BLS International


(blueeyedinvestor) #144

Its up to an individual how one would define the term ‘sustainability’. For me the current operational challenges poses major risk to business sustainability and for me it does not make sense if the sustainability is a make or break issue just on account of one contract. Management capability has been put on question mark for me.

The management has been maintaining that they will be getting new contracts but have not been able to secure any major breakthrough over last one year.

Punjab contract we all know they need to recover Rs 145 cr from the government. If they fail, which in my belief looks quite certain unless they get into big legal battle which they prefer not to enter given their eye on future such contract’ the liquidity will be a major challenge.

The company defaulting on Kendra Employees salaries, which they should not even though they are yet to recover money from the government. This for me is a big no-no, as salary is the last thing that management would touch in event of crisis. This showcase the management intent and approach to business. For me its bad on the governance.

The management still maintain, which is totally incorrect, that BLS has surplus cash and can repay debt and non-receipt from government is not an issue. In real sense this money is sitting on balance sheet of overseas subsidiaries and cannot be repatriated unless they agrees to pay tax on it. So in such case, for repatriating Rs 100 crore to repay the debt, BLS has to repatriate to Indian entity Rs 120 Cr (including Rs 20 cr of tax). Why any management will agree for that.

Now another carrot the Management has offered is that they are evaluating M&A opportunity. Where is the money available for that. Available surplus cash, they have been saying is going to care of debt.

One single contract cannot make or break the investment thesis. But for me the way the Management came up to address the issues one after the other, is the real cause of liquidation of my investment.

Remember, to continue as a long term investor, you also need to track major developments impacting operations of the company of your choice and you should be UPFRONT and EXTREMELY RUTHLESS in taking decisions to hold or sell. We all knew that the Punjab contract has been running into problem since last June’17, but whenever we asked about the same to the Management they ignored the question and says everything is running fine. It has not happened all of a sudden.

I carry maximum 10 to 12 stocks in my portfolio and don’t mind shuffling any scrips if any event impact its operation. But that’s my call. The investment style is highly personalized and can differ person-to-person.

REMEMBER TO INVEST IN GOOD MANAGEMENT. A GOOD BUSINESS WITH BAD MANAGEMENT CAN SCREW UP THE BUSINESS, BUT A MODERATE TO GOOD BUSINESS WITH GOOD MANAGEMENT CAN DO WONDERS FOR YOUR PORTFOLIO.


(Capsule91) #145

I will definitely will second on your assessment in that the employees were hired by bls not by the gov and its bls responsibility to pay the salaries… Definitely plays out your point on bad governance…

But the punjab government has not went out of the contract guidlines as of yet, and so logically the receivables will be released but this is a partnership where the promised quantum of revenue will be a balance between the gov and bls upfront generation, and it makes perfect sense of the gov which is said to be in crisis to wait and see what revenue bls clocks in total in a year from the project while its still operational and at the last pay the receivables…
So i am not at all worried about the reveivables…

The spannish contract bidding started in 2015 early and materialized in 2016end, so it typically takes time to officially announce the bid results and successful sanction, so a dull 2018 in terms of new contract is understandable and should have been well projected by all investors that jump in revenue will come in nonuniform steps but a step higher indeed throughout the life of the contract on the base of current operational contract…

While, the cash generation from the indian wing is not that great and hence inability to pay salaries, and no management is going to pay tax , take out money from other sunsidiaries and pay indian wing of operations… Never has happend , nor happens… The foreign wings where the cash generation is better and more normalized ,if has a employee salary problem or debt , they company shall pay and in practice pays from the cash available with that segment of business…
This is the norm and i dont see any default on bls here…
Yes, this situation of cash sitting in foreign subsidiaries is an issue and if it matters to an invest its personal opinion, but my view is that since with farewell of punjab project the indian wing of the business is miniscule in comparison the whole bls business and it is not to be a worry to factor in, also specially when they are expanding internationally in asia …if you super project and average this cash crunch situation to every other bls subsidiaries , that will be unreasonable and speculative wihout data.

And absolutely not the situation in spain where the major topline is coming from, a counter speculation.

So charging the management with bad governance is not loggically correct i feel , if anyone is doing business…

Anyways, your views well taken…

I second the market in taking a sound projection that punjab misdevelopment has little effect on the company and the valuation it should receive on the basis of the growth possible…

Operational efficiency and records are a vital point in bidding process where bls has either outperformed or equal to even VFS in the spanish project…
And i didnt find VFS or any other competitors bag new contract or renew old contract in 2017 (citation needed), so it will be unreasonable to understand the company has failed the investors with the promise of bagging new contracts as no new contracts have been finalised or renewed in the visa outsourcing market as a whole atleast…

This is a proven management with a good business, proven by spain governemnt, the afgan gov recently and also seconded by punjab gov in operational flawlessness even while ending the contract…

All the best for your investments @blueeyedinvestor
And thank you for an early thread which has captured so much of action…

I shall continue with my conviction this is a rediculously undervalued company with immense growth potential , a future disruptor to the establised visa businesses catering companies…

Disclaimer… Invested


(barasia) #146

From what I understood from the concall, they have processed 1.9 mn applications in 9m18. The math doesn’t seem to fit had they processed 1.5 mn applications last quarter, given that they get 15.45 EUR per app.


(Capsule91) #147

Thanks for pointing out…

I forgot to correct that, i just went offline from the concall and posted the initial notes, without back of envelop calculations…

I will correct that part in my post…


(blueeyedinvestor) #148

Has the management ever given how much spain vs. other visa application being processed on a qtr on qtr basis over last one year. Somebody should make an effort and see if they get any luck to get this info from the management. The management will never reveal this information (which is like a basic and has no competitive risk in sharing these numbers)


(Capsule91) #149

Ok…
Will get the numbers and return the same here or report oucomes…

I am lucky i got a direct phone line to the management ,
while i attempted to clarify during the punjab news…


(Mayank Narula) #150

Punjab govt. financials are in dire state.


(ramanhp) #151

Govt is not able to pay bills to their own employees. Likely the BLS receivables will be delayed.


(Capsule91) #152

A massive bullish bat formation…

Price action is trading in the PRZ (potential reversal zone), will face a major breakout on either side of the prz, and since this is a bullish nat, hopefully an upmove will start, 210 level o uppermost point of prz was tested one but didnot sustain, plus thoughout the movement in the prz there is constant bullish price momentum divergence, its looking good, yet atleast stable foe now…
here is my work sheet…

Disclaimer… invested


(Amit Mehta) #153

The stock now trading at 160. ~45% down from the LTM high. Isn’t it over-reaction from the market for the loss of just one contract?


(learning) #154

I guess market is not liking the fact that company is not able to show clear picture of future


(Capsule91) #155

The punjab loss will dent 25percent of topline…
The market discounted it and the stock was overvalued…
N the price cirrected , i feel now even its over valued


(deep86) #156

Interesting - Two competitor, one wins best visa service provider and the other wins the candian visa order. Easy to assign a value!

BLS:

VFS :

Awards!!


(Susindar) #157

This has been a lesson in not to catch falling knife. I entered at 230 and exited at 200, thanks to some of the advices here regarding not to hesitate in cutting out on losses.
Anyone tracking, do you think this may become a buy below Rs 100


(PE_Ratio) #158

TTM EPS is 8-9 rs. Revenue from Punjab was around 25% of total revenue. Subtracting that, then the TTM EPS will be around 6 to 6.75 rs. Discounting it 15 times, then reasonable price is 90 to 100 rs.
But market used to pay premium. It was even trading at 40x multiple. So, 90 to 100 rs price range is just conservative entry range. If market is ready to pay premium like it did, then even CMP 120rs looks attractive.


(deep86) #159

I personally feel - unless market sees a strong trigger this stock will not go up unlike past where it bounced after each decline. Again, its just a conjecture based on the fact that it has corrected almost 60% from top, while other quality names have not corrected so much.

Please take it with a pinch of salt I might be completely wrong as no one knows the future.


(Capsule91) #160

The only visible optimism left is the punjab receivable coming into the balance sheet, which most likely will be used to reduce the pending debt.
How this will be discounted by the market is a matter of artefact , but the effect on the earnings will be miniscule…and even be totally balanced by the loss of earnings due to contract expiry…
As of latest q3 concall, there was a mention of 10percent of the topline generator is expiring, which is in addition to punjab loss of 25oercent of the topline…

So the balance is net negative that is coming up…

All depends on the new contracts which is expected to be won…and also there sud be a lag between announcement n actual topline contribution, as we have seen in afgan project…

Now the afgan project is in a budding stage , i had discussed the numbers in my earlier concall notes, which has a good potential to generate incremental earnings…
Algeria contract is still a fetus…

Expecting a dull 2018 for this company…
I had been unfortunate a bit, i had invested a lumpsome at 238 average on the falling wedge, but just a couple of days later the news came about punjab…
I am still invested fully and havent considered selling the shares as yet, because i feel phases like this is a part and parcel of service sector and i find no reason to book loss and dent my capital…


(rvetri) #161

The mood is at the Lowest point… Quite likely this is the bottom… We
cannot change the fact that bls is the only listed play in the visa
processing space which has a huge headroom for growth…


(Capsule91) #162

yes, you are correct…
the downside is max another 16points…

Here is a technical speculation…https://in.tradingview.com/chart/BLS/a5z5Kb6c-BLS-International-A-knife-Fall/


(Mayank Narula) #163

204 Crs receivables still stuck with Punjab Govt. with no recovery in sight.