Hi All,
I have listed a few companies which seem to be a cash bargain. Your insights and views are invited. This post has already been posted on my blog http://kiraninvestsandlearns.wordpress.com/2011/02/13/cash-bargains/
Alright â even in this market (with Nifty P/E above 20, well above its historical average of 17.5), there are some cash bargains. What are cash bargains? Prof. Sanjay Bakshi defines them as âA cash bargain arises when the market value of a company goes below the amount of cash and other liquid assets in its possession, net of all current liabilitiesand debt.â I found some companies satisfying this criteria and I have listed them below. I have excluded companies which are burning cash. For example, âPunjab Communicationsâ was one such stock which was on my radar for a cash bargain, but I realised that they were having negative Operating cash flows (and Operating margins) for the past 5 years. Any cash on the balance sheet would soon be burnt. Hence, I have excluded such companies. I have also excluded companies like MTNL which satisfied Cash Bargains criteria, but is a value trap (as Neeraj puts it very elegantlyhereandhere). I have also excluded companies with very high debt like JVL Agro (in this rising interest rate environment, its very dangerous to bet on any company with high debt!) All the 6 companies in the list have low margins, low operating profit and may not have any competitive advantages at all (there are some reasons why these companies have been beaten down by the market). But they have been beaten down so much so that they are quoting below cash I have not researched extensively on any of these companies except for the fact that each of these company financials are in decent order (i.e., they are not burning cash, and have most of the time generating positive operating cash flow). (I doubt though, that something is seriously wrong with âTeesta Agroâ and/or âAmrapali Industriesâ (mgmt problems?), else why would they be quoting as such a tremendous cash discount?). (Aftek, I think is one of K-10 stocks, and hence quoting at a discount?) Do any of you have any idea why these companies are quoting at cash discounts? Do you have a position in any of these companies? As usual, the disclaimer applies. Please do your due diligence before you invest. Disclosure:I have starter positions in Eldeco Housing and Rajesh Exports.
Company
Cashper Share
Debt per Share
Cash-Debt
Current Price
Discount
Aftek
28
9.73
18.27
13.11
39.36%
Amrapali Industries
19.81
0
19.81
6.9
187.10%
Eldeco Housing
187.97
31.75
156.22
138
13.20%
MPIL Corp
93
5
88
63.5
38.58%
Rajesh Exports
250
78
172
131.8
30.50%
Teesta Agro
63.37
3.58
59.79
10.75
456.19%