Albert David - Potential Bagger?

(Shiv Kumar) #23

there was some buzz about Piramal Enterprises trying to buy out the promoters now that its no-compete clause with Abott has expired. But looks like it was mere rumours

disclosure: no holding in Albert David. Holding Piramal

(Vijayk) #24

Price to sales for Albert despite the run in the stock is only 1.2-1.3, despite it being debt free co with 75 crores cash on books.
Most pharma cos are trading at 3-5 price-sales ratio (and also having debt)

(stockhunter) #25 good report lot of red flags pointed out

(vinay ambekar) #26

Yes. Certainly indepth analysis and many valid points. Like he always does. A few can be explained, like for eg. the sale of assets, which was done above the depreciated value (they were old assets and nearing full depreciation) and infact were sold at a profit over the written down value. Also labour cost, which reason was explained by the Chairman himself. Etc.

Hopefully, the future should see a lot of improvements and things correcting out.

(cool_gaurav) #27

Two major red flags: (1) Number of related party transactions and to my surprise- DONATION to related parties, what is this? very serious issue (2) They are not providing data and cooperating with credit rating agency- What future hold for such a co? if numbers are true they should provide data to Credit Rating agency…

(cool_gaurav) #28

(Vijayk) #29
  1. Future of a company is dependent on its future revenue and profits. It is not dependent on rating agencies.
  2. These small political donations is a legacy issue. Hope it stops soon.

The future of a company is again dependent on how much net money it makes and whether it shares profits with shareholders or not… Which is seen by dividend payout as a percentage of profits.

(vinay ambekar) #30

Yes related party loans and investments is a known issue and I am quoting some snippets from above posts. This was raised with the management at the AGM - directly with the Chairman and later reiterated with the CEO after the Chairman had left. It needs to be seen what they do about it.

Also, the company has hardly any debt and is net cash positive by a huge margin. So debt rating, which is an opinion on the solvency of the company needs to be looked at in this context. Typically, lenders to the company push them to get ratings done. In this case, since debt levels are very low, and as pointed out, the entire assets are mortgaged/hypothecated, the lenders may not have pushed the company to get the rating done. The credit rating agency has not said that the management is not cooperating or that they are suspending the rating etc. which they have done in the past in other cases. They have just said that they are awating additional information.

Anyway, I have tried to be rational in my explanations without tilting overbearingly to the company’s side although I am invested. Concerns have been there, issues are there, and these need to be balanced with the positives. So boarders may take their individual call.

(learning) #31

Really amazing analysis by Dr. Vijay M. of the ADL . I doubt form the past perspective one can do any better analysis then this. Kudos.

As for the issues raised in the post,I guess most of the points have already been covered by @sammy11 @Vijayk So not going to repeat it. Since Science part has been covered, I would rather focus on the art part of it.

I have been thinking about ADL its past and also what it future may hold.

Thinking of future - I can think of following scenario : -

  1. New CEO makes the company grow for next few years and also guides the promoter towards what analyst/investor community wants
  2. New CEO makes the company grow yet promoter continues with these diversification.
  3. New CEO is not able to grow the company - promoter stops these diversification
  4. New CEO is not able to grow the company - promoter continues these diversification

For me as an investor : 1 is ideal 2 is good 3 is decent and 4 is where we are.

So, I see more things in favor then against me at current juncture. I will take 3/4 odd any day.

Now, which scenario will play out depends on CEO/MD skill and Promoter intention.

As, for the skills of CEO/MD looking at the past it is reassuring that he has the experience, whether he would work in this situation or not that no one can say, not even he himself. So, the only data point is the past which says that he might just be able to grow it. I mean looking at the scope( geographical, brand etc.) It is not a herculean task and any smart person should be able to grow. So, in conclusion i feel comfortable with the skill of the MD cum CEO.

Now, coming to Promoter intention ( this is what we are actually debating in the science part), In the past his methods/ decision have been questionable. Now, consider this - he is paying the CEO 1.5 cr. Think about this for a moment. If the objective of the promoter was only to milk company - he could have hired any Tom, dick and harry at cheaper rate and would continue with status quo. What does this huge salary to an outsider indicate about the intention of the promoter. I am sure he would not do it just to fool the investors. That would be a very expensive for him. So, this decision is crucial and speaks a lot about the intention of the promoter.

Now, whether from above 1/2/3 which one will play out and how would that play out for company and in turn for shareholder no one can say with certainty. So, its not a clear cut case of black and white investment. It has shades of grey.

However, I have invested my money in this business, so, its obvious that i want which scenario to play out.