ValuePickr Forum

Alphageo - Creating Seismic Waves

Its all about the time horizon. Stock returns are lumpy by nature. The best buys are when the market is down.

Alphageo is down because of the nature of the business. One big contract and it will rebound with gains within 10 days. Nobody can predict when that contract will awarded. Its execution skill is its moat.

I am invested and not selling.

Alphageo is again in lower circuits since 3 days. Is this related to IT raids or some other reason?

Two orders from ONGC received worth 112 Crores. Link to the announcement.

Order size is almost equal to market cap of the company.

The company is highly cyclical, and earnings are bound to be lumpy. Recently the company has moved into seismic services for other mineral exploration also. They also got a small order. One can invest here only with a very high risk appetite.
[Disclosure- Invested]

1 Like

A company with the worst investor relations.

When I queried about their order book few years back, they first told me that the CFO is busy. When I didn’t buy this alibi, they finally verbally told me that it was my decision to buy the shares, and that the company isn’t able to answer any questions beyond what is published in the numbers.

Next minute I exited the stock.

Investors beware

2 Likes

In between they had a PR agency appointed as well. Valorem Advisors. Not sure, if there is anyone now. Disclosure: Invested.

Promoters holding has marginally increased to 45.22% as per Dec, 2019 filing.

Alphageo received another order from Oil India worth 128 crores. Last month also they received an order from ONGC for around 115 crores. In FY 2018 they did a topline of 431 crores with PAT of 55 Crores. Thereafter the topline and profit started decreasing. In Q2-2020, they incurred a loss of 30 crores.
Finalization of these two orders from ONGC and OIL India, it appears that the trend is changing.

4 Likes

Indeed these 2 orders will help lift them financially. Trade Receivables is something that puts me off. They are more than the current MCap.

Check their Sep balance sheet. It’s around 38Cr only. They always have higher receivables in March end which gets reduced significantly by September BS.
Their cash equivalent is around their market cap. :slightly_smiling_face:

2 Likes

@raj1968 Sorry, yeah just noticed. Its interesting that the company is available below its WC (almost). Fy 19-20, till now has not fared well for the company because of the extended monsoon and margins have taken a serious hit. Their entry into the geophysical mapping for minerals might turn out to be a game changer in a long run. Would be glad to see how they perform in next 3-4 quarters. Indian sediments are highly under-explored and mapping, interpretation of data is a concrete part of the process therefore companies like AlphaGeo will be there until they decide not to update themselves with new technologies.
@raj1968, can you give more insights on this business.

The problem with such businesses is availability of orders on a continuous basis. However, there might be some more orders coming in.
Their competitor Asian Oilfields mentioned in their conference call that around 1500Cr orders is up for grabs for seismic players in India in next 6-9 months. Most of them will come from OALP award winners. Asian has won a 570Cr order for seismic survey recently.
Disc: only small position…exited most of it much earlier.

I completely agree with you, it will be foolish to say the we can predict future cash flows of these companies and discount them back. Quality of Trade Receivables itself will cause a hurdle, let alone the inventory and Payables. Thus its better to find bargains (if available)
4th round of OALP was completed last month and ONGC bagged all the 7 block, 5th round to follow. Alpha have fared during the bad times and its tendency to provide services at certain terrains provide a competitive advantage to it. There is also a huge valuation gap between Asian and Alpha though Alpha revenues are almost 2x Asian.
Cumulative earnings before tax for Alpha for last 5 years stands out to be : 264 crs while for Asian its negative 49 crs
If few more orders started flowing in, Alpha might give cumulative earnings before tax equal to market cap in next 3-4 years.

Do you know from which company Asian got an order for that 570 Cr? In the presentation/Press release, the name is not disclosed. I dont know why. But anyways, just in case if there has been management interaction on that front.

I don think quality of trade receivables are a concern here. Since they are either ONGC, OIL India and their history suggests no issues. OALP itself was a big reform, I am surprised the time it took to implement on the ground. Hopefully, now the flow has started.

Disc: Invested.

1 Like

We need to understand businesses like Alphageo. The company is a leader in seismic data acquisition and processing. Around 10 years ago, it was doing a topline of around 30-40 crores, now it is doing a topline of around 400 crores. The earning is bound to be lumpy as orders are large and come at intervals.
The company remained focused in its niche in onshore seismic survey only. In good times, it commanded an EBIDTA of around 35%. Lately, the company is starting to diversify into other forms of Geophysical services for mineral explorations.
Scale of seismic survey orders are increasing. Recently Asian Oilfiled claims to have received an order worth 640 crores on its website. They also declared an order of 570 crores in latest investor presentation on 17.02.2020. Their order book is more than 900 crores with seismic work constituting 56% of the order book.
Alphageo presentation is not informing about order book. However, for the past 4-5 years, Alphageo had a lions share on seismic data work as obvious from the comparision of financial results of these two companies.
Shareholding changes in December quarter is showing sign of things turning better. Promoter shareholding has gone up from 44.93% to 45.22%. HNI individual shareholding [more than 20K shares] has gone up from 3.72 to 4.59%. Looks like informed purchases are happening in the company.

4 Likes

Recently the presentation has been uploaded and the order book was 160 Cr as on December 31st 2019. Post which around 240 Cr orders have been received so around 400 Cr order book can be considered.

1 Like