Very disappointing result… as always… this is the reason why promoters % not gone up for long time…
The repeated disappointing results indicates that the seemingly positive changes expected in last 3 years (since the initiation of this thread) did not work (new products, supposed direct marketing, international growth etc.). Listing on NSE , regular conference calls and publishing of concall transcript etc also in reality didn’t improve corporate governance. In summary, almost all risks listed in the opening post are playing out and positive triggers still remains as hope.
That explains market cap degrowth. If promoters were keen to grow holding they could have gone for buyback without promoter participation instead of dividends.
Learnings: 1. First see triggers playing out even if some potential gains can be missed out. Never buy on hope.
- Give utmost importance to potential red flags if some one unearths. For us individual investors 20-30 good stories are sufficient from all investible universe.
Learn what and whom to ignore.
What could you have done differently without doing Forensics
Written down on a piece of paper- what exactly company does (in the simplest way - like u explain a 80 year old or a 5 year old)
Who are the other players who do this work. What is their margin profile
Ask yourself, Why did the story suddenly emerge during a Bull Market. What was the company doing all this while. And if it is such an important change, why are senior investors not buying (Dont talk about the Singapore investor…We all know what has happened to his Kridhan)
Check R&D Spend done in previous years to judge if indeed company had spent something to develop a great technology
What hint management had given in earlier Annual Reports. Suddenly stock started running in one year, while there was no mention of any strategic plan or effort or new business in earlier year’s annual reports
And stay away from stocks of people who continously do Pump and Dump. You know who I am talking about
The results for latest Q4 looks less attractive by the write off of bad debts .I feel that the management should have disclosed this position earlier and should have made adequate provision .
When the market had reacted to this unexpected development and the price of share crashed I have added a good quantity to my existing one .
My optimism on this much debated stock is due to the following reasons.
1.A product company which is finding difficult to get traction in sales available dirt cheap at around 5 times EBIDTA .
2.Has been able to reduce losses consistently for last three years and now is into profit mode despite the write offs .
3.I sense I conviction in the words of the promoter that they have put their entire life (into this venture) and they are in the right space at the right time and in the right position to en-cash and Ensure to live their dreams.
4. I do not have much to loose as the share has reaches its bottom if not near bottom. On down side my entire investment will be written off which I am prepared to take the risk as I am others comfortable in my other portfolio stocks.If the upside materialise as expected the upside will be good.
Sitting on my holding .Will wait and see.
@MSSMurthy The analysis that you have posted has numerous flaws, which have been listed out point-by-point:
EBITDA is not an accurate parameter to judge results. EBITDA does not take into account “Other expenses”, which is high. In conf. calls, it has been mentioned that a) expenses from certain subsidiaries are recorded in other expenses (like expenses for the regions Europe and Middle East; read last concall’s transcript) b) Company has written off revenues, which should be taken into account given that receivables continue to be high and that the company has reversed revenues recorded in the past. We cannot ignore other expenses, which is high, and say that PRICE/EBITDA ratio is low. Look at Price/EPS, which is a better parameter here and which is around 10. Technically, the stock might go down to 29-30. After a long red candle on Friday (10% drop in price), the downward trend might continue and will not easily reverse.
While the company has turned a positive EPS, the topline has not grown for 3 fiscal years (2017-2019). Employee benefit expenses have reduced. Some wasteful expenditures have come down too. There is nothing extraordinary here. If these were indeed good results, the share would not have fallen 10% on Friday. If we keep the promises made by promoters in mind around pipeline of revenues, then the results are very much sub-par.
If you have read Parts 1-8 of my analysis as well as all my posts after every set of quarterly results detailed above, then it should be obvious that the promoters have provided un-timely and inaccurate information on a continuous basis that has resulted in insiders/operators dumping shares while retailers have held on to theirs (because they have inaccurate information on what to expect) and in total the stock price has dropped ~90% from the peak. It is surprising that you derive conviction from the words of untrustworthy promoters.
Almost all retailers have lost most of their capital in this stock. I am sure they will agree with you that they have nothing more to loose and hence are holding on to this stock. This may or may not be the bottom as we do not know the future. What we do know with certainty is that we are holding on to a poor-quality stock. If the stock goes up, there is always a risk of not knowing the truth and the stock might come down later.
It looks like they lost some business and gained some. In hindsight that is very much on expected lines. The entire Management bandwidth was fully on managed services deal as per their own admission. So I think many old customer needs also might have got ignored in different aspects. (Now that indicates lack of management breadth if entire top management had to focus on saving one big deal.
The results would be losing business. Only that explain revenue regrowth inspite of assertion that there were deal wins. If we recollect correctly earlier license component were small (SI influence), so maintainence or service revenue also have to come down.
I also will continue to hold some shares for long long time as a reminder for me.
Disc: continuing to hold. Now this is not among top 5 holdings.
This will be my last post/analysis on this stock for the foreseeable future. If you have held or are holding Intense Tech. shares and have read my analysis in the past, I’d recommend that you read this post once. (The post is long, so I have tried to make it interesting with analysis )
There are two parts to this post:
1. Third Pump and Dump explained
2. Why I am still holding this stock and am moderately bullish as well
Third Pump & Dump
If you have read Parts 1-8 of my analysis detailed above in this thread, then you already know and understand how the pump and dump was executed. In Part 6 of my analysis, I explained how the stock went through a second pump and dump within the larger one.
The stock has gone through a third pump and dump as well. I thought I’d skip this as this should have been easily decipherable. I will give you some hints and you can figure out the rest. It will be useful to know how stocks are manipulated.
There were three events that helped execute the third one: a) In March 2018, the company announced that the BSNL contract was not only back on track but the scope of the contract as such was enhanced. But we know that nothing significantly changed in FY 19 w.r.t revenues earned b) AKG and UNO bought and sold large quantities of shares amongst themselves a few hours before the announcement c) Kuber India fund bought shares in Jan 18 (when the second pump and dump was executed) and “surprisingly” bailed out one day after the above “BSNL contract resumption” announcement (when retailers were buying in a frenzy), at a 35% loss in a few weeks (now, why would a fund ever do that!!)
The rest can be figured out.
Why I am still holding this stock and am moderately bullish as well
There are two reasons. The first reason is less important for me. The second reason might sound silly and strange, but I give it a lot of importance. My intent is not to influence you in any way to buy or hold or sell this stock, but just to jot down my analysis, given that I have already posted pages of data and logic driven arguments.
The stock is down ~90% from the peak and is back to where it was a few years back. P/E is less than 10. The company has maintained revenues of 55 odd crores for 3 years. A lot of it is AMC driven and these should recur year over year bringing in some certainty to revenues. The downside is limited now unless the books are cooked, which I am assuming is not the case. There is no point bailing out now. My loss in this stock is ~75%. I never averaged this stock nor will do so and continue to hold a large stash of shares. There are better stocks out there to buy instead of averaging. I consider my investment as “tuition-fee” like @james_kerala to gain expertise in the stock market. However, given that most of my capital invested is eroded, I don’t really care anymore. I think stock should stabilize in a few days. This is the less important reason (downside being limited) as to why I am still holding.
The more important reason as to why I am moderately bullish, will need a lot of explanation:
I have immense faith in the manipulativeness of operators, as strange as this may sound. All stocks are heavily controlled by operators in our stock market. Large caps/bluechips impact indices directly that reflect performance of our country as such, so the operators do not bring in too much volatility here. Also, large caps usually have good corporate governance standards and shares are owned by many funds, so blatant manipulation is avoided. When it comes to small/micro/nano caps, the situation is different. For these stocks, investors usually say: “Businesses do well, and so stocks move up”. I disagree. I think: “Operators hold a huge quantity of shares, that’s when businesses do well, and stock moves up”. Operators take the price up of shares and distribute their shares amongst investors. Post distribution, businesses stop doing well, profitability stagnates/comes down, strange issues turn up that starts hampering growth of the company, stock price starts coming down over an extended period of time, investors get tired, fed-up, frustrated, lose faith and panic (exactly in that order) and eventually give back their shares to the operator. That’s when operators accumulate massive quantities of shares. Of course, there are trash stocks that destroy investor-wealth completely, and they even stop quoting on the exchange, and operators involved in those stocks are terribly unscrupulous too. But I am trying to generalize here for the small/micro-cap universe.
Once operators accumulate large quantity of shares, beautiful things begin to happen !! Businesses start doing well, new contracts/markets/sales channels etc. suddenly start showing up, there is a good amount of (paid??) media publicity, products/services get good recognition, and in general positive vibes are created to attract new investors and a bull-run begins. And that is how the cycle of manipulation continues!
We can either sit here and complain continuously that these operators are devious, (which is the truth but complaining is of no consequence actually) or understand what they are upto and ride the bull and bear cycle with them, because manipulation is what the stock market is mostly about. To be fair, a few of the operators (the good ones) do give warning signs (chart reversal patterns) for a fairly long period of time before the eventual drawdown occurs, and unless you understand them, you may be caught off-guard. Good quality stocks have less manipulation, the poor-quality ones have much more. Our stock market is not as matured as developed countries with stringent rules in place to check rampant manipulation and insider trading. But then again, we can complain and fret about it, or figure out how to work around it.
The above analysis is a generalization for small/micro-cap stocks and may or may not work out in practice in this stock. Who knows the future really?
Ask yourself: “Who owns Intense Tech. shares now?” Promoters own a certain chunk. Many retailers have lost faith and sold their shares in disgust. There are no funds invested. It’s just the operator who is silently accumulating. Long story short, I still believe the “accumulate-pump-dump-re-accumulate” theory described in Part 8 of my analysis above. This does not mean that the stock goes up for a few weeks and gets dumped. There could be a slow and sustained up move as well. Or maybe I am overthinking things too much.
Anyway, “operator manipulativeness” is the second reason I am holding on to these shares. Further, like I said, with most of my invested capital destroyed, there is not much to lose anyway. Therefore, I have decided to give this few more months. I will not average or buy these shares, no matter what the price is, but have decided to hold on to my existing shares.
It is really your choice as to what should be done with your investment, but just thought I’d pen down my thoughts.
Thank you shrihari for the post. If not on this thread, please continue to post your views on names you hold and if there is a thread on VP.
Also why not start a thread or use threads on corporate governance/forensics thread when you observe a link with operator and announcements by company/news or analysis to paint a rosy picture. I think that will help to further the aim to “separate the wheat from chaff”.
You seems to be addressing many areas in my blindspot. Do you have a PF thread ?
Interesting observation on pump & dump with correlation to announcements and a new hypothesis on what happens in small/micro/nano cap universe generally. It helps me who don’t have much info on dark side of stock market. I observe few names in listed universe and it looks like you have a point. And this gives a reason on why i should learn technicals to limit my downside.
I started following a rule not to hold on any stock if it goes below 30% of my purchase price. But that looks like crude rule until i up to my stock picking skills or to add to that.
You have summed up what I have felt for a long time. But the fact of the matter is in the next bull market, the old pump and dump cases may not make a come back. Even in cases where the fundamentals really improve, investors are wary of investing in them due to lack of faith in the reported numbers.
You are right. Each and every stock may not rise in every bull market. This stock did not perform for a period of 5 years(2009-2014). Most of the retail investors who invested in Intense Tech were new ones who din’t see the 2007-2008 bull market and the brutal bear market after that and they bought it at the peak giving operators the room to pump and dump. Since a lot of us have lost a good chunk of our money in this stock, we would hesitate to invest in it in the next bull market even if the stock moves up. Waiting for this to happen isn’t a wise decision because the fundamentals of the company are seriously flawed. The money left in this stock should be invested in a good company which is what I feel and I did it. The recently given dividend was just a bait to trap investors in their holding position.
Disclosure - Invested and sold in loss.
Concall Y19-Q4 attached.Intense Concall-Y19-Q4.pdf (358.3 KB)
Read the concall transcript where the management states that the worst is over and expecting to concentrate on new business. For the first time they have given a guidance of sales around Rs 65 crores to Rs 75 Crore and Rs 25 Crore EBIDTA for the current year .
I continue to be invested though sitting on a loss on date. Will wait to see if they walk the talk .
Prepared to wait in pain for one more year.
would suggest new people to ignore such positive commentary. Was a classic bull market pump and dump and all the reasons have been mentioned above. People who are stuck in the counter may now be trying to offload
This stock has corrected from 225 levels to current levels of 30-32. Investors need to be careful where this kind of price decimation takes place. If not anything else, stocks which fall 85% do not usually go back up. Caveat emptor applies.
While the price erosion is obviously a concern, but that cannot be a reason for stock not to regain previous high. Many front line product companies (Apple, Microsoft, Oracle) have corrected 70-80% in their life time and then regained new highs, having said that I am not comparing their business with Intense. , what I am trying to mean many micro/macro economic factors impact price.
Even ‘Intense’ corrected from 100 to 10 in past, before it moved above 200 again. But question is whether the fundamental of this company completely broken or numbers are crooked? Don’t think so. It has a excellent product, company definitely was going through tough time for past couple of years, but now seems things are getting sorted out. As Shrihari mentioned that company has maintained revenues of 55 odd crores for 3 years, and lot of it is AMC driven so brings in some certainty to revenues, so downside should be limited. Also company looking to reduce dependency on Telecom, signed up BSFI clients. If they get traction in other regions like north America, that should be super positive. As MSSMurthy mentioned they have given guidance of 65-75 cr rev and 25 cr ebidta, if that could be met I think stock price will be much higher than what it is now.
It is not just business. It is credibility with growth. Even of bz picks up which is hope for last so many years market will not hibe ot credit. Virinchi is a good example doing good for ever and languishing…some time you have to say good bye. There are better fishes to try.
Y20-Q1-Intense Results.pdf (1.1 MB)
Clarification sought by exchange. Let us wait for reply
Is anyone attended AGM ? Any updates about AGM ?