Thank You. Provides much needed confidence …will look forward to your updates.
Promoters willing to put in 600 Cr at 90 per share makes this worth a look with CMP less than 70. That they need to shell out 150 cr (25%) up front would mean some alignment of interest with promoter incentive to have a better stock price. Their presentations seem to suggest that they are looking at higher ROCE, debt repayment and so on. Whether it is their real intention or they are saying this to look impressive to market participants needs to be seen. One this is certain - debt reduction is a sure sign of cash flow generation and that is happening. For the same EV if the debt is brought down by 2500 Cr the equity value should go up by 2500 Cr. On a MCAP of <4000 Cr a debt reduction of 2500 Cr can have substantial impact on market price.
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Promoters signing up for warrants @ 50% higher price than current market price is good news. However, this company has a history of equity dilution and they keep on doing it. Also, they are very frequent to create pledge. They did it again before couple of days.
Disc: Invested.
Regards,
Suhag
Yes, this gets very confusing to evaluate the company. Further disclosures filed by the company in the exchanges:
https://www.bseindia.com/xml-data/corpfiling/AttachLive/BF290D02_C73A_4BC0_B3B2_A7C4038C15C7_164858.pdf and
https://www.bseindia.com/xml-data/corpfiling/AttachLive/FE094274_71ED_4BB7_8954_6795DBB5E0FB_160336.pdf
Does this mean the stock price will crash further
I am no expert, but the need for extra pledge might be because the price of the shares have fallen necessitating the need for additional shares to be pledged
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Dolly Khana has posted a blog on Sintex Plastics Ltd
https://dolly-bestpicks.blogspot.co.uk/2018/03/sintex-plastics-technology-ltd-active.html?curator=alphaideas&utm_source=alphaideas
Is it a blog of ‘The Dolly Khanna’ (wife of Mr. Rajiv Khanna) or some imposter?
This should explain the blog:
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Not by dolly khanna. But research is top notch. Many people swear by their picks.
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Nilkamal EV is 2500 Cr and TTM EBITDA is around 230 Cr so EV/EBITDA is about 11.
Sintex Plastics EV is about 7500 Cr and TTM EBITDA is around 750 Cr (Only 3 quarters of demerged results available, so I have averaged per quarter and annualised it) so EV/EBITDA is about 10.
So it does look like its fairly valued now at least on a relative basis. However, One look at all the pledging and it doesn’t give any comfort at all. Over 50% of the 30% promoter holding seems to be pledged. Nilkamal in comparison has 65% promoter holding and has consistently generated positive cash flow. There is no comparison to equity dilution as well between the two. D/E as is 0.12 for Nilkamal vs 1.31 for Sintex plastics. So overall I think we cannot giving similar valuation to these companies. My gut feel says about 40 levels might be fair value here.
Disc: No Interest
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Nilkamal was a deleveraging story mainly on the back of favorable input prices between 2014 to 2016. When its gearing ratio was 0.92 in 2013, there were very few takers. 2017 has been a tough year for plastic companies as the crude prices surged escalating the input cost. Sintex could turn out to be a similar deleveraging play. Company caters to much wider set of industries compared to Nilkamal primarily focusing on growing segments like infra, auto & defense themes, and other govt initiatives like Clean India & Smart Cities. Sintex also has a stronger brand presence globally compared to Nilkamal with higher realization for its products. As far as valuations are concerned, it is a relative concept primarily based upon future potential. Basing entire investment thesis on any single metric may not give best results.
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Out the 110 mn $ FCCBs, the outstanding as on 31 December was 18.5 mn $. Further, 5 mn $ was converted on 9th Feb, so outstanding FCCBs as on date is 13.5 mn $. This implies that ~88% dilution has happened, so the overhang of the FCCBs can be history, as early as Q1 FY18.
Regards
SJ
What about the new warrants they allocated to promoters recently? Won’t they increase the equity base as and when they are converted?
Regards,
Suhag
Yes there will be ~10% dilution on the current share capital, post conversion of warrants. But I don’t think anyone here would mind that, given that Rs. 600 cr will be utilized for repayment of debt.
Regards
SJ
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Moreover it will increase promoters holding in the company.
From Amit Patel’s interview to economic times . They are planning to have 3 new plants in FY19 also looking for acquisitions . I wonder how are they going to fund this.
Can you post link of the interview / article?
It is on the website. http://www.sintexplastics.com/. Under press release . " The economic times magazine interview of MR Amit Patel" .
Under the heading looking ahead .
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