I agree with @gurjota. It may not be a a great investment for long term investor but it surely can become great “cigar butt investing” due to price mismatch with underlying financials.
Disc : Invested for more than 1 year. No new investments in last 6 months
It would have been better if management had waited for a year to see performance of Textile unit and then planned for Phase-II expansion…Their method of expansion - Huge expansion financed largely with Debt is surely not appreciated by the market
Stock price is not a slave of earning but earnings per share (eps). In Sintex case earnings may go up, but eps hardly goes up because of dilution. It has high chances of going down if interest started hurting.
In case of Sintex, there is negligible interest cost since it is subsidized by State Government (7%) and Central Government (4% for phase I and 2% for phase 2).
Main concern is frequent dilution of equity, increase in debt and going ahead with phase 2 when fruits of Phase I expansion are yet to be reaped. It would have been much better if they had waited for 1 - 2 yrs to see full performance from Phase 1 expansion before going ahead with Phase 2.
Thanks for highlighting - obviously my mistake to not be clear and explicitly mention “earnings per share” for those who’ll take it at face value.
Let me be a bit more clear - “Stock prices should be slaves of EPS growth/de-growth in the long run (assuming earnings are real and a consistent EPS upward or downward trend of atleast 2 years or more depending upon company/promoter history, etc)”
Let me roll back to what you’d mentioned a few months back-
Now if you’ve gone through the Q4 earnings - obviously the company’s performance has beaten your expectations with a higher YoY EPS in Q4 FY16
As for FY17 - I will not disagree that the higher interest cost can be a burden on the company this FY and the EPS may even deteriorate - but the market’s already priced in that poor performance otherwise there is no way to justify the existing P/E of 5.5 (equivalent to a junk grade rating IMHO)
With all the corporate misgovernance / SEBI investigations of Tree House, Ricoh India etc - even they’ve been accorded better valuations.
Simply put - if there is something seriously wrong with the Sintex promoters which isn’t public yet - we’ll all find out soon enough (and I’ll change my mind when the facts change) - but I can’t understand the junk grade valuations of this company.
@basumallick @varadharajanr
If possible, Please share your thoughts on sintex post Q1FY17 results.
See notes about FCCB. NCD as well as announcement of Rights issue…Any idea what Management wants to do with so much gun powder.
Sintex is continuously making the same mistakes over and over again… their misery started with the FCCBs in the last round and now that they have paid it off, they have started yet again. Why do they continuously need to do mindless things is beyond me. I am not tracking Sintex any longer. Personally, I think its a waste of time and effort.
Sorry I have been irregular here - I sold out of sintex at a small loss - was extremely disappointed with the FCCB redux and rights issue - find it strange that the mgmt woudl pump in more and more money in textiles and let go of the advantages in plastics and custom mouldings - which is a 20 % ROCE, 20 x PE business.
Exited sintex at the start of this year after noticing dilution of equity. Company which dilutes equities continuously are not so good for investors in long term
all noted about the management quality; nothing great here and agreed. But i am long on sintex, with a perspective of holding it for a medium term (max around a year or so); key trigger i m waiting for is ramp-up of textile business, first phase of which is completed and was funded with 2% interest rate debt (inr funding, subsidized)
Given it is currently trading at a pe of around 7 and a price band of 70-80; i see a limited downside in short term, with a possible big jump with good growth in textile.
Curious to see how cotton or Cotten blended textile companies will perform with increased raw cotton price.
Hi,
Any followers may please throw some light about the right issue, shall I subscribe it.
Thanks,
Questions on the rights issue:
Knowledgeable people please throw light on this issue.
Thank you!
Amount of liquidity increased is limited here ( ~1 share to every 6 shares). also, price fell till 70. Logically, If price actually can fall till 65 who is going to opt for rights issue? Now, those who opted for rights issue will get those shares @65. I guess allocation date is post 23 sept. So trading of those shares can happen after that only. But ultimately fundamentals will decide the valuation and currently odds looks in favor of sintex who downside also will be limited.
What you said makes sense. Thank you!
Any idea on how the proposed de-merger of PreFab and Custom Moulding Business and issuance of shares in Sintex Plastic Technologies improve shareholder value?
I am not sure how the demerger will affect the Sintex price in short/medium term or how it will affect the valuations of individual entities or their share price on the longer term, but I am getting sick and tired of all these constant rejigs being done by the management.
First, converting debt into equity and diluting equity like crazy and qtrly finance cost has hardly come down
Then, the rights issue
And now, this demerger
To be frank, demerging the plastic and textile divisions does make sense and after the demerger the balance sheets for both the entities should be cleaner.
Today the demerger news got diluted with the rights shares hitting the market and the across the board cuts due to the Indo-Pak tension.
Hopefully institutional investors who are invested in Sintex are doing the calculations right now and we might see a rational and meaningful reaction tomorrow.
(I am invested in Sintex)
Once upon a time I was holding 20,000 shares of sintex in the hope that it
will benefit hugely from the infra sector push by Modi. Over last two years
I got so sick of its maneuvers of constantly diluting equity and insatiable
desire to raise funds via rights etc., I sold my complete holding - at a
loss. Now I have peace of mind and invested funds in stocks backed by
credible management.
IMO, keeping aside mgmt’s antics of continuously diluting equity etc., which, of course, is a major concern, other two very important factors, Price and Business, are quite favourable. Mgmt perception of the market is generally very fickle and changes with business performance and so not that reliable.
I think recent decisions of right issue at 65 and now de-merger are welcome steps in the right direction for the shareholders and will help unlock the fair value of the businesses which I think is far above recent price.
Disc: Invested
Guys, just trying to figure out this demerger news and if it presents as a short term investment opportunity. What I understand is that the company will retain the textile business in the current entity and will spin out the plastic moulding and infra pre fab business into a new entity called Sintex plastics (to be listed pursuant to some approvals)
The company is not as investor friendly as some of the others I follow, but based on the limited info available, this is my understanding of the numbers before and after. Assigning very conservative multiples, I seem to be getting a value of as much as 12k Cr!! I know im surely missing something here. Glad to hear from folks who have been tracking the company for a while now. Thanks!
