Details about sector and comparison with competitor TVS Logistic services : (Source : ICRA Credit report of TVS Logistics )
About Sector challenges:
Ability to manage and synergize the large geographically diversified businesses with presence across continents
Thin margins and moderate profitability metrics
High working capital intensity
About TVS Logistics services ltd :
TVSLSL is a third party logistics service provider (inbound/outbound logistics, warehousing and material handling and inventory management). The company which started as a division of TV Sundram Iyengar & Sons Limited (TVS & Sons, [ICRA]AA (Stable)/[ICRA]A1+) in 1996 was hived off in December-2004 as a 100% subsidiary. In March-08, private equity player G S Logistics (Goldman Sachs) acquired stake in TVSLSL, followed by a second round of PE funding in May-2012 when KKR (Kohlberg Kravis Roberts) acquired stake in the company. In September 2015, Tata Capital (through two investment arms) infused additional equity funds. The company provided exits to KKR and Goldman Sachs in YTD FY2017, and inducted Caisse De Depot Et Placement De Quebec (CDPQ). Currently, TVS & Sons and the individuals of the TVS family hold majority stake in the company while CDPQ, Tata Capital and TVSLSL’s employees are the other shareholders. Over the past four years, TVSLSL has expanded its domestic and global presence through several inorganic acquisitions, using borrowings and PE funds (infused into the company). The five largest of these acquisitions are [1] UK based logistics services provider TVS Supply Chain Solutions Limited in Q3FY2010, [2] Rico Logistics Limited in UK during Q2FY2013, [3] Wainwright (USA) in Q3FY2013 [4] Drive India Enterprise Solution Limited, Q2FY2016 and [5] Transtar International Australia, Q2FY2016. Apart from these, the company has several other subsidiaries and joint ventures. Currently, India accounts for less than 30% of the company’s consolidated revenues.
From the above figure’s it’s clear that TVSLSL is far bigger in size (probably the market leader in 3PL). But if you see the margin levels Tiger logistics is leading with superior margins both in operating level and PAT level. In standalone H1FY17 TVSLSL is in losses due to losses making Drive India Enterprise Solutions Limited (DIESL) acquired in FY16. They bought DIESL for 953cr, it has presence in consumer durable segment with 6.5 million sq.ft warehousing capacity.
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Another important tailwind is PM Modis persistent efforts to improve relations with countries worldwide. The image of india has improved dramatically in the last 3 years as a business destination. For a 3PL player the qualitative image of the exporting country plays a very important role. I think TGL has benefited tremendously from this improvement.
TGL has formed a promising higher lows pattern on the charts in the region of its previous support and has also successfully tested its previous support formed 6-7 mths ago. A higher high if it happens would confirm a short term reversal of the trend which would most likely be a precursor to a larger move upwards. Please note that the prices still remain way below the 200 day average and also seem to be closely hugging the 50 day while remaining below it. Equally interesting is the observation that despite the steep correction the 200 day has been moving UP. The 200day in the past has formed very reliable support & resistance levels for TGL and in my opinion remains a key hurdle to overcome.
Best
Bheeshma
Best Logistics Company for the financial Year 2016-17’ award at the National Conference on Cold chain- Convergence and Capacity Building and Awards 2017. The award selection was processed by ASSOCHAM (The Associated Chambers of Commerce).
http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/29a56785-0f20-4fcb-9d6e-f7de914eaeca.pdf
Not sure how much weightage to be given to such awards.
“In 2007, Ernst & Young awarded Mr. Raju with the "Entrepreneur of the Year‟ award. In 2008, Satyam won awards from MZ Consult’s for being a “leader in India in Corporate Governance and accountability”. In September 2008, the World Council for Corporate Governance awarded Satyam with the "Global Peacock Award‟ for global excellence in corporate accountability”.
Satyam scam broke out in Jan. 2009.
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It is a good practice not to give weightage to awards in formulating a thesis. However, awards or any kind of external validation does help in building a brand and positive perception of the company. In a largely unorganized market like logistics it remains a key differentiator to get business in a competitive environment.
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Good to see interest from brokerage houses
Promoter and Managing director Mr. Harpreet Singh Malhotra drawn a salary of 84 lacs ( 11.5% of Net profit) in FY16. As per FY16 annual report his salary from 2016 May is 9 lacs per month i.e 1.08C per annum (10.5% of FY17 net profit).For me it looks very high. Any views on this.
Hi @mmvravindra
The company doesnt have separate CFO. While Ms Benu Malhotra is represented as the CFO in the AR but doesnt receive any remuneration in the capacity of a CFO. The MD, CFO,CMO and what have you for all practical purposes is Mr Harpreet. Its a one man army in a family owned business. So one must evaluate the remuneration given the multiple roles performed.
Best
Bheeshma
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I found the above report over net but could not understand who has initiated the coverage. The report is prepared by an independent agency on behalf of Tiger logistics. I may be wrong here but it looks like the company has initiated coverage on itself.
Hi @mukeshamar
Research and Analytics Division, Value Ideas Investment Services Pvt. Ltd., Mumbai has created the report. Other such reports created by them are
http://www.kamatsindia.com/PDF/Independent%20Equity%20Research%20Report_Final.pdf
The report has been paid for by the company with the primary purpose of providing information to potential investors on the company.
Its website is - http://www.researchandanalytics.in/
Best
Bheeshma
I don’t deny that, investor presentations are available at company website, i was referring to initiating coverage part, there have been instances in the recent past where companies try to showcase their achievements, try to be in the spotlight, given the said agency is not a brokerage house it looks sheepish. Nevertheless i find the story interesting. Tracking the thread and given the size and nature of the company i feel it has substantial amount of key man risk attached with it. It will be very difficult to pass on the leadership and expect same results going forward. I would appreciate your views. I am a rookie and still learning the art.
Thanks.
Hi @mukeshamar
They should hire a proper CFO. Perhaps as the company grows they will. Right now all functions are handled by the MD except HR. I think the focus right now is on sales. Whatever money is made is reinvested in receivables which forms a subtantial part of the assets. I am hoping that as the transport time shrinks after gst implementation so will the collections period. Will have to wait to see how that pans out. They have opened up offices in dubai and singapore recently both important trade routes. Overall i think Mr Harpreet has done a good job so far. I would however love it if the receivables come down to 40 odd days. That would really indicate that the company brand is strengthening.
Best
Bheeshma
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In all the group entities mentioned above Mr. Harpreet singh and Benu are the directors. What is the necessity of running different companies in the same sector (logistics). Will it create a conflit in future?
Being a director in these many companies how Mr. Harpreet allot his time to Tiger Logistics where he is drawing huge money as salary.
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For those following TGL, the stock has formed a “Three Rising Valleys” formation a few days ago which basically means three higher lows.
You could have a look at the following article for more info on this formation
https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/threerisingvalleyspattern_12_2003_v2.pdf
Best
Bheeshma
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Hi Bheeshma
I’m beginning to learn technical analysis. Would you be so kind to confirm or improve my understanding your post?
Point 1, 2 and 3 are the 3 high lows. Point 4 is the highest point in the three valley formation, so the chart gets confirmed if Tiger closes above point 4 (210ish). The target then is 50% of point 1.
Is this correct?
