MPS Ltd

Stock Opportunities Not-so-Hidden Gems
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There are some important presentations at the very end of this page including the latest conference call transcript:

http://www.adi-mps.com/Investors/InvestorsOverview.aspx

There are few points which I missed while listening to the transcript:

1.The management thinks there is significant scope to grow within publishing itself because:

a. There is considerable cost pressure on publishers. Those who were doing work in-house are being forced to outsource now.

b.There are only 5-6 players globally who do business of 150-200 crore and hundreds of players doing 5-10 crores. Hence, scope for consolidation.

c.More and more legacy content is being digitsed.

d. A lot of new content is being generated out of non traditional places like China in journals. Journals is a strength for MPS and this content is being routed through its clients.

2). MPS team in rich media is upgrading itself and building abilities in audio and video.

3). MPS is evaluating acquisitions possibilities within publishing services to widen its offering base

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Hi Bagdu,

Yes, the links have a problem. when you copy paste there are - between aords which have to be removed for the link to work.

For example thishttp://www.digitalbookworld.com/2012/ten-bold-predictions-for-ebooks-and-digital-publishing-in-2013/ has to be converted to this

http://www.digitalbookworld.com/2012/tenboldpredictionsforebooksanddigitalpublishingin2013/

Like-wise for other links too.

Yes, glassdoor holds good potential for researching such sectors

Cheers

Vinod

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Sorry,its still not working…let me figure out…

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Hello Ayush, very interesting find, just read the whole story.

@Bagdu- your research is simply superb, the way you organized your thoughts and found suitable tools for validation is amazing! Though I used glassdoor to check on my current employer before joining, it did not occur to me that it could be a valuable investment research tool.

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45

Even though MPS and Repro differ in the businesses, they are essentially in the same sector. Repro also offers good value just like MPS. Their topline and bottomline is more than that of MPS and it showing good growth as well in the last few quarters just like MPS has. Dividend yield is also good and is all set to increase this year end looking at the increase in its numbers… Infact I feel the board of directors of Repro are more experienced with a good track record than MPS…

Why would one chose MPs over Repro is the dilemma im in…

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@Binu thanks man! see page 11 of this report: http://www.iimpact.net/2012/04/11/1977/

Nishith Arora is associated with this NGO through his alma mater. He visited the kids with his family. How many high flying CEOs take time out to do this earthly stuff? This was not a PR exercise, neither is it highlighted in any corporate newsletters or Annual report as CSR. This is what inspired faith in management. When I first invested, i knew there was tremendous undervaluation but had a doubt whether this guy will share that value with me? Most of things that we know now, were totally unknown a year back.

Most of the time I have seen on forums people hairsplitting on undervaluation disregarding ethics. But as Madhusudan Kela says: More important than ‘kitna paisa ayega?’ is 'Paisa ayega ya nahin ayega?

I had looked at both MPS and Repro before going for MPS. They both provide services to book publishers. Similarity ends there.

Repro provides printing services. Its only competitive advantage seems to be that it is the largest such player in India. Nothing prevents anyone else to buy a better and more automated printing press in a different corner of the world and beat it. It seems like a services company but actually is a manufacturing company that manufactures books. China exports 10 times the number of books that India exports. I had gone through the conference call transcripts of the company and it did not inspire much confidence in its abilities. 23% RoE is not sustainable in this business. Management is looking at developing book cities and planning to write white papers to convince state governments about the concept. That seems more like a real estate play. India has the least efficient paper industry, we have expensive power and we don’t make our own printing presses. We might have cheaper ink.The industry itself is declining.

Its a buggy whip business and the best buggy whip ecosystem is in China. Even Indian state governments are giving away laptops and tablets not free books anymore. The pace of decline in printing might be sudden and surprising once RELIANCE 4G starts.

Repro’s Surat press has some tax exemptions, 50% of which will be gone in a year and rest in next 5 years. I see a lot of risks and no competitive advantage that Repro has.

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47

@Binu thanks man! see page 11 of this report: http://www.iimpact.net/2012/04/11/1977/

Nishith Arora is associated with this NGO through his alma mater. He visited the kids with his family. How many high flying CEOs take time out to do this earthly stuff? This was not a PR exercise, neither is it highlighted in any corporate newsletters or Annual report as CSR. This is what inspired faith in management. When I first invested, i knew there was tremendous undervaluation but had a doubt whether this guy will share that value with me? Most of things that we know now, were totally unknown a year back.

Most of the time I have seen on forums people hairsplitting on undervaluation disregarding ethics. But as Madhusudan Kela says: More important than ‘kitna paisa ayega?’ is 'Paisa ayega ya nahin ayega?

I had looked at both MPS and Repro before going for MPS. They both provide services to book publishers. Similarity ends there.

Repro provides printing services. Its only competitive advantage seems to be that it is the largest such player in India. Nothing prevents anyone else to buy a better and more automated printing press in a different corner of the world and beat it. It seems like a services company but actually is a manufacturing company that manufactures books. China exports 10 times the number of books that India exports. I had gone through the conference call transcripts of the company and it did not inspire much confidence in its abilities. 23% RoE is not sustainable in this business. Management is looking at developing book cities and planning to write white papers to convince state governments about the concept. That seems more like a real estate play. India has the least efficient paper industry, we have expensive power and we don’t make our own printing presses. We might have cheaper ink.The industry itself is declining.

Its a buggy whip business and the best buggy whip ecosystem is in China. Even Indian state governments are giving away laptops and tablets not free books anymore. The pace of decline in printing might be sudden and surprising once RELIANCE 4G starts.

Repro’s Surat press has some tax exemptions, 50% of which will be gone in a year and rest in next 5 years. I see a lot of risks and no competitive advantage that Repro has.

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MPS has an advantage of being in a niche space doing away with all the publishing content and inventories; but those are quite strong words against the Indian publishing industry. After all India is the 3rd largest English language publisher in the world. India having a long way to go in the education space Repro can grow with it too. Estimates about the publishing industry could be made by computing the growth in the education and institutes. Also Repro has a good order book and is very upbeat on Africa which is a long way to go as well in the education publication space.

http://www.firstpost.com/living/good-news-unlike-west-publishing-industry-growing-in-india-620000.html

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Ya considering long term growth there is more room for MPS than Repro.

Do u know any similar companies like MPS doing business in Europe and US? So we can study their growth trajectory and their companies. It would help us in knowing the business margin and prospects going forward in this sector.

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If you follow the thread properly, and look at the links referred above you will see that there are similar companies but none of them is listed on Indian Stock Exchanges

Regarding your other point about growth in publishing in India, there is growth but publishers elsewhere can open their own captive operations in India. What is it that Repro has that it should get repeat and new business and not the other players? Anyways, hope its clear that MPS and Repro are in different league. I have nothing further to add on Repro and it can be discussed in its own thread: http://www.valuepickr.com/forum/not-so-hidden-gems/72787417

Here is another nice discussion of successful entreprenures in which Nishith Arora participated.

www.educomp.com/DataImages/news/img.pdf

Those who read will find it interesting.

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Thanks for the link.

Certainly clear that they are in different leagues. Well, MPS has all the right ingredients to a value company for long term investing.

Keep us updated of any new links or information u come across.

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Hi Vinod,

Yes, MPS is quite an interesting story. I agree and feel that after making the co super efficient, the promoters may sell out at a good price.

Please forward me the links, unable to open them.

Ayush

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Hi,

I had a look and attended the last quarter con-call. At that point i wasn’t really convinced on how good the business model was.

But seeing, the dividend i had a look again at the last 2 qtr con-calls. There is an interesting comment which Nishith makes, he says that since MPS and publishers work so closely, god forbid if MPS was to shutdown, most publishers would be in major trouble for printing their books. Considering that there are just 7-8 large publishers this is a veryinterestingcomment.

Can this be a reflection of high switching costs (courtesyPat Dorsey)? And if that is there then MPS can continue to be a very good play with a good moat.

regards,

saurabh

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Hi Ayush,

Let me try posting the links again

http://www.sourcingnotes.com/blog/holiday-season-cheer-for-publishing-outsourcing

http://www.digitalbookworld.com/2012/m-a-in-publishing-technology-heats-up-more-acquisitions-to-come/

http://www.digitalbookworld.com/2012/ten-bold-predictions-for-ebooks-and-digital-publishing-in-2013/

http://www.digitalbookworld.com/2012/why-publishers-dont-like-working-with-start-ups/

Hi Saurab,

Its the same question in my mind. Is there any moat. Is this digitisation something which can be done by anyone with a BPO setup?

Yes, they have relationships, but looks like there are any many cos in this business.

Cheers

Vinod

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Thanks Vinod! this time all the links are working.

For knowing more about the scope of the activities of MPS, go to books.google.com and type: “MPS Limited”.

Relationships are an important competitive advantage for MPS. Once you have had a good experience, what will make you choose a new company: Cost, quality, stability and better technology. There is no obvious reason why a competitor will have an advantage in the former three. Technology is something that nobody can predict. There might be a technology in future that may allow an individual to write, publish and monetize his own book and gather feedback via social media for topics of leisure and philosophy.

Specialized and educational topics will require inter-mediation by service providers for a long time to come since it involves complex workflows, huge resources and mild payoffs. This is the forte of MPS given their known dominance in journals and deduction from the above Google search.

The books of leisure and philosophy might also evolve and demand rich media which MPS is learning as are its competitors.

“There is an interesting comment which Nishith makes, he says that since MPS and publishers work so closely, god forbid if MPS was to shutdown, most publishers would be in major trouble for printing their books. Considering that there are just 7-8 large publishers this is a veryinterestingcomment.”

This statement exemplifies the importance of Vendor stability for the publishers. MPS has a rock solid balance sheet. I doubt if its competitors have that.If a Reader Digest files for bankruptcy one cannot be sure how many Vendors it will take along. Like in the commodity world, one who is already strong will keep on getting stronger and small guys will disappear. There are 100s of them in this market.

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56

Those were very interesting links indeed. Though I had seen the Video and read the top ten trends article, was not aware that Aptra got acquired. The article on M&A is hugely insightful. The PPT is scary and my first thought was: get out of this mess, let MPS be acquired at rosy valuation. Fast.

Since Aptra, with 5000 employees, was acquired for $144 million, MPS with its real estate and technology assets should get valued at about 500 crores. 2.5 times its current market cap.

But selling out would be foolish.Given the opportunity that MPS has. Some key statements from above article on M&A:

“People looking from the outside in may think that this industry has a low barrier to entry, but the biggest barrier to entry here is the relationships.â”

Each of the thousands of books published with MPS’s help is a relationship.

“Sources at major technology vendors like Aptara, SPi Global and others we spoke with reported that their clients were asking them to take on more services in the hopes of having fewer vendor relationships to maintain.”

âIt used to be that one vendor would be specific for this type of content, but because itâs all the same kind of content being pushed out to the various vendors it makes sense to push content to one place instead of multiple vendors,â

"The attractive areas within BPO would be those where a secular trend is driving growth. All content moving to a digital construct is a fundamental driver.â

“the greatest need, the most-pressing factor in the drive to acquire might be technology: the threat of being subsumed by a company with better technology; of losing clients who want different or more technology; or lacking the technology talent to build the tools that will bring in business two or three years from now”

Slide 5 is the essence of the PPT: Paper to digital, passive to interactive, individual to social, consumer to producer

1 Like
57

Hi,

Latest update on MPS

http://www.dealcurry.com/20130513-MPS-Acquires-Element-LLC.htm

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Element, LLC announces partnership with Gantec Publishing Solutions, LLC
Element, LLC today announced the formation of a business partnership with Gantec Publishing Solutions, LLC. The relationship will allow the company to deliver effective, efficient print and electronic product development solutions in response to changing market dynamics, global business opportunities, and the accelerating use of technology in markets the company serves worldwide.

Gantec is headquartered in Chicago, Illinois with sales offices in Madison, Connecticut. The company operates two development facilities in India, located in Chennai and Hyderabad, with a third business unit located in Singapore. Gantec has served the global media market since 2003, notably in the education, instructional materials, and trade market sectors. The company produces and prepares content and products for use in print-based textbooks, publications, journals, magazines, and catalogs, and provides development services for high quality web-based and e-learning products. Gantec offers extensive data management services including database publishing and asset re-use solutions, data conversions, and content structuring applications, among others.

Matthew Reynolds, Elementâs Chief Executive Officer, noted âAchieving this strategic goal concludes an extensive effort over several years to explore, test, and deliver the most effective and responsive global development solution possible to our customers. The combined expertise, experience, and capacity resulting from our partnership with Gantec will allow Element to serve clients with greater agility, diversity, and options for large-scale, end-to-end product development solutions. We are confident this partnership will enhance and sustain Elementâs status as a first choice, best-of-class development partner to our clients around the world.â

Ramana Abbaraju, Chief Executive Officer of Gantec, added âThe vision and personalities of the two companies were very similar and apparent from the outset of our relationship. Both organizations are extremely client-focused, and the resulting culture and philosophy of the partnership moving forward reflects the business model our prior successes were built upon separately. Our collaboration in recent months has delivered great results, and this formal integration will allow us to manage and invest strategically, maximize efficiencies, and leverage the combined expertise and core competencies of the various development units operated by the two companies separately. We anticipate a very favorable response to this partnership from the marketplace.â

Gantec will function as an operational unit of Element in the U.S. marketplace. Internationally, Element-Gantec will provide premier, comprehensive development solutions that meet the diverse and changing needs of our clients and their markets around the world.

Element announces expansion to Higher Education Market

Element Expands Editorial

Element Markets Integrated Project Management Services

Element Staff Adobe Certification
Achievement
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Result out

http://www.bseindia.com/xml-data/corpfiling/AttachHis/MPS_Ltd_270513_rst.pdf

Sales down 10% compared to Q3FY13 but up 9-10% compared to March Q last yr.

EPS for the year was 18.96 compared to 6.46 for the 15 months ended March12.

Element deal was 10Cr.

There is no comment on the dividend. I think ppl were expected big dividend. That could be a disappointment. But I think they can not pay big dividends every Q. It was only through the sale of assests that they could fund the dividends last year. Lets see what happens tomorrow.

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Hi Rohit,

The result seem decent to us. I don’t think the dividends were due to asset sale…they were from income from normal operations.

Most probably the div in Q4 has been skipped due to the acquisition they have done. If one goes through the presentations, concalls etc, the mgmt seems to be walking the talk and with this acquisition etc, may be they are preparing for growth.

Ayush