in my view, the stock is reacting to lack of visibility beyond the current mega order. i jotted down my reading of the chronology of alphageo.
in alphageo, a huge order of 1500cr was announced in jun16, when its fy16 sales was 70cr. it was to be executed over 3 years, ie appx 500cr per year. stock rose in anticipation of huge bump up in earnings. this was the move from 500-600 to more than 1100. then it began to correct because there were doubts about whether the company can execute such a large order, given its scale of operations till then. it drifted down to below 900.
then the company had 2 great quarters of mar and jun17 where it did 166 and 114cr sales (560cr annualised - in line with the run rate). once company demonstrated that they can execute the order (from results of these 2 quarters), the stock rose again to 1100 plus and kept moving in a band.
sales continued at levels of 100, 190 and 130 cr for dec17, mar18 and jun18 quarters - again in line (infact, more than) the required runrate to complete the order in time.
and now realisation has dawned that if they maintain same execution rate going ahead, base effect will kick in next year and then there will not be any YOY growth. if there is no growth, how can PE be sustained? so it fell again and this time almost kissed the levels it was at before the order win.
now even if they announce order wins, they will not be as big as the ongc order. hence quarterly numbers may not show growth, and actually may show de-growth once the ongc order comes near completion.
my learning from this is to try and apply this scenario to any other company getting a huge, probably non repeatable, one time order win, and by extension doing a huge one time expansion. because, after a point, growth will not be visible. hence exiting at right time becomes critical.
disclosure - i entered in the 1st fall and should have exited in the subsequent rise. however, exited in the later fall at a minor loss. now, no holding.
This will create huge opportunity for alphageo I believe…last time only 57 areas… now.more than 97 areas…which is almost 100 % increase in areas…so I feel better chances for alphageo to win contracts
Disc: Invested …views are biased…take your own decision.
ONGC to invest nearly Rs 13000 crore in Assam in next five years
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Hi Raj. Can you please confirm if Alphageo has bid for Cairn contracts? Believe these will be awarded by 1Q20.
Do you have any updates on bids put, or when they will be awarded?
Bad news
The following is the Management Statement:
“The company would like to inform that there had been search by the Income Tax Department from 24th July 2019 till 28th July 2019. The management and employees had fully cooperated with the IT officials and supported them with all their requirements. The company has not received any statement from the IT officials on the conclusive findings of said search. The company would like to clarify that neither the company nor the management had any connection with Agusta Westland VVIP choppers scam case.”
Real bad news this.
Corporate governance, ethics & honesty at its lowest nadir.
& this all at the expense of investor’s trust and money.
Yeah, what else can the management say. But i have a feeling this would be bad. Would sell my stocks if true.
The search was conducted from 24th to 28th July, but the company kept silent till CBDT made the matter public. And now too, the company only denies involvement in the VVIP Chopper Scam, but does not deny any of other specifics mentioned in the CBDT Press Release. That says it all.
CBDT Press Release:
(Disc: No positions)
I have this stock with 8 % allocation in my portfolio…what a lesson…almost 70% loss…what a costly lesson
It is really sad whatever is happening to this company. It was on my radar sometime back for its return ratios and future potential. It is really shocking that they had so high ratios despite alleged siphoning of funds. It is a lesson for other promoters who indulge in these activities and also for investors who have no means to verify true character of promoters beyond annual reports/AGM and screener numbers.
I appreciate your honesty. Nobody would know, I have a subscription from one of the most prestigious advisory, which also works as an NGO on financial literacy, also known to unearth scams.
They also had this Stock suggestion.
I can only say bad luck to you and really appreciate you run a concentrated portfolio.
Don’t give up on that, you just need one good winner.
Cheers!!!
This advisory had also recommended krbl. These goes to show how important diversification and management integrity are in creating a portfolio of stocks.
Take this learning and move on, mate. I know it’s difficult to bear pain and cut your loss, but it is crucial for becoming a better investor.
Be wary while investing in such bull market ‘bubblies’ with one time order book. I was lucky to realize this and made a timely exit. While looking at rear view mirror is important, but even more important is to look forward.
i have a straightforward back of the hand rule when i invest - base case earnings…if there is even slightest of chances that the base case earnings cannot be maintained in future, do not invest! Key learning for me with order book based companies (more specifically government orders).
I have 4% allocation. I had also allocated based on the same advisory that you are talking. Money down the drain. Even i had done analysis. the company looked good. I have lost 72% loss.
This market has been teaching me very costly hard lessons this year. But its better not to invest in such a company with such a management.
Most of the retail investors bought @ above 800/-. Its downward journey started since October 2018 when it fell below 500 then never recovered. First I though it is going down due to pledging of shares by the promoters and recovery is possible once shares are unpledge. As small/mid caps are making new lows daily it looks difficult for Alphageo to recover when it is almost 70% down. Concept of long term holding is not working these days.
“Many shall be restored that now are fallen,
And many shall fall that now are in honor”
These are the staring statement that I come across when start reading security analysis . To add to above in process of these one should perfect the Art of doing Nothing. strong text
Tips always flips , anchoring to price and investment based on price movement is not a good practice.Reaptedly Senior VP ask to find out the interinsic value of a business. And then apply Margin for unknown events and error in making ones interinsic value . There is no perfect formula but one should , in order to have long term invester , should have sound investment philosophy and knows one self first before investing? It is easy to preach than to practice .With the Sound processes and practices of using checklists often take care the most of the mistakes which is common in nature .i do have burn my fingers in some other stocks . You need to answer following questions before exiting any down stock
1 Do you need this money over next 5 years ?
2 Do the company’s product or services will remained in existence for next 3-4 years ?
3 Does the company has same conditions in past ? How does it survive ? .
I do have used to jump in to conclusions very soon and made mistake made not to check the background of Promotors results i book LOSes
I am invested in a company that operates in niche field it is 30 down I buy more it goes 30 more down I bought more it goes further 20 % I bought more . But still sitting at loss … But my point is if you CONVECTION in place than it is worth adding more but if your original thesis is full of follies than better not to average down .IT better to exit .
The thing is we forget our process when Bill takes the charge and we sharp our horns once bear takes charge . My humble opinion is take time and write down the SWOT of your Stock . One thing is Sure Market Knows more than one individual.
Disc : Not invested this is not any recommendation to buy sell or hold . I am not SEBI approved analyst
Booked the loss…all business related thesis intact…when i bought it…but this corporate governance…not digestible…I can not stay with this guy…
Disclosure: no sell/ buy recommendation…I am.not sebi approved analyst…my views may be biased…