Majesco Limited - looking Forward


(Kumar Saurabh) #63

One of the best way to seek answer is look for gartner, IDC etc rankings of companies in similar offerings n I remember Majesco is there in top 3 for some of its products. Googling might help


(Whipsaw) #64

Q2 Results:
YoY
Revenue Rs.211.1 crore (FY17Q2) vs Rs.187.4 crore (FY16Q2)
PAT Rs.5.21 crore (FY17Q2) vs Rs. -0.58 crore (loss) (FY16Q2)

QoQ
Revenue Rs 211.1 crore (FY17Q2) versus Rs 220.1 crore (FY17Q1).
PAT Rs 5.2 crore (FY17Q2) against Rs 1.5 crore (FY17Q1).

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/28BCD41D_6CA5_4D58_9E73_BD666937DBB7_154257.pdf


#65

Focussed on improving profitability going forward: Majesco’s MD


(NNaik) #66

So in FY16 out of total income of 26 cr

  • income from operation is 12Cr
  • income from rent is 7 Cr
  • interest in FD 3 Cr
  • profit on sale of current investment 5 Cr

Other income seems too high

any idea on what this rental income is about


(Parag) #67

I think the leading players in the US are buying niche player. Guidwire has bought 2/3 companies this year and last being ISCS. ISCS has a cloud based insurance business and apparently Guidewire paid $160 million to buy at and it has a revenue around $20 million (http://seekingalpha.com/article/4035664-guidewire-greenfield-opportunities). DuckCreek has bought few companies last year, so Majesco (assuming it is 3rd player in US Insurance industry) cannot leave much behind the competition.

I am hesitant to use price to sales as a valuation matrix, but it look Majesco is Sales to price is around 1.2 to 1.5, which is not expensive.

On the other hand, Mastek has bought an IT company in US. It has paid $30 million for the company and it’s revenue is around $30 million. The company is a traditional company which rely on staffing and offshore development to earn money (non niche)

Considering that Majesco has domain expertise in insurance and many products catering to the insurance industry with 150 + customers, even someone has to buy it, the current price is quite compelling. From the private buyer’s perspective it looks compelling.

In my view, Majesco will go for smaller acquisition due to no QIP. The management has an excellent reputation for buying companies in the past. With the new acquisition- even if smaller- the story may change.

By the way, management has said that FY18 will be year of profitability so stay tune (and hope)….


(bbbhutra) #68

HDFC report on Majesco. It appears next 1 year might continue to be a struggle for the company, road forward would depend on if they are able to optimize the deal with IBM. Though as much as I am tempted to average at the current price, I will look to wait until cloud clears further. Without the QIP, I do not see much bullets for action in the next 12 months. Worth holding, since it might get acquired in worst case scenario in 3-5 years.

http://www.moneycontrol.com/mccode/news/article/article_pdf.php?autono=8411241&num=0


(reachvk) #69

Agree - we have to wait for at least another year with no major gains. Even I am tempted to average at current price but will not. Am already holding a decent quantity at an average price of 483. For now it’s wait and watch. Wondering if the new H1 visa norms will make things worse for Majesco.


#70

Considering they are an IT product company, H1 B visa shouldnt be a big issue. Traction in gaining orders and ability to be on top of trends while working closely with their customers should be the key to future growth.

Seems they launched two new products and stock market is celebrating it as if its an ANDA filing: http://economictimes.indiatimes.com/markets/stocks/news/majesco-climbs-12-on-launching-two-insurance-solutions/articleshow/57406011.cms


#71

Majesco bags an order with a Tier One insurer in the US. This is good news - http://www.businesswire.com/news/home/20170323005204/en/Tier-Insurer-Selects-Majesco-Strategic-Partner-Modernization

As per Businesswire:

"As a part of the agreement, the insurer will leverage Majesco’s enterprise consulting services and the business transformation framework, application development & management services and the technical reference architecture, and testing services with the automation test framework and testing repository to support the vision laid out by the company for their underwriting and policy platform.

The insurer has been in business for a significant time, working with individuals and businesses to provide innovative insurance solutions for niche market segments. The needs of these markets require the ability to deploy new products quickly to meet the unique needs of these niche markets."

Need to understand the nature of the deal and revenues accruing through this deal.

Disclaimer: Invested and holding


(niravacharya) #73

Latest report from HDFC SEC looks promising…
http://hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3022106

Disclaimer: Invested and holding


(sanketkulkarni1987) #74

Honestly, i will not read too much into HDFC’s report. To me their target price of approx 20 times FY’19 earnings still looks very high. The business has not performed at par with expectation (reasons can be plenty). To me, Majesco needs to show an improvement in performance for next 2-3 quarters consecutively for the market to increase its confidence in the stock. Till then price will keep fluctuating between 330-400 band and may even go below that if performance deteriorates …

For HDFC, they will just come with a new report 3 months later with revised target price of 500 Rs (which they have been doing consistently by revising the price from 900 Rs plus to 500 Rs plus so far)

Disc: Invested. Hoping for the best.Next 2 quarters is what i will see. If mediocre performance continues, then exiting will be the best option for me


(niravacharya) #75

I agree.

There are a lot of negatives that are prevailing. However, here a list of opportunities that can be worth considering:

  1. Partnership with IBM Watson, which can single handedly puch Majesco off the limits as 90% of top 100 insurers are on IBM.
  2. Once a client comes on Majesco platform, it is highly unlikely that they will change platform without any serious issue, as switching costs and time impact is high. Also, it is easy for Majesco to come up with features that is requested by clients to meet their requirements.
  3. There are a lot of Tier I & Tier II companies still on old systems, which is still untapped opportunity.
  4. Insurance business is existing since old ages and will be existing for coming future. Growth of business can be subject to population rise, inflation, number of assets to be insured for each person, etc. Hence, growth will be around 5-10% for perpetual time. It will be only market share game after a certain growth globally. Hence, having a product suitable for insurance business will also exist. The reason for such logic is to bring out the point that once a revenue stream starts it will be remain locked and will increase only based on above parameters. This is exactly supported by quarterly results in last 4 quarters. i.e. revenues are more or less constant, only afftected by currency fluctuations, taxes, one time costs, etc.
  5. Since, Majesco is product company, H1-B visa will have minimum / negligible impact on it.
  6. Once Brexit is actually over and stabilises, UK revenues will be stable based on actual GBP currency rates.
  7. Re-insurance is another leg which will always exist.
  8. Downside seems protected around 300 as EV/Sales will be less than 1 for FY18E, as anything less than 300 will result in better risk rewards ratio.

In spite above opportunities, downside risks are:

  1. Slower growth in new deals.
  2. EPS will not show any growth till sales grow beyond breakeven point of approx 175 million USD.
  3. No major MF / Investor except Ashish Kolecha holding the stock.
  4. No acquisition for inorganic growth.

Disclaimer: Invested and Holding.


(reachvk) #76

DSP Blackrock Microcap Fund has a stake in Majesco. It has Vineet Sambre’s ok and that’s a big positive. I would believe that below 330 this is a bargain.
Disclosure: Invested


(niravacharya) #77

Majesco USA Results are out.

Shows signs of upcoming opportunities, however it is yet to show signs in profits.
However, EBITA Margin jumped 500 bp, seems it is right at the point of break even.


(niravacharya) #78

Majesco Indian Results are out.

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/1702ac00-638c-4b15-840e-92423b4fb7f2.PDF

There is a good turning of financials with Profit rising 107.2% YOY.
Management has clarified why there was a sluggish performance in FY17.

Also there are articles today on moneycontrol.com also for “HOLD” recommendation.
http://www.moneycontrol.com/news/business/stocks-business/remain-invested-in-majesco-sharmila-joshi-2274549.html
http://www.moneycontrol.com/news/business/stocks-business/hold-majesco-says-rajat-bose-2274555.html


#79

Results don’t look great as PAT growth makes little sense. They have high operating leverage so revenue growth is the most important thing to watch and here they have faltered. Surprisingly, their employee costs declined a lot. Have they fired US staff of the merged companies?


(niravacharya) #80

HDFC SEC Report
http://hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3022535


(Anandca09) #81

Sir should it be compared with Guidewire results listed on NYSE and a competitor of MJCO.


(niravacharya) #82

It can be compared but it will make sense only when revenue picks up. If revenue pick-up is very slow (as it is from last 7 quarters) there is no point of comparison.

However everybody is saying that it is 70 - 80% discount to guidewire. You can read all Majeso research reports from ICICI, HDFC, IndiaNivesh, etc.

But if revenue picks up we will have a good move from rerating and growth in revenues.


(Anandca09) #83

Insider buying in company … I think co has good potential and management is confident about it

http://www.conferencecalltranscripts.org/4/summary/?id=3820560