He talked about the
companies which we come across in our daily lives yet pay no attention to.
Some of such companies are MT Educare, Tree House, Lovable Lingerie, Page
Industries etc. Lets have a look at them one by one.
MT Educare:
MT Educare is a very young company established in 2006, run by Mahesh R
Shetty. The company is in one of the most lucrative, or let's tone it down to
'fast growing' , businesses at present i.e. into coaching and education
support. It has a vast network of coaching centers providing services to
secondary and higher secondary students, students with commerce background and
other competitive examinations. It has centers across Maharashtra, Tamil Nadu,
Gujarat and Karnataka and runs around 188 coaching centers. It has
collaborations with other institutes too to run centers in New Delhi and
Gurgaon.
Lets see how its
stock prices have done over the period after its IPO:
Certainly, nothing
spectacular to take home about. But that could be attributed to the fact that
the government is coming around with regulations to rein in the coaching
institutes for charging abnormally high fees and the fact that most of these
are run by school/college faculties. But with an ever increasing heads
enrolling for higher education in India, all such companies focusing on
professional studies are going to stay relevant for days to come. In the same
context, one can take a look at Career Point
too.
In its last
earnings report for June'12, MT Educare posted a sales of Rs 34.7 crore and a PAT of Rs 2.53 cr. On an equity base of
around 3.95 crore shares, the EPS stands at Rs 0.91 per share. For the whole
year, the company may post an EPS of Rs 3.6-3.75 per share. At the current
share price of Rs 102.25, P/E stands at approximately 28 while the industry PE
hovers around 17 and Career Point in the same domain has a PE of 10.56. The
company has a very low Debt-Equity ratio (0.04) which is generally the case
with all coaching institutes. But it has very low current ratio (0.80) too.
The company has grown tremendously since inception. The sales increased
multifold from a mere Rs 4.55 crore in 2008 to Rs 138.47 Cr last year. The PAT has also been increasing at over 60%
for the past 4 years! Probably this could be the reason for the high valuation
in PE. And looking from
that point of view, the company looks under-valued. Companies in some of the
other sectors get much more valuation even for half this growth.
The next stock
discussed in the blog was Tree House.
And this is certainly a great institution, and I am talking only from the
shareholders' point of view. The companies run one of the longest chains of
pre-schools/play schools in India. It also serves the K-12 section as well as
provides the teacher training materials. Pre-schools is the cash cow for the
company as it charges high premium for its services in this category. No
wonder, the company's Sales and PAT have been growing at the rate of over 80% and 120% for the past 4 years or so. The
company is in an expansion mode and is trying to diversify in terms of
geography of operations. With a consistently increasing demand for pre-schools
in India where more and more women are taking up jobs and parents' urge to
make their kids ready for future competitions, the company looks set for a
high flier.
Next in line is Lovable Lingerie. And this is where the heat
turns on. And I am still talking from the stockholders point of view. The
company has low debt, high current ratio (2.48), quick Inventory Turnover
(5.04), reasonable debtors' turnover (10.59) and very comfortable Interest
Coverage Ratio (39.58). However, the ROCE% (Return on Capital Employed) has
been faltering down from as high as 45.08% in 2007-08 to 15.28% in 2011-12. It
is still substantial when compared to other sectors/companies. Moreover, the
dip in the ROCE% is due to a high base which has increased substantially in
the last few years. The sales of the companies increased by 38.89% to Rs
140.95 Cr and PAT by 53.66% to Rs 21.65 Cr for the year ended March'12. With
more and more awareness about the inner garments seeping into the Indian
mindset, the company will keep making good money for the shareholders.
However, from charts point of view, the company has been in a intermediate
down turn. The stock gave a breakout recently after which it has been
consolidating around the same levels.
With a decent PE of
around 28, the stock is reasonably valued for its leadership status in its
line of business. One could look to accumulate the stock closer to Rs
300/share where a lot of support kicks in for the stock.
What Lovable is for
women, Page Industries is for Men. Well, Approximately. :)
Page Industries is the Indian licensees of the
famous Jockey brand. The company also manufactures under-garments for men,
women and children. But, the company's story revolves around Jockey only. As a
brand, Jockey has been phenomenal. Such is the strength of its brand value,
that at time when the whole industry was in a slump and other
textile/readymade cloth manufacturer were fighting the price war, Page
Industries went on to increase the prices of the Jockey under-garments and
garnered higher sales than ever. Company's sales grew from Rs 198.33 Cr in
2007-08 to Rs 741.09 Cr in 2011-12 with PAT improving at a CAGR of 12.9% from
Rs 23.82 Cr to Rs 89.98 Cr during the same period. The company reported a
splendid EPS of Rs 74.7/share on a small equity base of Rs 11.15 Cr from the
previous Rs 48.21/share in 2010-11. It is a big dividend paymaster and pays
off nearly 50% of its earnings to its shareholders. The stock has given a
return of more than 40% in this year itself. This is superb given the fact
that the stock gave a return of around 58% in 2011 when major indices gave a
negative returns of 25%.
The reason for
these stocks to be ever attractive for investors are very clear. They are recession-proof -
more or less, with the assumption that you wouldn't stop wearing underwear even if you are out of a job.
And with an economy coming out of recession, or rather living in the
continuous fear of it striking back again, one would like to look at companies
which are not highly leveraged, have small business cycles, reliable
management and possibly less policy issues.
Due to constraint
of time, I would leave the topic here.
Other stocks that I wish to cover in my next article are Jubilant
Foodworks, the company which runs the
Dominos pizza chain in India; Gillette, the market leader with almost
monopolistic powers in the Men's shaving/grooming section and others which
either generate very high free cash flows or are unique in their business
model.
Till then, Happy
Investing! :)
P.S. Here's the
link to my friend's article How To Observe
& Make Money.
No comments:
Post a Comment