Regulation 10 of the SEBI(SAST) Regulations to acquire up to 78,26,788 fully paid-up equity shares of face value of Rs 10 each of the Target Company forming 20% of the Emerging Voting Capital of the Target Company at a price of Rs 344.00 (Rupees Three hundred & forty-four only) for each fully paid-up equity share ("Offer Price") to be paid in cash in accordance with the SEBI (SAST) Regulations, & subject to the terms & conditions mentioned in PA & as will be set out in the Letter of Offer in relation to the Offer ("Letter of Offer") aggregating to Rs 269,24,15,072 (Rupees Two hundred & sixty-nine crores twenty-four lacs fifteen thousand seventy-two only) ("Offer Size").
Schedule of Activities:
Specified Date - June 19, 2009
Date of Opening of the Offer - July 25, 2009
Date of Closing of the Offer - August 13, 2009
URL of the pick: (click here)
This Offer is made to all shareholders of the Target Company in terms of Regulation 10 of the SEBI(SAST) Regulations to acquire up to 78,26,788 fully paid-up equity shares of face value of Rs 10 each of the Target Company forming 20% of the Emerging Voting Capital of the Target Company at a price of Rs 344.00 (Rupees Three hundred & forty-four only) for each fully paid-up equity share ("Offer Price") to be paid in cash in accordance with the SEBI (SAST) Regulations, & subject to the terms & conditions mentioned in PA & as will be set out in the Letter of Offer in relation to the Offer ("Letter of Offer") aggregating to Rs 269,24,15,072 (Rupees Two hundred & sixty-nine crores twenty-four lacs fifteen thousand seventy-two only) ("Offer Size").
Schedule of Activities:
Specified Date - June 19, 2009
Date of Opening of the Offer - July 25, 2009
Date of Closing of the Offer - August 13, 2009
URL of the pick: (click here)
Updates on Previous Pick: TCS
Bonus of 1:1 declared. Record date for the same and dividend of Rs. 5 per share has been fixed. It is June 17, 2009.
For URL of the pick(click here)
For URL of the pick(click here)
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