Kellton Tech - Growing IT company


(vikas sinha) #209

As long as they keep growing at similar pace and PE remains the same :money_mouth_face:


(vikas sinha) #210

“Earnings Call” on August 16th, 2018 from 04:00 PM-05:00 PM IST.


(vikas sinha) #211

Q1 results:

YoY:
20% Topline increase
35% Bottomline increase.
No exceptionals, so Margins improved.


#212

Perhaps some should probe the management with tough questions listed above during the concal


(vikas sinha) #213

Previous concall

“Kellton Tech Solutions Limited Q4
and
Full Year FY18 Earnings Conference Call”
May 31, 2018

Views:

  • Capital as Fuel for Growth, is lacking, hence 2020 plan of 2000 Cr looks not possible, as has been said before, QIP was not done. Guidance was only 15-20% growth, which they have beaten by good margin.

  • Overall decent answers, Receivables days they say are just the norm with increasing number of bigger clients

  • Margins have improved, debt reduced by 5% YoY

  • 80% repeat customers, zero bench size

  • Lower taxes due to Trump in US and 7% of revenues (of Europe) via Tax-free Ireland, where they want to focus


(Vilas D'Souza) #214

Given their balance sheet, no institution will subscribe to the qip.

The CFO I think is Mr. Chintam himself who isn’t qualified in finance if my memory serves me right.

Goodwill is an overkill clearly, the net profit margins are not even 10%, Goodwill paid for what? Surprising that none of the acquisition investments failed and needed impairment. Even Warren Buffett made some loosing investments and recognized it.


(vikas sinha) #215

They are infact paying a large amount as Earn-Outs, mentioned in the concall, which is basically a (leveraged) form of financing of such takeovers. These get paid to the seller only when certain performance parameters of the sold entity are met in the years following the sale.
Like they say in the concall, they look for a good cultural fit while buying, which means good synergy in a sense i.e. a business which will be a win-win for both buyer and seller!

About the CFO issues, his LinkedIn profile says enough!
https://www.linkedin.com/in/niranjan-chintam-6057421/
Education
University of Pennsylvania - The Wharton School
Degree Name MBA
Field Of Study Finance & General Management


(Vilas D'Souza) #216
  1. That excess portion above the goodwill is called contingent goodwill. Thats there in the liability side of the balance sheet. U need to read more on contingent goodwill. They need to pay fixed plus the variable portion of goodwill. The variable portion depends on certain kpis. So the actual burden on cash flows is not fully reflected in the Bal sheet

  2. Check Mr. Chintam profile on the website and see if you can spot any experience or degree in finance. LinkedIn is not the best source for all this info.

No wonder the stock like 8k is available at mouth watering pe.


(vikas sinha) #217

Now, you mean to say his LinkedIn profile is fake? Kellton website also lists his MBA from Wharton and a long list of achievements.


(devarshi84) #218

It is but normal for investors to be impatient when their investments are not paying off. The Chintam brothers got a little over ambitious when they decided to announce their 2020 goal.

The effects of fast inorganic growth through tight financing were visible in the last few quarters when receivables days increased and company had a cash crunch of sorts.

On the other hand, after going through a lot of their interviews and concalls I can say this is not the best governed company either. They do not disclose a lot of vital information.

A lot of people term Mr. Chintam as a fake person. This is without proper research. If I’ve invested in Kellton and my money is lost, it is solely my fault as I was the one to go ahead with the investment without proper research.

Imho, Kellton will bounce back only after their pledge is cleared and their receivables are under control. I wouldn’t want the promoters to go with more acquisitions if that means a better governed companies with real cash in hand.

So while I have faith in Kellton based on my research, I am also skeptical if things aren’t as shown or have changed recently. Only time will tell.

Disc: Invested at a higher price but not accumulating/averaging.


(mp bajaj) #219

I don’t know whether I can put this screen here. A site I follow MarketsMojo.com. They have given it 3 Greens.Comments welcome.


(devarshi84) #220

A lot of us follow Markets Mojo but their Green lights are indicators at best. The indicators are based on numbers and not practical logic.

It is true that that Kellton Tech seems like a good value, but it remains to be seen whether it is really a long-termer or just another value trap.


(Shrinivas) #221

Hi all, recently I noticed the promoter holding is decreasing, debt is rising, equity dilution and resignation of previous Chartered accountant. Many red flags.


(devarshi84) #222

Promoter Holding is down by about 2.5%. I would take it as a warning sign but unless it goes below 49%, lets not loose the horses for nothing. A lot of companies dilute upto 5% of their promoter holdings during tough times. Definitely something to keep an eye for though.

  1. Number of shares pledged or encumbered has doubled. but
  2. Number of locked in shares is down from 14.3% to 6.5%.
    Can somebody explain this? I am assuming the bonus issue had something to do with these shares rather than reward investors.

I am assuming, the Chintam brothers had become overly ambitious looking at many small IT stocks in the same segments flying. liquidity crisis and long payments turnover ratios woke them up to reality. Their recent investor concall had this hidden meaning in one of their responses.

I would prefer for them to be a little investor friendly and let the business generate more “REAL cash” before buying more companies and revising targets to be more realistic. Also, a small 50ps dividend will also go a long way in showing that they have money in the bank.

I do not know why their CA resigned and would want an answer on this.


(devarshi84) #223

I just read the 8k miles thread in detail and have similar doubts for Kellton. Kellton is following a similar growth process and promoter holding has been going down here too.

I have no faith in the credit rating agencies of India as their AAA ratings are only derated after a default (What’s the use?) and hence the pledge of Kellton is a big question mark.


(Kumar Saurabh) #224

80% of assets r intangibles , goodwill and receivables built over acquisitions . I work in SMAC area and to some extent understand how these businesses work on operational level. Hope one has enough trust in the balance sheet components . Seeing historical patterns of companies which have been dusted, this is a pure recipient for disaster.


(utsav_garg) #225

Hi, i couldn’t arrive at that 112 CFO figure, I am not very proficient at this and still learning, so if you could please let me know how did you arrive at that figure. And also, to find out capex expenses for particular time period, is there any variable on screener directly or i’d have to dig into AR’s only for that purpose?


(bharat19) #226

It is all done using Screener Export to Excel tool. It adds automatically the CFO of any time duration you need. I did it for last 5 years and it was 112 Cr.

To find out Capex , I usually apply a simple formula.
[{Fixed Assets of (t) Year + Work in Progress (t) year} - {Net fixed assets (t-1) year + WIP (t-1) year} + Depreciation during the Year ]

Screener Excel tool has all the Data , you only need to add your own formula’s and make your own template.

Advise you to go through many of his articles , you will have a better understanding.


(trancePorter) #227

Hi all,
I had this company on my radar a year back when it was at 110 level. Their products and acquisitions looked great on paper. But however, someone I know told me they knew the promoters and they were involved in some unethical business practices which is a big negative for a stock. So I chose to invest in Sonata software which was then available for a price of 170. And I must say I made a wise choice of not investing in this company. Personally, for me integrity of promoter matters a lot. And the way this stock has gone down or not moved in the bull run confirms my doubts. Please do more research on promoter integrity and invest wisely.

Disc: Not invested


(devarshi84) #228

Please state facts to back your statement. Otherwise, it’s not helpful to the reader.

I have read a lot of such posts on the Chintam brothers but facts are usually absent. Just raises the curiosity quotient but without facts.

Stock price definitely speaks the story like you said.