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July 14, 2019

Garden Reach Shipbuilders (New Value Pick added to my portfolio) CMP 117.50

Hello Everyone,

 My next value pick is Garden Reach Shipbuilders & Engineers Ltd (GRSE).There are lot stocks now available on reasonably good valuation. A lot of investors asked about my value pick during 2017 and 2018 but the market was overvalued and was not offering value pick with a margin of safety. So, I haven't discussed anything in the blog. However, last year(Aug) I briefly provided my new growth stock list.
1)Sirca paint India Ltd  ( Avg 161)
2)Sterlite technologies ( Avg 340)
3)Vimta Labs  (Avg 215)
Sirca has doubled to 316 ( bonus adjusted) CMP 208 in a difficult market. However, Sterlite is half due to pledging and prices of fiber optics. Business performance perspective it is still a good bet. Vimta is also on track.
From my earlier picks which discussed in detail only I was not able to sell TechNVision near the top. Rest of others I was able to give sell call at the top.
e.g. Intrasoft bought around low of 45 and within a year given sell call at 500. Olympia sold around 300 and it is now around 13.
A lot of investors focus on the art of buying but forgets the art of selling.
It doesn't mean to sell a quality business. One should understand aukat of the company ( Type of company).
There are the following type of companies exits in Indian stock market
1) Ordinary Companies  (90% companies)
2) Current Bull Run/Cycle
3) Enduring quality 
If one has to do be successful then need to understand type of company and take sell call. You can't sell quality companies just because of the market cycle.

Coming back to my value pick Garden Reach Shipbuilders & Engineers Ltd . 
The first thing one will notice with the company is that the market cap of the company is 1350 crores and it has cash more than 2700 crores. Does it mean we are getting the company free along with market cap cash? No, it is not the case, we will see in the moat with the float section.

About the company:
It is Govt of India company. GRSE is a shipbuilding company in India under the administrative control of the MoD, primarily catering to the shipbuilding requirements of the Indian Navy and the Indian Coast Guard.
Look more at 
Go through investor presentation  from 

The margin of Safety : First of it will not be the company which will show a consistent profit every year. But , GRSE has a total revenue of 1386.42 in FY 2018-19 against the huge order book of around 28000 crores. It is almost 20 x . However, we need to remember most of the orders are for more than 4-5 years execution. Still, chances of revenue of 4000 to 5000 crores revenue is very likely in the next 3-4 years. VoP is maximum during 33 months to 63 months period where some of the big deliveries are going to enter in the next few quarters. 
Visibility of revenue eliminate downside but we never know in a bear market. Still,if it gets down it will come up fast relatively.
The second margin of safety is offered by dividend yield. It has declared a dividend of 6.95 per Share which is around 6 %. Interestingly, it has declared a final dividend of around Rs 5 but not paid yet. So, our effective rice will reduce by around 5 i.e. 117.5 - 5 = 112.5 , that will make a dividend yield 6.2% if the dividend remains the same next year.
The third Margin of safety comes from the negative working capital requirement which is due to the huge float enjoyed by the company.

Moat with the float: It is true that the company is debt free and it has cash and cash equivalent current asset worth of 3000 cr against a market cap of 1350 cr . 

So, you might be thinking you are getting this company free with extra cash. But, I will stop your dreaming by saying no, that is not the case.
This 3000 cr cash is float company enjoyed. It is not retained cash from profit. 

It has current liability around 2550 crores.

Let me explain this by example.
You are a famous caterer in the city. You enjoyed moat and powerful brand. Since you have moat you take the whole deal amount in advance but gives your supplies money after a week of the event.

If you prepared a balance sheet on year-end ( 31St March)  it will show that you have cash in hand of around 10 lakhs. Will, you distribute that 10 lakhs among your shareholder/partners. The answer is No. It is not surplus cash but your float ( working capital). Same as in the case of GRSE. You are not getting business free.
Last year the company did PBT around 180 cr out of that 170 cr came from interest income of float. So, almost no contribution of business in the bottom line that's why even cash from operations will come negative. Once, VoP increases even bottom line will also increase along with float interset it will make a double impact.
GRSE also enjoyed the moat due to Govt company and expertise in the field . It is not easy for some other company to destroy this moat.
There are two main private players Larsen & Toubro Ltd and Reliance Naval & Engineering Ltd apart from five state-owned groups Mazagon Docks & Engineers, Garden Reach Shipbuilders & Engineers Ltd, Goa Shipyard Ltd, Hindustan Shipyard Ltd, and Cochin Shipyard Ltd .
Govt extremely focus and in hurry to match Indian navy capabilities with China. Govt is ready to spend around 60000 crores for it.
On 1st July, MoD issues RFPs for shipbuilding projects worth Rs 15,000 crore. 
 Now on 12th July, Govt wants global warship makers to build 45000 crores in new submarines. The Indian shipyard selected under the process would tie up with the chosen foreign company to establish dedicated manufacturing lines for the submarines in India.

Negative Points: Since it is MoD company, there is always the chance of bad capital allocator and a piggy bank for government.
IPO had struggled and merchant banker had to revise price band downward.
So far not much contributed by business in the bottom line, mostly FD interest contributing to the profit.

Conclusion : After analyzing all positive and negative points, I have included in my portfolio, it is Heads, I win; tails, I don’t lose much! type of stock pick.

I will have to give at least 4-5 years to it.

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Disclaimer :  Please treat this post as starting point of your research and not conclusion to invest in any discussed stock. As always , please take the advice of a SEBI qualified financial adviser which I am not .

August 15, 2018

My Stock Portfolio Update

First of all , Wish you all a very very Happy Independence Day  !!!!!!!!

Entered in the following stocks mentioned in the yesterday's tweet.

1)Sirca paint India ltd  ( Avg 161)
2)Sterlite technologies ( Avg 340)
3)Vimta Labs  (Avg 215)

  Last year a lot of readers ask about new picks but due to high valuation, I avoided to discuss any new pick. After correction market became attractive but not many are seems to be interested in stock picks now. That is the market psychology of the crowd.

Still holding Fomento , ADI Finechem Limited ( Fairchem Speciality Ltd. ) and Blue Chip Tex Industries Ltd . Blue Chip Tex Industries Ltd last quarter was flat but It has ROE of more than 25 and available on throwaway PE of just 6 . 

Dics : Do your own analysis with your qaulified financial adviser if interested.  

July 24, 2018

Trait of Great Investor

Sharing great article on trait of great investor . If you want to read whole article then read it at

Mark goes on to describe how some of the greatest investors of our time have produced annualized 20+% returns during their careers, a feat few have come close to accomplishing. He notes that it’s still possible to have success in investing, but just realize it takes more than a high IQ.
On the bright side, although most of you will not be able to compound money at 20% for your entire career, a lot of you will turn out to be good, above average investors because you are a skewed sample, the Harvard MBAs. A person can learn to be an above-average investor. You can learn to do well enough, if you’re smart and hardworking and educated, to keep a good, high-paying job in the investment business for your entire career.
Mark then describes the things that won’t provide enough of the necessary edge needed to become “great.”
Everyone reads.
There are 8,000 hedge funds and 10,000 mutual funds and millions of individuals trying to play the stock market every day. How can you get an advantage over all these people? What are the sources of the moat?
Well, one thing that is not a source is reading a lot of books and magazines and newspapers. Anyone can read a book. Reading is incredibly important, but it won’t give you a big advantage over others. It will just allow you to keep up. Everyone reads a lot in this business. Some read more than others, but I don’t necessarily think there’s a correlation between investment performance and number of books read.
Everyone can get an education or earn an investment credential.
Another thing that won’t make you a great investor is an MBA from a top school or a CFA or PhD or CPA or MS or any of the other dozens of possible degrees and designations you can obtain. Harvard can’t teach you to be a great investor. Neither can my alma mater, Northwestern University, or Chicago, or Wharton, or Stanford. I like to say that an MBA is the best way to learn how to exactly, precisely, equal the market return. You can reduce your tracking error dramatically by getting an MBA.
Everyone can get experience.
Experience is another over-rated thing. I mean, it’s incredibly important, but it’s not a source of competitive advantage. It’s another thing that is just required for admission. At some point the value of experience reaches the point of diminishing returns. If that wasn’t true, all the great money managers would have their best years in their 60s and 70s and 80s, and we know that’s not true. So some level of experience is necessary to play the game, but at some point, it doesn’t help any more and in any event, it’s not a source of an economic moat for an investor.
So what are the keys to developing a competitive advantage in investing, at least according to Mark? You’ll notice that what’s not included is a Twitter follower count threshold, The number of presentations made at the SALT or Delivering Alpha conferences, owning homes in multiple zip codes or secretly knowing Bobby Axelrod’s character is based on you. Instead, Mark notes a great deal has to do with the psychology beyond investing, breaking it down into seven traits that previous great investors have shared.
#1: Not panicking
Everyone thinks they can do this, but then when October 19, 1987 comes around and the market is crashing all around you, almost no one has the stomach to buy. When the year 1999 comes around and the market is going up almost every day, you can’t bring yourself to sell because if you do, you may fall behind your peers.
The vast majority of the people who manage money have MBAs and high IQs and have read a lot of books. By late 1999, all these people knew with great certainty that stocks were overvalued, and yet they couldn’t bring themselves to take money off the table because of the institutional imperative, as Buffett calls it.
#2: Being obsessive
These people don’t just enjoy investing; they live it. They wake up in the morning and the first thing they think about, while they’re still half asleep, is a stock they have been researching, or one of the stocks they are thinking about selling, or what the greatest risk to their portfolio is and how they’re going to neutralize that risk.
They often have a hard time with personal relationships because, though they may truly enjoy other people, they don’t always give them much time. Their head is always in the clouds, dreaming about stocks.
#3: Willingness to learn from past mistakes
The thing that is so hard for people and what sets some investors apart is an intense desire to learn from their own mistakes so they can avoid repeating them.
Most people would much rather just move on and ignore the dumb things they’ve done in the past. I believe the term for this is repression.
#4. Having an inherent sense of risk based on common sense
Most people know the story of Long Term Capital Management, where a team of 60 or 70 PhDs with sophisticated risk models failed to realize what, in retrospect, seemed obvious: they were dramatically over leveraged. They never stepped back and said to themselves, “Hey, even though the computer says this is ok, does it really make sense in real life?”
The ability to do this is not as prevalent among human beings as you might think. I believe the greatest risk control is common sense, but people fall into the habit of sleeping well at night because the computer says they should. They ignore common sense, a mistake I see repeated over and over in the investment world.
#5: Having confidence in their convictions
Great investors have confidence in their own convictions and stick with them, even when facing criticism. Buffett never get into the dot-com mania though he was being criticized publicly for ignoring technology stocks. He stuck to his guns when everyone else was abandoning the value investing ship and Barron’s was publishing a picture of him on the cover with the headline “What’s Wrong, Warren?”
#6: Using both sides of your brain
I later learned that some really smart people have only one side of their brains working, and that is enough to do very well in the world but not enough to be an entrepreneurial investor who thinks differently from the masses.
On the other hand, if the right side of your brain is dominant, you probably loathe math and therefore you don’t often find these people in the world of finance to begin with. So finance people tend to be very left-brain oriented and I think that’s a problem. I believe a great investor needs to have both sides turned on. As an investor, you need to perform calculations and have a logical investment thesis. This is your left brain working.
But you also need to be able to do things such as judging a management team from subtle cues they give off. You need to be able to step back and take a big picture view of certain situations rather than analyzing them to death. You need to have a sense of humor and humility and common sense. And most important, I believe you need to be a good writer.
#7: the ability to live through volatility without it impacting your process
This is almost impossible for most people to do; when the chips are down they have a terrible time not selling their stocks at a loss. They have a really hard time getting themselves to average down or to put any money into stocks at all when the market is going down. People don’t like short-term pain even if it would result in better long-term results. Very few investors can handle the volatility required for high portfolio returns.
They equate short-term volatility with risk. This is irrational; risk means that if you are wrong about a bet you make, you lose money. A swing up or down over a relatively short time period is not a loss and therefore not risk, unless you are prone to panicking at the bottom and locking in the loss.
Mark concludes with a point that I’m not entirely sure I agree with, which is that these seven traits are all learned before reaching adulthood or not at all. While I agree that many of our foundation attributes are molded and formed during childhood, the idea that we become mentally and psychologically immutable is inaccurate. Must an investor or trader have all seven of above mentioned attributes if they are to have a fighting chance of having success in this business? Many would argue no, but I would challenge that I do think there’s a glimmer of truth to each of the seven – but also that being successful in anything can not be boiled down to an equation or list of traits.
Taking on the uphill climb of investing, an arena that thousands have failed at is no easy task. Personally I take the idea of being included on the list of the most successful investors as a challenge rather than a deterrent. So I say to Mark – Game On!

July 22, 2018

Annual Update Letter

It is long back that I have not updated my blog, I was not getting enough time. We follow a lot of big investors reading their annual Letter so why not I should also write some annual letter even though I don't have enough knowledge, still learning but no harm in trying

Indian stock market has less than 1% quality stock where you can buy and forget. Another 99% of the stocks we need to understand their aukat (limit)  I have always five known and proven quality stock. I give the weightage of 30% to those stock and rest 70% in small and Mid Caps.
I have added Bajaj finance to list a few months back. Other existing are
Eicher motors
Britannia Industries Ltd
Pidilite Industries Ltd
3M India Ltd.
HDFC Bank and Kotak Bank ( Both reduced after entering in  Bajaj finance )

Rest 70% I will have around 25 stocks. So, I don't have a concentrated portfolio but these 25 stocks proportionate to conviction.
Top 5 holding might have 70% of 70 %.

Value investing can be divided into two parts.
1) Quality Value investing
2) Value trading
If a stock is from the first category then we don't need to churn it, just hold it till your earlier assumptions about quality, growth and business changes.
But if a stock from the second category then one needs to know aukat (limit) of that stock. And always be on toes. Continuously watch it and take appropriate action.
Since I am not a full-time investor and working in IT firm, even need to work sometimes on the weekend, it is difficult to keep the continuous eye on business or meet management. But, luckily I have two big exposure stocks (Intrasoft and Olympia) in my portfolio where I can sense business performance online.

You hate me or like me but I am one of the few who not only discusses buy calls but even sell calls. Mostly you will hear only buy call from others.No one knows when they sell.
Intrasoft buy call discussed around 45-47 range and disclosed sell call on around 500. Because I could sense online. Now it is below 300. 

On Olympia also disclosed sell call around 300 (on Twitter), it is now below 50.

Everyone can understand from the just above screenshot, it is off track.
On another hand, I missed to sell TechnVission and it is now around 50. But it is concept stock instead of a value stock, I do see a lot of positive business news flow but the company is not able to convert into revenue.

  • A lot of research report are predicting huge growth in next 5 years where Solix and Imagia subsidiaries of TechnVission are operating.
  • Huge EU GDPR opportunity and similar opportunities in India and worldwide
  • Veena Gundavelli, Honored as the Innovator of the Year at 2018 Women in IT Awards USA
  • The launch of Artificial Intelligence device Gia which is similar to Amazon's Alexa 
  • The launch of Solix Big Data solution for Data-driven Healthcare.
  • any many more 

But the company is not able to scale on their financials front.

FOMENTO RESORTS I am still waiting for the expansion to complete.

Apart from above-discussed type I also invest in nursery type stocks, it is just on gut feeling and symptoms. Allocation is very low and I don't track them closely.

Everyone suggest one should not time the market. Agree, But I believe one should try to time the market by allocation. One should increase and decrease allocation by sensing a market.
Only a few suggested to have some cash in 2017, one name I can remember is Rohit Chauhan (@rohitchauhan). Even, I suggested cautions in 2017 not because I am good at predicting but my fearful and balance approach during high valuation period.

I don't invest in mutual funds but over the last one year, I invested in four type funds.

  •  Liquid Fund (debt)
  •  Ultra Short term fund (Debt)
  •  Gilt funds (Debt)
  •  Overseas Fund (Franklin us opportunities fund)

Learned about debt funds burnt fingers in Gilt fund. When I invested in gilt fund never thought I can get even the negative return. But, later figure out Ultra Short-term funds are more suitable for my requirement. Still, need to learn a lot of nonsense of the debt market.

 Franklin us opportunities fund so far has given me around 18% return in first half of this year. Reason for investing was two folds
1) Wanted exposure to worlds best companies.

2) Since small-cap valuation was very high and I was not able to find good value stock with a margin of safety. Even the US market was also trading high but I didn't want less than 50% exposure to equity (fearing missing out). So this fund was giving me an opportunity to remain in balance.  My thinking was US market is trading at high if US market corrects 20% then the Indian large cap will correct by anywhere between 25-30% but the small cap will correct more than 40 %. If the Indian market is going to correct like this then currency will depreciate by around 10 %. So, actually, I will have loss of only 10% on my capital and I can invest that capital in small caps which have lost more than 40%.
If the market moves up then I will not miss-out the equity gain.
My prediction was half correct, US market and Sensex both touching an all-time high. But, most of the small-cap down beyond 25% and rupee also depreciated around 10 %. Luck was favorable this time for me, nothing to do with any kind of skill. Surely, luck will not favor me again during buying time, I have to be very cautious.

Still , small cap stocks are not very cheap but lot of opportunities are emerging . Hope, Soon , I may find some good pick .

September 19, 2017

Value Pick : FOMENTO RESORTS (Cidade de Goa)

Hello Everyone,
                  My next value pick is Fomento Resorts & Hotels Ltd. I have moved from value to growth over the years. But nowadays, growth stocks are trading at higher multiples range. Fomento Resorts is not just value pick but it is the combination of growth plus value along with the good margin of safety. It is having the market cap of 206 crores, with the enterprise value of around 300 crores at the average trading price of Rs 129 on Friday (15-sep-2017).
About the company:
                Fomento Resorts & Hotels Ltd runs Goa’s premium 5-star deluxe resort Cidade de Goa
                Cidade de Goa : Situated in the land of sun, sea and surf, the property comprises of 207 rooms that showcase the unique Goan Portuguese architecture and ambience. The property is preferred by discerning travelers worldwide due to its proximity to the beach and its courteous staff that lay emphasis on providing warm Goan hospitality. Cidade de Goa provides Goan experience and feel to its guests. It is situated on Vainguinim Beach and has a distinctive advantage with its proximity to the Capital Panaji and most of Goa’s frequently visited locations. Cidade de Goa is also a holiday destination by itself as it has something for everyone. One can find a variety of restaurants namely
Alfama, Chef’s Speciality restaurant that serves authentic Goan and Portuguese cuisine. Alfama has also been ranked amongst India’s 30 best restaurants by an independent customer survey conducted by a leading Media House.
Barbeque, the evening restaurant with a live kitchen. The Beachside Barbeque allows one a unique dining experience of grilled seafood, meats and vegetables.
Cafe Azul –Poolside coffee shop provides the ambience of an Italian café with a choice of varied menu. One can savour global cuisines at our buffet restaurant Laranja. Other Food & Beverage options include
 Doçaria a charming tea and coffee lounge operating round the clock;
 Taverna – the lobby bar;
Bar Latino, the pool side bar.
Visitors can de stress with the state of the art Health Club- Clube Saúde and Pavitra – The Ayurveda Spa. For the adventurous at heart, Cidade de Goa offers a vast array of options that include water sports, tennis, bird watching, beach games and an outdoor chess. For the business traveler, Cidade de Goa offers a variety of conference and banqueting facilities along with its Business Centre. Cidade de Goa can be summed up as “ Goa in a resort”.

Shareholding of promoters:

The promoter used to own more than 95% a few years back before 75% cap rule came into implementation. This 20% went to AJMERA family which might be the proxy to promoters.So this is very tightly held company. Thus, the liquidity is very less.

Revenue of the company:
  •  Sale of Room Nights
  •   Food and Beverage
  •   Wine and Liquor
  •   Lease rental income from the Casino (Right now in closed not sure when it will re-open)
  •   Interest on cash/FD.
Growth of Company:

Shown good growth, profit double in last 4 years. It has 54 rooms in 2009, which has increased to 270 in 2017.
Negative points and Questions :
          1)The Fomemto group is known for its clout with the Goa's political leaders. Cidade de Goa has often been the base for major political discussions for both BJP and congress; Congresses passed amendment in 2009 to save jobs and portion on Cidade de Goa
              This is positive as well as negative.
          2) One of the negative points that emerged after GST roll out was that MICE activities (Meetings, Incentives, Conferences and Exhibitions) and other events held in hotels outside of home state are not eligible for Input Tax Credit.
         3) A hotel accommodation with the declared tariff of less than Rs 7,500 a night will attract GST of 18 per cent. For a room with the higher tariff, the GST rate will be 28 per cent. An online search suggests room rate of around 10000 per night (non-peak season).  So, GST will be around 28% unless they reduce tariff below 7500.
            They paid the tax of around 35% (around 9 cr on 26 cr PBT) , not sure if GST will reduce it or not. However, one of the earlier annual reports mentioned multiple taxes as a negative point. So, GST will bring relief.

Red Flags :
               Fomento Resources Pvt Ltd. (FRPL) is an associate company of listed Fomento. The Company has a sanction to avail unsecured inter corporate borrowings not exceeding an amount of Rs. 150 crores at simple interest not exceeding @ 11% per year from FRPL for the purpose of funding the ongoing 2 hotel projects of the Company.
                Some investors may see it as a red flag but if you see from builder's or construction companies eye then this is a good deal . For example, a builder or construction company has land, now they want to make hotel on it. After all/major permissions are in place Bank/Financial Institutions fund project on construction linked finance. Rates vary from 12-18 % from Banks for unsecured loan. Sometimes builders invite Private equity players or investors to the project. Typically they are promised high double-digit IRR (18%-27%) . The only advantage of these investors returns are after project completion or after 3-4 years , therefore cash flow management is better till that time.
                I am not much worried about it but I am worried when the company has 60 cr cash then they can reduce this debt by at least 50 crores, why get low-interest rate through FD and pay a higher interest rate to Fomento Resources Pvt Ltd for at least this amount. I couldn’t get the logic of it.
                If retail investors hold less than 5% in any company then that company is not going to gain anything from cheating minority shareholders. So, chances of wrong-doing are very less.


The ministry of company affairs (MCA) vide its notification in official gazette dated 16th Feb 2015 notified the Indian AS (Ind AS) applicable to certain class of companies. Fomento Resorts And Hotels Limited adapted Ind AS from the accounting periods beginning April 1st, 2017. If they had continued with GAAP then profit for the quarter could have been 2.95 cr. I am still figuring out this diff , CAs can you please help .
As per GAAP , TTM profit is 16.82 crores(2.25+5.65+5.97+2.95) which give valuation of 206/16.82  = 12.24 . It is trading on PE of just 12.24 .  If we remove cash of 60 crores from market cap and reduce interest income 3.94 crores ( 30% tax then PAT contribution should be around 2.76cr ) then new PE will be = (206-60)/ (16.82-2.76) = 146/14.06 = 10.38
That is the valuation when the market expects zero (in fact negative) growth in coming years. Leave alone upcoming expansion, market not even factoring inflation related growth. That is the opportunity for us.

Expansion Plan:
             Cidade de Goa The civil and construction works are in progress to set up a 5 star convention hotel consisting of 300 rooms at the plateau of Vainguinim Beach, Goa.
Investment in hotel at Aarvli The civil and construction work is in progress for setting up a 5 star (luxury) 32 room boutique resort at Aarvli, Sindhudurg,Maharashtra.

Capital work in progress (expansion plan) they already spent around 167 crores.  I believe, this is not a book value but also includes interest as well. So, if the company today decides not to complete expansion plan but sell to some hotel chain (a lot of foreign hotel chain might be interested) then they will fetch around at least 167 crores plus price of land which I believe not included in 167 crores since they might already own it at least for Goa.
             Getting clearance /permission is a very tedious job; you can view details at . Aarvli project looks to near completion.
                The Company has also sought an approval of shareholders to purchase a plot of land admeasuring 5425 square meters situated at Curca village, North District, Goa for a consideration not exceeding an amount of Rs. 4.10 crores from FRPL.
             The casino is right now close but if it opens again then the company can earn around 4-5 crores from it.

Margin of safety:
             We will try to evaluate margin of safety by two cases.
Current Bussiness: As we know the company can fetch around 167 crores plus land plus some premium to do all clearance/permissions work done by the management? This figure can go beyond 200 crores but Assume only 167 crores.  Now for calculating current business valuation, assume they sold it for 167 crores. What will be the valuation of the current business?
Market cap : 206 crores , debt for expansion 97 crores , cash 60 crores , got 167 crores by selling expansion projects
             Gain through selling expansion 167-97 = 70 ;
 So, effective enterprise value/market cap = 206-70-60 = 76 crores with zero debt.
So, zero debt company which is having PBT 26 crores, paying 35% tax is available for only for effective 76 crores. Isn’t it bargain in the current bull market where everything is so expensive?

With Expansion: With the current capacity of 207 rooms they are making PBT of 26 crores, with new Goa hotel of 300 rooms plus 32 rooms of Aarvli (Maharashtra) they are likely to do more than double, in fact much more, may be around PBT of 65 cr ( 47 cr profit). If casino resumes then can touch even 50 crores and if we assume they will able to pass on inflation on rate then it may be increased by inflation. This figure of 50 crores is excel sheet person guess, actual figure may vary. But, if we assume that in next 4-5 years they able to reach 50 crores profit then the market will reward them with high PE .So, re-rating will be defiantly on the card. Of course, the market condition of that time will decide PE.
Selling to hotel chain:Recently a lot of foreign chains bought Indian hotels. If any hotel group is interested to buy it then re-rating will happen. I had discussed Mac Charles ltd ( Link ) but this idiot couldn’t hold for such long time (discussed price 245.65 (bonus adjusted 123) , Embassy Property Developments Pvt. Ltd, given the open offer for Rs 670 ) . I and my blog follower who acted on my sell call missed getting 5.5x in discussed Mac Charles ltd .
High ROE and good ratios:

         The company enjoys whopping operating profit of 48%. How many non- commodity companies in India enjoys better operating margin than this? Somewhat comparable peer Wonderla Holidays Ltd used to enjoy 50% operating profit margin but now it came down to below 30% . Didn't study it, but maybe before and after IPO difference or might be having some valid reason behind it.
Above picture shows the return on capital employed of just 11.66 . Is it real or misguiding? Let’s calculate by adjusting figures.
         Total asset is 265 crores out of this 60 crores is cash and 167 crores is Capital Work in Progress for future expansion which is not contributing to any return so far.
So adjusted asset come around just 38 crores . Reduce interest income from EBIT to get the accurate figure.

It gives ROCE access of 100 for current business. Since, this high ROCE is hidden behind other numbers, this stock will not appear in your high stock ROCE filter. One will have to put little effort to dig and find this type of business.                             

Luck Factor: Expansion is going on from last 3 years or so. Not sure when it will be get completed and start contributing to profit.If we have good luck then it will start contribution on time else it can get delayed.At least, this idiot can’t control or predict it. However, Aarvli project looks to near completion.

This is a starting point for your research, please don’t conclude to buy it. If you decided to buy then remember this is low liquidity stock, don’t show desperation to the sellers. Avg selling price is around 130 and there is always the gap of 5-10 between seller and buyer price. I believe one should try to get below 150, don’t chess if moves fast. Due to Indian AS (Ind AS) it may show less profit and that may give you the good entry point.

P.S. (20-09-2017)

One of the my blog follower(@samanaabhakthi) on twitter pointed me red flag mentioned by @leading_nowhere ( . I would like to thanks for pointing red flags.

I missed to analysis preference shares. So very good point raised by him. I will explain major concern one by one.
1) Loan from related parties with 9.8% interest rate : I already explained that is not concern but beneficial for the company .Company couldn’t have got better deal from
 Outside for unsecure loan .
2) Fixed asset concern: Whole purpose of CWIP to show assets which are not productive yet and in-progress , those will move to assets once project get finish. Nothing unusual.
You can find this in n number companies which are asset heavy companies . e.g. Reliance Industries

3)Related party transactions : This is little concern but they give business to company . You will find very few companies where related part transaction are zero and it is value pick . however , Amount is very less and if they have done something wrong then profit might have impacted badly . But, that is not the case. Also remember they will not achieve much by cheating just 4.5% retail investors.
4)7.5% dividend to promoter and 1% to investors: The word dividend of 7.5% is little confusing. That born misunderstanding. These are Preference Shares with face value 100 and not equity shares. First of all we need to understand difference. Preference Shares are almost like debt instruments but some has option to convert into equity but in  our case it is like debt with fix dividend coupon 7.5% ( In fact , it is 7.5% interest rate). Coupon of 7.5% to preferences share is not abnormal though .Most of the other companies has same . Preference shareholders has some legal preference over the equity shareholder .Fomento has 7.5% redeemable cumulative preference shares would be redeemable at par after 5 years from the date of allotment i.e. 10th January 2015. These shares would carry a fixed dividend of 7.5% p.a . This is type of debt till 5 years.
Redeemable Preference Shares Definition: A company may issue this type of shares on the condition that the company will repay the amount of share capital to the holders of this category of shares after the fixed period or even earlier at the discretion of the company.
So in other term company is paying just 7.5% interest for debt type instrument. That is pretty much acceptable rate of interest. Minority shareholder should not worry of Redeemable Preference Shares. However, Indian AS (Ind AS) standard will reflect it properly. GAAP was not reflecting it. The mystery of difference between profit of  Ind AS) standard GAAP is solve .

So. Most of those are not valid concerns for me. He did very small mistakes but I must appreciate he covered all aspects. I also did mistakes by not including preferences share in my analysis. Some numbers may need to revisit based on that. Everyone does mistake. We need to learn from those. At least he is attempting to do some in-depth analysis, if one don’t do then one will not do mistake. And one will not evolve over the time. I am sure he will be master of forensic accounting in next few years.
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