Intense Technologies


#195

You said “There was no factory in the first place”. It is premature to state that the BSNL contract is bogus.

You have ignored or kept out below fact.
As per company: BSNL revenue was booked based on milestones that were were reached. Due to disputes, the payments were delayed. If not reversed, company would have had to pay taxes, and hence was the revenue reversed. Company has shared on concalls that this revenue is not lost, and may be realized once disputes are resolved.
That rationale makes sense. Time will tell, if they lied about it.

In such cases, where customer disputes and holds payments, receivables pile up, and there’s no clear point of time where you write it off. In this case, they reversed it, instead of writing the revenue off.

The way I see this…
Is the business real - surely yes.
Is BSNL contract real - not done scuttle-butt, but I’d say yes.
Is mgmt capable of managing the business they have on hand - yes
Is mgmt fraud - does not seem so. they may have said half-truths, in hope that things will work out. but does not seem to be defrauding everyone by design.
are they engaged in insider trading - not sure, as i have not spent enough time understanding. will go through work that Shrihari and others have done.

discl: i hold.


(bullrun1988) #196

@Shrihari i would say business is real for sure bcz “rishi” had used their software ( as he written in thread) and saying that was really good and its not easy to develop anything like this.


(Shrihari) #197

@bullrun1988

  1. I think that the software product is a good one, as well. It is difficult to be recognized by Gartner as per the links below

https://www.quora.com/How-much-does-it-cost-to-be-included-in-Gartner-Magic-Quadrant-A-sales-rep-told-me-that-a-competitor-came-onboard-this-quarter-and-“if-you-see-that-they-are-included-and-you-are-not-being-a-client-will-give-you-a-good-vehicle-to-plead-your-case-”

https://www.quora.com/How-long-does-it-take-to-get-listed-on-a-Gartner-or-Forrester-report-after-becoming-a-member

Getting recognized by Aspire Leaderboard enhances credibility too.

  1. The BSNL contract has been non-existent for 2 years but may exist in the future. I, just like all shareholders, am waiting patiently for real and permanent revenues to be recognized through BSNL

  2. I have mentioned this thrice earlier but will state this again: I do not intend to sell my shares for some time at the least. This is because, the AMC revenues (which I consider real) will balance out consolidated expenses and we are now waiting for a nudge to get the P&L statement to a much better positive territory. This nudge can come from BSNL or any other contract and can result in a significantly better share price than what we have today. My opinion is that, the wait may be worth it. (but in no way should my statements related to my stock holding be construed as a stock recommendation, as it is definitely not one; (I am not an investment advisor and this is my opinion only))


(vkshetty9) #198

Dear Mr. Srihari, Thanks for the detailed analysis… Is there any tool to get this kind of information on real time basis so that the retail investor like us can benifit out of it…

Discl:-hv invesed , in loss now.


(krrish seth) #199

Thank you very much @Shrihari for the detailed analysis.

It seems through your analysis that utsavbhai is also trapped in the whole mess.

Great read…really hard work from your side, love the value pickr


(M S S Murthy) #200

When we analyse , spot , and invest in stocks some of them may fail or not performing to our expectations . I have also invested in Intense Technologies having read and satisfied with the analysis of Mr Rishi and invested in Intense. Later on some time during 2016 I have also come across the details presented at the the start of this thread by The Stocklady. I still find both the analysis rich in detail and are logical. If we see in retrospect to be fair it would have been difficult for many of us to have anticipated many of the subsequent developments happened in this company.Still I feel not all is lost in this counter and wait patiently nursing my losses and wait for this quarters results hoping for the better !


(Shrihari) #201

@rareks, Thank you for your kind comments. It means a lot to me.

I want to take this opportunity to summarize my thoughts and share a few specifics with fellow Valuepickr members / shareholders. You might wonder why I typed this 20-page word document out and put this up on this platform. Here is why:

  1. I have lost a good amount of money in this stock. It is frankly my mistake, and an expensive one, moreover. I followed conference calls / call transcripts blindly, without looking at any other details (like shareholding patterns, technicals etc.). I was busy with other activities, but that is no reasonable excuse though. I do not want to repeat this mistake or any other, as much as possible.There is a desire to learn from this experience and hence this analysis.

  2. I have immense respect for the hard work that has gone behind my investment. So, I want to know exactly where I went wrong. I have gone back and looked at every possible element for the sake of a thorough analysis.

a. I have equal amount of respect for a fellow forum member/fellow small retailer ‘s investment and I can relate to their conundrum when he/she has lost a sizable portion of his/her investment; and I want to share my learnings with all of you, with the hope that you get something out of it.

  1. I have read through many Valuepickr threads and what I have realized is this: Some members say a vehement “YES” to a stock and some others say a strong “NO”. No matter what we say, what binds us all and what is common amongst us is that, we put our best foot forward; that is to say, we always present an analytically rigorous, well thought-through and logically driven arguments. Therefore, I have no doubt in my mind that fellow members like thestocklady have put their best foot forward and presented a coherent and a logical case; and so have I. Please, let’s not hold any one responsible here, let’s stay united. Our investment decisions are our responsibility.

a. My analysis is unbiased as I have positives and negatives to share. My eventual decision to stick with the stock for some more time might sound contradictory and illogical to you. But it is not, in my mind. There are myriad data points and the synthesis of them has yielded this decision, and in no way do I want to bias anyone’s buy/hold/sell decision in any way, whatsoever.

  1. I sometimes wonder: “Why don’t shareholders realize that by putting their money in a stock, they have become part-owners of the company. Why don’t they know that the management has a responsibility towards this investment?”. I say this because, we do not join conference calls and ask questions.

a. For instance, have you not wondered: “What has happened to the 80-crore contract (200 crore with 40% conversion to be precise) pipeline promised on the call on Sep 22nd, 2017? It can’t appear and magically disappear after a few days, now can it? Can we not join conference calls and ask promoters what has happened to it? Please do join going forward and let’s get as much information that can help us and others and hold the management responsible for their commitments.

  1. I have used some amount of humor in my analysis. In an otherwise disappointment of a shareholding experience, why not use some humor, I thought. Hope you are not offended in any way. If you find mistakes in my point of views, do let me know.

  2. The best outcome for all of us is this investment working out, it will benefit: shareholders, company and even the government :slight_smile: . No other outcome is optimal.

If you have read this far, I must thank all of you for going through my elaborate analysis (Parts 1-7 mentioned above) and thoughts. Thanks for your comments, likes and appreciation as well.

As @rareks has said, “Love the ValuePickr”.

Best Regards


(Ashwini Damani) #202

Mark this post. Let’s talk after June quarter


#203

This thread was created with a view to discuss the business of the company.

Instead , it has become a forum for discussing price movements, shareholding patterns and for casting unsubstantiated aspersions on people for pumping the stock.

The final decision to buy/sell lies with each investor. I cant catch your hand and make you buy. The rewards were all yours…same goes with downside.

Net net, creation of a thread so that people can understand the company better is an excercise in futility. There is no upside for the creator, only reputational risk if stock underperforms.

Thus, I request admin to remove all the threads created by me.


(TheRishiK) #204

Hi Utsav (@thestocklady) , don’t get bogged down by all these nonsensical posts. It is a part of investing. There are people who have been benefited by your posts and discussion over stocks, and they are good readers/listeners (seldom posters). The very same people who are criticizing you now will avidly praise you in the next bull run.


(Sethuraman) #205

I would like to thank @thestocklady and all forum members for the knowledge sharing and useful discussions which help us get varied perspectives and take calculated risks. I am noting down my observations here to add value, however small it may be.

Couple of years back i was scouting for Indian IT companies with differentiated business model - Based on the analysis, three companies came to my radar.

  1. Tata Elxsi
  2. Persistent Systems.
  3. Intense Technologies.

From the ground up, these companies seem to have a differentiated model from other IT Services companies.

Coming to Intense, I glimpsed through the annual reports 2 years back and found that it had a good clientele in India and it has been around for long time (15-20 years). It was expanding into EU. It had appointed a Sales executive for NA, noting that it was still cost intensive exercise and it would take a long time to get some penetration.

Since it was a micro cap, i just invested a token amount as the promoter pedigree was unknown. It has been close to 1.5 years now and am at a notional loss of 40%.

My current take -

BSNL Fiasco has shaken my confidence and its good that it only forms < 5% of my overall portfolio. So, the damage is limited.
I still like to hold on for an year to two as: (a) It’s a product company and has good client base in India and trying to expand in EU/NA (b) The company is a micro cap & upside is more, (Greed) © The company was featured in Aspire Leaderboard 2018 as Leader in CCM space. Note - This may not mean much because they were featured by Gartner in 2017 as well.

Based on how things shape up, I am okay to sell @ loss or load on the way up if things improve. Either ways, it’s my own decision and I am responsible for the outcome.

Disclosure: No recommendation; Holding small amount.

Thanks,


(vij) #206

Poor results. When will this nightmare end.
0d2d6480-ef5b-4b5a-bee6-e8d870c4cad9 (1).pdf (1.4 MB)


(Shrihari) #212

PART 8

This is a continuation of Parts 1-7 of my analysis on this stock. I’d recommend that you read those parts first before continuing ahead.

In Part 5, based on data and analysis, I had concluded the following three points:

1. The stock has been pumped and dumped
2. The promoters are not trustworthy
3. The stock price can go up in the future

I have explained the rationale behind the first two points above, however, have only touched upon the last point on stock price appreciation. This Part (Part 8) is on this point and is required for the sake of completion of my analysis.

Make no mistake, this stock is of poor quality. Any stock that gets pumped and dumped and where the underlying company practices poor standards of corporate governance (by not sharing material information on time with shareholders like non-existence of contracts, revenues being written off etc.) is most definitely a stock of poor quality. This is a fact. It has been explained in detail in Parts 1-7.

A poor-quality stock in rare cases can still provide very good stock appreciation and I will make a persuasive case that this stock belongs to this group of exceptions.

I want to present the following three arguments on why I think the stock price will appreciate in the future: (This will also help retailer investors / forum members who have been quite patient for a very long time)

1. Supply Demand Mismatch
2. Technical Analysis
3. Fundamental Analysis

Understanding Supply Demand Mismatch

Most, if not all retailers already knew and correctly concluded that the stock has been pumped and dumped in the beginning of 2018 itself. See the link below from Quora which has a huge number of upvotes.

https://www.quora.com/Why-is-the-intense-technologies-stock-continuously-on-a-downtrend-inspite-of-good-results

What retailers do not know is that just because the stock has been pumped and dumped, it does not mean that the stock price will not appreciate. Stock price increase is purely a function of EPS growth. If a stock is of a poor quality like this one, valuation multiples could be on the lower side. Yet, the price will appreciate, if EPS growth occurs and technically, demand for stocks exceeds supply.

To understand demand-supply mismatch, lets break down the pump and dump process:

This process has 4 phases, and the last phase leads to a supply demand mismatch as explained below:

  1. Accumulation: This phase started before June 2016 prior to BSNL contract announcement. In this phase, insiders accumulated shares for a long period of time at a low rate. You can check AKG Finvest and UNO Metals share holding patterns on BSE website.

  2. Pump Phase: This phase started on June 28th, 2016 and ended on Feb 9th, 2017. (stock price hit 248 on Feb 9th). During this phase:

  • Non-existent contracts’ (might exist in the future) announcements and non-existent revenues’ booking led to massive stock appreciation in a couple of months’ timeframe.
  • A sense of euphoria is usually seen in this phase and retailers concluded that they need to own this stock at any cost. (Read messages during this time on this forum itself, as an example)
  • Insiders, operators and retailers all contributed to the pump phase.
  • Dumping was started by insiders towards the latter part of the phase.
  1. Dump Phase A: This process started in Feb 2017 and ended on June 1st, 2017. This phase is the first part of the overall dump phase. It is short and leads to a steep drop in stock price (60% drop from 248 on Feb 9th, 2017 to 96 on May 31st, 2017). In this case, retailers were confused as to why the stock is nose-diving and while some of them exited at a loss, many did not sell as they did not understand why the price had dropped (I have already spoken about the poor communication practices adopted by the company towards shareholders in earlier sections)

  2. Dump Phase B and Re-accumulation: This process started on June 1st, 2017 and ended on July 17th, 2018 when the stock price hit 49 on BSE (80% drop from peak). This phase is a slow, long winded, patience-testing, grinding process where the key purpose is for insiders/operators to take back/re-accumulate the shares from retailers, who bought the same shares at a high price in the first place from these very same operators.

Pump and dumps at a smaller scale also occurs here as explained and proven in Part 6 of my analysis above.

We cannot blame retailers for panicking and letting go of their shares as a) They have lost a large chunk of their investment. b) They worry that they may lose more and c) They see other multi bagger stocks appreciating in price and want to rebalance their portfolio making up for the losses.

The important point to note here is: As shares keep getting reaccumulated at lower and lower prices, supply of shares dwindles. Those retailers who want to sell and move on would have already done so. Those retailers who have decided to stick with the stock will not sell. So, there will develop an acute supply demand mismatch. Demand will always exist as insiders and operators have ample funds. Supply will cease as retailers stop selling. I strongly believe that the reaccumulation phase is also over and ended on July 17th when the stock price touched 49 on BSE.

Here is some data to prove my points:

Proof of Pump Phase and Dump Phase A: Already explained in Parts 1-5 above where insiders dumped shares at a high price (or gave it to others like CSE etc. to dump it for them)

The proof of Dump Phase B and Re-accumulation is: The insiders AKG Finvest and Uno Metals bought back shares from retailers at a price of ~80 and have not run for the exit as per shareholding patterns. (I am sure insiders have bought many more shares). This itself points to share price appreciation as insiders holding on to shares and not running for cover is a good sign. (AKG and Uno hold 6 lakh shares as per the latest shareholding patterns)

The proof of supply diminishing is: Look at trading volume over the last few weeks to early part of 2018 or even 2017. Trading volume has been a few thousand in the recent past (even normalizing for being in “T to T” segment) and it was in multiples of 10000 most of last year and early part of this year.

This argument on supply demand mismatch due to reaccumulation needs to be verified against technicals and fundamentals as well, which I have done in my analysis detailed below.

Technical Analysis:

The chart patterns show that the price did not breach ~50 zones which was a strong support area a few years back. The stock most probably will not breach ~50 zones at all. At the current price, valuations give a lot of comfort, as explained below. Further, insiders holding on to their shares bought at a price of ~80, points to the fact that sooner than later, stock price might cross 80 zones. The stock formed a final “base building” in the month of July between 50-60 zones and is further consolidating. The uptrend started on July 17th when the stock touched 49. This uptrend is here to stay.

Fundamental Analysis:

I will detail out my valuation methodology and potential stock price ranges for different ranges of revenues earned. This might help out other forum members. Realistic price targets can be obtained only from sound valuation methodologies. (and not from WhatsApp messages / other online forums, which are trash)

To value a software product company, one good methodology is to use Market Capitalization/Sales multiples.

The multiple not only changes for different software product companies, but also changes for the same software product company with time. The multiple ranges from 1-10, and it is quite difficult to command a 10 times sales multiple unless the product becomes a benchmark in an industry, around the world.

An early stage start-up might get a Mcap/Sales multiple of 1-2. That is because their revenues are on the lower end compared to the costs. (unless they possess a strong strategic advantage (patents, investments from renowned funds etc.))

A company that is close to breakeven can command a Mcap/Sales ratio of 3. This can be higher only if visibility to pipeline of revenues exists.

Valuation of this stock:

As per the last conference call, of the total revenues earned in FY 18, Annual maintenance contracts revenues formed 85% and new license contracts formed the remaining 15%.

AMC (Intrinsic) Revenues Valuations

A few important points regarding AMC revenues:

  1. The revenues are legitimate (unlike historical BSNL revenues which were recognized only for pump and dump purposes as detailed in Parts 1-5 above). These revenues have been earned year over year and the receivables have been converted to cash; therefore, the probability is very high that they will continue to be converted to cash in the future
  2. The revenues are associated with software support, upgradation, answering queries raised by clients etc.
  3. The revenues are generated from clients with good brands; these clients will keep up their commitments
  4. The digital CEM/CCM product is critical to the functioning of the enterprise. The probability that an enterprise will continue to use the product year over year is high as enterprises continue to invest in digital transformation

The question is: What is the valuation of AMC revenues?

FY 18 revenues = 55 crores
AMC revenues = 47 crores (85%)
Consolidated annual costs = 52 crores

Since AMC revenues balance out consolidated costs, to much an extent, a Mcap/Sales multiple of 3 can be applied.

Share price assuming AMC revenues only = 47*3 / 2.23 = 63.

Today’s share price is less than AMC revenues valuation. The price is lower than intrinsic value!

Total Revenue Valuations

Here is an estimation of future MCAP’S/ share prices:

Last year, new license contracts totalled 8 crores. This year, the company could double the revenues fairly easily due to the following 4 possible reasons:

  1. The base itself is low and the company has an experienced sales agent in every region, who should be able to perform better!
  2. As per the most recent concall, sales agents will be provided additional variable bonuses to incentivize performance and generate more license revenues
  3. BSNL contract might become existent finally. This contract which has remained non-existent for the last 2 years will not generate revenues for the first half of FY 19. It will become existent in the second half, as per the company (based on Media release of Q1 FY19 results)
  4. From a qualitative standpoint, demand for products that can enable digital transformation is high. Companies in every country have a digital transformation budget. IT service companies have shown steep appreciation in share price due to digital projects. Every IT service company has rallied in the last 6 months. It is very strange that this company, with an important product that can enable digital transformation and where the use cases for the product are plenty, has not turned around. But the AMC valuations detailed above, give a lot of comfort and any new contract will take the price upwards.

AMC revenues may go up by ~10% due to inflation / new clients’ addition in FY 18.

There are two extreme cases of valuations:

  1. Low extreme case: New license revenues in aggregate coming to 16 crores. (assuming BSNL provides little to no contribution this fiscal year)

This will take the valuation to = (47+ 0.1*47+16) *3/2.23 = 91 per share

  1. The best case is new license revenues going up to 30 crores (assuming half from BSNL and half from other clients)
    The valuation now becomes interesting. BSNL revenues will come at no additional cost. Mcap/Sales itself might go up to 3.5 to 4, simply based on operating leverage at hand.

Valuation = (47+0.1*47+30) *3.5/2.23 = 128 per share

Valuation comes to 147 per share assuming a valuations multiple of 4.

Therefore, in the next one-year, worst case scenario, share price will touch 90 and in the best case will touch 125-150. Today, share price is less than intrinsic value; intrinsic value being, valuations of AMC revenues which is mostly guaranteed and has been seen year over year. (100% genuine and not fake)

If overall market environment is positive, better valuations are possible. If new license revenues exceed my ranges, you can use the methodology above for calculating new targets. However, valuation multiples may be lower given the history of the stock. Reaching the peak price of 248 might take time and we can forecast only once the company has reached 100-150 zones on new targets.

All of the above is based on realistic and logical valuations, using publicly available information.

Summary:

I have given three different arguments to prove that the stock price is quite low. I have repeatedly said that “We can get a much better price to sell our shares” and now I have logically substantiated my stance.

Just like how the arguments associated with a “pump and dump case” are strong and convincing, I find my arguments related to appreciation in stock price equally strong and convincing. These two points are not at all contradictory purely based on logical analysis.

To conclude: @vij, to answer your question: The nightmare has already ended. It ended on July 17th, 2018 when the stock price touched 49. Now, things have turned for the better, and the case above is convincing. Hope other forum members/shareholders find my analysis helpful.


#213

Excellent analysis…but i have one thing to add. This holds only if u believe promoters werent involved in any wrong doing. I u believe they were involved, then its not a buy at any level.
I hold humungous qty…still posting this at my own detriment.


(bullrun1988) #214

In AR-2018 they mantioned that BSNL contract back on track then revenue should increase but Q1 was not that good but expecting Q2 should be good then there could be some price appreciation happen


(James Sebastian) #215

If anyone attended AGM, would you be able to summarise key points observed during AGM ?
@thestocklady, @Shrihari, @hrishikesh @MSSMurthy Did any of you attend the AGM? Would you share your feedback if you attended. Are you all holding still ?

Disc: Still holding and waiting for AGM reviews and Q2 results to make a decision


(Shrihari) #216

@james_kerala

I continue to hold this inferior quality stock with the hope that things might turn around. This is also based on the extensive analysis that I have done and posted, but, I do realise that I am holding on to a stock, that I would never ever buy, if I were to go back in time and redo things all over again (even if the stock turns out to be a multibagger in the future).

I did not attend the AGM; I want to know what should shareholders look forward to in the future, based on the AGM, from others who have attended.

In Part 8 of my analysis, I had mentioned that the intrinsic value of the share is in low sixties and that the share price should not break high forties. Unfortunately, it did.

Now, the question is, should this be a worry given that the stock has corrected ~ 84% from the peak? I don’t know but an unbiased analytical approach leads to the following points:

Why we should not be concerned:

  1. The overall market has corrected much more than expected. This share price correction could be a function of this point
  2. The promoter, keeps insisting that no existing client has stopped using their software. If we choose to believe him, the AMC revenues should be intact in the near term future. So, the stock is more undervalued than before.

Why we should be concerned:

  1. The discount to intrinsic value is way too high. Is there something that we do not know?
  2. The promoters are untrustworthy and it is difficult to believe anything that is communicated to shareholders.
  3. The auditors have resigned again. Last year, in Sep 2017, the company appointed auditors, who were supposed to stay for five years, and who have now left. This is the second recurrence in the last two years. What should we make out of this? What do other shareholders think?


(s) #217

Story of 30 percent of Indian companies…Good at manipulation… and there are operators who conive with these conpanies to swindle and investors who get the raw side of it…


(rajdesai60) #218

At the same Mr Shashtri has inducted her daughter on the Board. If ship is sinking no father will dare to bring in her daughter to ruin her carrier. This indicates the normalisation of BSNL contract and now Mr Shashtri is more confident about company future


(hamed) #219

Any one who is relying on BSNL (which itself will soon become irrelevant) for turnaround is hoping against hope.