Gateway Distriparks Ltd

Gateway Distriparks is a multi-location CFS (Container Freight Station) operator, with one of the largest CFSs in the country at Jawaharlal Nehru port. The scrip GDL went to the bourses in March 2005. The IPO price was Rs. 72. It made an opening of Rs 90 on the day of listing. It gave bonus shares in 2007, 1 share for every 4 held. Business has grown consistently over the past four years. Its turnover in 2005 stood at Rs. 93 crores. This past year, it was 453 crores.

The stock currently trades in a range of Rs 90-100. It witnessed some serious upmoves in the last couple of days- in tandem with the broader market, slightly outperforming it. That's the bit of information for the short termers. For the long termers, this is a serious opportunity. Gateway Distriparks is a debt free company. The Mar '09 Quarterly results were less than spectacular, due to the general downturn in the economy. Gateway Distriparks has the potential to do better given its great debt free position. The promoters increasing their stakes in the company corroborates this. According to this piece of news even mutual funds and FIIs are increasing their holdings in companies like GDL. Although GDL has a formidable competitor in Concor, GDL has till now stood well and has also maintained a far from over stretched balance sheet. Companies competing with major players end up corroding their balance sheets, but here we have an exception.

The Rail Budget also had its share of incentives for GDL. Though there were no direct incentives, there were some announcements that catch one's attention. A host of measures announced such as private sidings for containers, private operation of freight terminals, etc will increase the market for rail container operators such as Gateway Distriparks Ltd. The dedicated freight corridor implementation being put on fast track will push up the market for rail container operators in the longer term. The investment-linked tax incentive scheme proposed in the Budget to firms that are setting up cold stores and warehouses for farm produce will also be positive for GDL, which operates a cold storage business via its subsidiary, Snowman Frozen Foods Ltd, a JV with Mitsubishi. This is another area that has huge potential. Agricultural produce's wastage is significant, and this move to promote those who do prevent that was welcomed by the industry. These incentives are investment-linked and thus, the general industry sense is that a lot of money may be invested here now. Gateway Rail, a subsidiary is expected to achieve operational break-even in FY10. The reason is that the company will be operating with an increased capacity. For FY09, it reported a revenue growth of 23.4 % to Rs 203.6 crore and PAT growth of 24.7% at Rs 94 crore, despite a marginal reduction in volumes, particularly in the last quarter of FY09, as discussed earlier. GDL was also looking for PE investors, with a dilution of promoter stake for its rail project.

There is a lot of buzz going around for the stock. Temasek exited from GDL, but its block was bought by Allcargo earlier this year. Long termers may evaluate the stock price, and consider this as an investment candidate.

Asian Electronics: Turning Around?

The share price of Asian Electronics fell into the abyss last year. From highs of Rs 500+ it fell to a low of Rs. 17.2 on the NSE. But unlike most other companys' shares that took a beating, the Asian Electronics stock deserved that beating. The results were dismal, their "project" that they were talking about that could possibly double or more than double the company's topline actually halved it. Have a look at the results, if you haven't:

Sep 07 Quarter:................................... Sep 08 Quarter:
Sales: Rs. 96 cr..................................... Sales: Rs. 38 cr
Profit: Rs. 30 cr................................... Profit: Rs. -15 cr (loss)

Yearly Results:
Mar 06: ........................................Mar 07:
Sales: 166 cr................................. Sales: 395 cr
Profit: 25 cr................................. Profit: 66 cr

Mar 08:............................... Mar 09:
Sales: 238 cr .......................Sales: 213 cr
Profit: -154 cr.................... Profit: 5 cr

The fall had been consistent over the last year, and was painful for the investors. The book value has been bludgeoned from 245 last year to 71 this year. Nothing could be worse than this. The last quarter results were refreshingly positive:

Sales Turnover: Rs. 78 cr
Net Profit after extraordinary income: Rs. 16 cr
EPS: Rs. 5.66

The results of the company hint at a possible turnaround of the company. Suresh Shah has stepped down from the post of Chairman, and Arun Shah is now the chairman of the company. The company is planning a rights issue at Rs 20 a share (1 share for 2 held). There is also a preferrential allotment of equity shares to the bigger investors at Rs 40 a share. So, a lot of fund raising is going on at the moment- that signals a potential attempt of the company to get out of the quagmire that it had found in the last year.

So, if you're a believer in turn-arounds of companies- and are looking for a company that's totally down and out, and has a potential to swing back to glory, then Asian Electronics is the stock to have. Keep an eye on the announcements of this stock. Another potential long term investment can this be.

Mahindra Ugine Steel Company: Bad Times?

For those who do not know, Mahindra Ugine Steel Company (MUSCO) is an M&M group company engaged in metallurgy.

I had been reading an old Annual Report of Mahindra Ugine (2006-07). They had very optimistic estimates about the next year, which we all know, was bad. And it was bad for the company as well. Most of their growth, they felt at the time, would come from the automobile sector. That did not quite happen as expected. The company was marginally well off in the next year, and posted a loss in the next. Although their net income rose steadily-

Year Net Income(profit)
2006 615 crore (65 cr)
2007 717 crore (45 cr)
2008 922 crore(29 cr)
2009 1073 crore(-18 cr)

Now that's what has happened now- momentarily it looks bad- a company whose profits are plummeting every year end! But look outside the braces. The net sales or operating income has risen steadily and now is an impressive 1000 crore plus. The company does have potential for growth in the automobile sector. How? Here's how.

Carmakers around the world are finding it expensive to manufacture cars in their homelands- increased labour cost (cost involved in paying the labour and maintaining it- eg, the healthcare bill) being one of the major factors. They may move to cheaper and more feasible parts of the world. One of them being India. GM has already been operating plants in India. Volkswagen is expected to come, and Toyota had been planning a second plant. Now if they're going to make cars, they're going to need steel. MUSCO makes that kind of steel- and that's good for the entire bunch of suppliers such as MUSCO.

We have a company here, that paid good dividend last year- and the year before last to its shareholders. Rs 3 per share is what it paid. Now going by the CMP (of around 30), that's a very good return (10%). If you can get these shares cheaper, it would be even better. From the historical record of the stock's trading on the bourses, the stock has reached highs of around 110 and al low of 17. But it does make sense when the price is very down, and the company is posting losses inspite of increased turnovers- to buy shares of such a company.

Keep an eye on this one- you don't want to miss a good dividend paying share in the sunny days (if they ever they come!).