Gillanders arbuthnot

Stock Opportunities
1

GILLANDERS ARBUTHNOT cmp 113, market cap 242 crores.


This company is a conglomerate of various businesses which consists of

Tea, Yarns, Construction, Marketing, Waldies, Property, Power Plant.


CONSTRUCTION:

Modern India Construction Co. (MICCO), a Unit of Gillanders Arbuthnot & Co. Limited (GACL) , Kolkata, belongs to the KOTHARI GROUP. MICCOhas expanded in the last 18 years to become one of the leading engineering and turnkey contracting company in India. MICCO's expertise incorporates absorption of Basic Design of various Plants from the World Leaders of the same and translation of the design into a properly detailed engineered plant.

FABRICATION DIVISION at Sodepur makes Tanks, Pressure Vessels, Chimneys, Bunkers etc., -Heat Exchangers, -Building & Technological Structures, -Electric Arc Furnaces and Walking Beam Furnaces, -Power Winches, -HT & LT motor frames, -Ship Bulkhead modules.

TURNKEY/EPC DIVISION is involved with Blast Furnaces, Reheating Furnace, Desulphurisation of Hot Metal, Coke Oven Battery, Skin Pass Mill, Cold Rolling Mills, Continuous Galvanising Lines, Gasholders, Water Cooling Systems in BF & LD, Material Handling Plants, Structural Steelwork, Piping.

MICCO has an well-equipped Design / Drawing office at Kolkata, equipped with Latest AUTO-CAD manned by qualified Engineers and Draughtsman. MICCO is doing Mechanical, Piping, Structural, Electrical, Instrumentation, Automation drawings for Consultants and Technology Partners like DCL, EIL, TPE (Russia), MECON, DASTUR CO., CLAYTON WALKER (UK), IHI (Japan), KUETTNER (Germany), BRICMONT (USA).

TEA DIVISION comprises of tea gardens measuring a total grant area of 5874 hectares and has various tea estates in Betjan, Tengpani, Jutlibari in Assam and Gairkhata in Doars and Taipoo in Bagdogra.

WALDIES It is one of thelargest manufacturers of Lead Oxides and Stabilisers for PVC Industry. Its factory is located on the bank of River Ganges around 14 Kms from Kolkata. It is the most respected name in the industry and is well known for its high quality products which are unmatched in India.

YARN DIVISION produce varieties Yarn for Domestic and Exports market. They have two spinning mills known asGIS Cotton Millat Champadany, near Kolkata, West Bengal, India and another one asNorth India Spinning Millat Ahmedgarh, near Ludhiana, Punjab, India.

MARKETING DIVISION The company is active in marketing various products connected particularly with Building Industry mainly in Southern and Western regions of India. They market various products like Supercemâpaint related brands, CICO â water proofing compound, Tapecrite, and various other numerous brands. They market 3M products in Tamilnadu.

PROPERTY DIVISION owns and rents Gillanders house at Netaji Road in Calcutta and POWER DIVISON has a 6.5 MW co-generation power plant at Akbarpur in Dist Sangrur Punjab.

FINANCIALS:

CMP AROUND 113, MARKET CAP AROUND 242 CRORES, TOTAL DEBT IS AROUND 211 CRORES


YEAR

04

05

06

07

08

09

10

Q1FY11

SALES

51

240

258

269

408

487

613

158

NP

-1.64

2.81

4.86

5.93

14.6

16.2

25.3

11.3

Before jumping the gun about FY 11, one needs to consider that they report losses during March quarter due to lacklustre performance of tea division. But overall the trend in sales and profits seems to indicate good growth performance. For Q1 FY 11, the company reported sales of 158 crores against 110 cr in Q1 FY 10 and net profits of around 11.3 cr against 4.2 crores.


For the first quarter, the textile division has shown a smart uptick in sales and profits and this division looks like a good growth driver going forward besides the tea division.


DIVIDEND declared for FY 10 is Rs 5. (for stock before it went ex bonus)

PROMOTER HOLDING IS AROUND 68.62%, NO PLEDGING.

STOCK IS AVAILABLE CURRENTLY CUM BONUS WITH ONE SHARE FOR EVERY TWO SHARES HELD.

TECHNICALS: (before stock went ex bonus)

Here there are two different interesting patterns which I have posted on theequitydesk.

First is an inverted head and shoulders pattern on long term charts where breakout levels are around 180-190, and a break above these levels should target much higher levels.

LINK--http://www.theequitydesk.com/forum/forum_posts.asp?TID=2860

Secondly on the daily charts it has formed a bullish cup and handle pattern, again breakout levels of this are around 180-185. Link http://www.theequitydesk.com/forum/forum_posts.asp?TID=339

Gillanders seems to be a combination of deep value cum growth play.

DISCL: I OWN THE STOCK.


2

The September quarter numbers for this company are out and quite encouraging.

Sales 178 cr vs 146 cr(q2 fy 11)

Np 19.45 cr vs 14.5 cr

Half year figures for Sep 2010

H1 FY 11 sales 338 cr vs H1 FY 10 sales 258 cr

NP for H1 FY 11 at 30.82 cr vs 18.7 for H1 FY 10.

Among all the divisions of the company, the textile and the engineering divisions have done very well with tea and Waldies being stable.

On charts, the stock has last week posted its all time high and retraced to around 128-129 levels. This is one stock where technicals and fundamentals are very clear and looks excellent for the short to medium term.

It has broken out of short term cup and handle pattern discussed in the write up and from the long term inverted head and shoulders pattern.

3

Because of some fire accident , machine break down and general slowdown this company cannot product good results last year and the same is reflected in price. AFter looking at first quarter results looks like they are back on track.If they could give dividends like before , Ibelievethis is a good company to buy at CMP.Inventories , receivables and debt are going downdards ( even though marginally)

4

seems they are back on track .

Net profit of Rs 15.50 crore in the quarter ended September 2012 as against net loss of Rs 1.67 crore during the previous quarter ended September 2011. Sales rose 8.60% to Rs 189.87 crore in the quarter ended September 2012 as against Rs 174.84 crore during the previous quarter ended September 2011.

EPS of 7.22 against -0.81yoy. Textilebusiness seems to make loss and they are back to profit now.Remaining sectors are flat to negative.

5

Whats the point in producing good profits, if its used for just financing working capital? The best use of accruals is to invest in productive capacity, then to trim debt, then to be just kept liquid for financing future known commitments, and then to build inventories and debtors. For some strange reason, they are not so keen on trimming debtin spiteof the fact that their debt burden is so high…some companies simply believe in using debt to the hilt.

I had asked them a question at this year’s AGM about whats the rationale behind keeping money locked in mutual funds and keeping high debt at the same point of time. In reply, I was told that its done to maintain the relationship with the bankers. The problem lies with their capital structure, and not so much with the overall operations.

See, the company has been able to stage a smart turnaround on the back of the tea business. Tea division has been financing the losses in textiles business. And the company is only putting money in textiles, and that is what isagonizing. Tea, along with MICO, has been the cash cow all this while. And the company is not paying due attention to them…

6

Vivek Bhai, Now a days I am seeing many ads from Gillander for jobs on Job portal in their MICO division.Hope in future quarters MICO will show results.

7

Vivek Bhai ,

"just kept liquid for financing future known commitments, and then to build inventories and debtors. "

I was of the impression that sales should increase with out much build up in inventories and debtors.Could you please clarify.

8

Valuepick guy recommended this today

http://value-picks.blogspot.in/2012/12/gillanders-arbuthnot-coltd-buy_29.html