There is a contingent liability of 108 cr, any idea what’s that for?
@ achal,the run seems to be genuine, little chance of operator play. The stock could move up to higher trajectory with some consolidations, thats my opinion.
But lets wait and see.
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The Contingent liability is mainly for guarantee given for subsidiary KMLL. After scanning through the latest AR and looking at the numbers, the stock story looks very interesting with multiple triggers in place, worth digging more. The only visible concern as of now is, It has appreciated very sharply from year low of 45.
@varadha…your message hasnt appeared. @Aksh, yes the numbers look interesting, regarding technical charts a fantastic elliot wave has begun already, EW3 to be atleast 50% more than the present EW1. If at all things go well i am confident it will head to 470 levels.please come up with your analysis.regards
Sorry I do not know why the message did not appear:
sanjay dangi - famous operator seems to have been holding this stock.
Also, do a google on kesar promoters and there are plenty of complaints about their real estate business. Makes me uncomfortable.
Also, kesar terminals just seems to be an opportunistic land play. Unless I know :
)- if the terminal right is exclusive
)- duration of the arrrangement
)- potential for competition
I would not touch this stock. The management pedigree does not seemm inspiring.
at varadha, first and foremost that article is 1 year and 6 months old…since then kesar terminals has held itself and produced good results qtr on qtr -roughly 6 good quarterly results since the article was published!! i wouldnt be bothered just because dangi holds it.
…no.2, mentor capital(sanjay dangi) holds 3% for the last 2-3 years, national insurance and oriental insurance also hold more than 4% each gives some credibility to the stock.Regarding management credibility it takes time to see what they are upto…meanwhile the stock hits 315 all time high today.
@board members, excellent points everyone! thank you very much.
@vardha - we did not find promoter complaints by doing a google search, pls do share more details.
#Management - We believe that the management is honest and investor friendly -
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Intent to keep the companies separate (Kesar Enterprises with sugar industry that is cyclical and has not been making money)
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Group is well established in business and not a novice
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Regular dividends from the incorporation of the company
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The promoters are well educated
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KTIL and KMLL mgmt. is professionally run. Here is the profile of the CEO of these companies (something you don’t see in their annual report) - https://www.linkedin.com/in/santkharee)- The profile alone alludes huge confidence.
We will post a series of inputs for members to further ponder on and debate.
We are continuing our post on providing inputs and our analysis of some of these inputs. Please note that our report that we published probably does not bring out the depth, as our report is in the public domain and these reports are not. These inputs are an attempt toconnect the dots and we would appreciate members to be as critical as possible.
We encourage members to go through this report by Ernst & Young - The Indian Warehousing
Industry: An Overview released Oct 2013 - Link - http://bit.ly/1ptYRyE
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Demand for Multi-modal Logistics Park (MMLP) is very high, competition is very low, entry barriers are high. Realization/sq.ft is highest for multi-modal agencies => Location, Location, Location => KMLL situated in the heart of the country has an excellent location. We encourage members to go through the RFP that was sent out for this and the final agreement (most of which is available in public domain through google, be creative with the words to use) -KMLL isa special purpose vehicle (SPV) that needs to invest 145 cr into this project. We estimate KMLL to be worth about 350 cr as it stands now - Even if we take out the equity and debt out of this company - KTIL is sitting on a cool 200 cr of NET asset value (about Rs.380/share) alone! We believe that KMLL will be spun off as a separate entity in 2-5 years after operations creating value and giving windfall gains to the shareholders and promoters of the company. The govt (state and central) are committed to providing the rail, road and shipping connectivity. All these ministries are signatory to this PPP. There aresafeguards for the investments that KMLL is making.
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Page 8 of the report talks about Liquid Storage =>Macro economics - 1. Demand for Liquids in India is going to increase 8-10% per annum, 2. storage facilities are in huge demand, 3. India is a huge importer of liquids => Location, Location, Location
=> It has a very large moat
=> It will have pricing power (for the next 10 years at least) given the demand and the geo-political situation around the world.
- Commissioning of new facilities => KMLL’s existing locations @Kandla, @Pipavav, @Kakinada (land for which is bought a long time ago) give it strategic advantage as a 3rd party liquid storage facility. @Pipavav goahead was received in early 2012 and iscurrently under implimentation- http://commerce.nic.in/trade/Minutes_IMC_held_on_07Feb2012.pdf
http://commerce.nic.in/trade/Minutes_IMC_held_on_06_06_2013.pdf
http://commerce.nic.in/trade/Minutes_IMC_held_on_13_12_2013.pdf
http://commerce.nic.in/trade/Minutes_IMC_held_on_18Oct2012.pdf
As we pointed in our report, we believe that the terminal @pipavav is likely to be functional ready June 2015 and will add to the revenues of the company in later part of FY-16.
- E&Y has listed KTIL as a major player in this space (along with names like IMC, Vopak, Aegis, IOT). A recent recommendation on Vopak for insights - http://seekingalpha.com/article/2428385-royal-vopak-the-perfect-hedge-against-a-trade-war-with-Russia
The industry trades at an avg of 20 p/e => Indian players are getting higher valuations due to growth, demand and ability to recover the investments faster (Look at the cash generated by KTIL. @20 p/e KTIL would be valued at around Rs.560-600 /share, we believe this stock should be re-rated to at least 25 p/e= Rs.700/share.
If the company decides to sell-out then they would easily get around 750 cr (350 cr for KMLL and 400 cr for KTIL) = Rs.1500/share.
- Citi has recommended 3 stocks over the last week in the logistics sector with Gujarat Pipavav being one of them (same recommendation of Gujarat Pipavav last year) -
When Guj Pipavav can grow only 7% in the last 3 years, have a 7300 cr Enterprise value for 500 cr of topline and their margins expanded after they started the liquid storage business in the last 18 months => why cant KTIL be valued at 400 cr Enterprise value at least? => Rs. 700/share.
We will continue to more inputs for members to further ponder on and debate in the coming days.
We would like to also comment on Sanjay Dangi /Mentor Capital holdings of Kesar Enterprises and KTIL - While this is a valid concern brought out (thank you very much), we have not found any link between the promoters and Dangi group of companies. Also, KTIL has not shown any interest in QIB/FCCB issue (neither has the group) which has been the primary reason behind the manipulation. We have gone through the SEBI order - http://www.sebi.gov.in/cmorder/dangientities.pdf Link: http://www.sebi.gov.in/cmorder/dangientities.pdf and believe that SEBI has done a very extensive investigation - If there were any links between Kesar and Dangi group - It would have been found for sure.
We also tried to look into the history of the Kesar Enterprises group itself and have not found anything to demonstrate that the promoters have colluded for the sake of manipulation.
@board members, pls share anything that you might know/found towards this.
https://www.linkedin.com/in/santkharee Link: https://www.linkedin.com/in/santkharee -
Harbin,
Is Kesar terminals carrying 100 cr debt for Itarsi project interest burden for which will start appearing from next quarter?? Is there any entry barrier in chemical storage business as lot of new players it seems are entering g the business? When will Itarsi multi modal project become EPS accretive n what will be the impact on ROCE till then? So far to turnover is quite small @ 20-30 crores. Any risks?
@Vivek - Great observations
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Consolidated company debt is at 56 cr currently, it is already paying back the interest on about 20-25 cr of this. The interest payment on 30-35 cr would start from late FY-16 onwards.
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We believe that the Itarasi project - Phase 1 will be functional in Q3 this year (Oct - Dec period) and will go towards full capacity in 3-4 quarters. This will be EPS accretive by the Jan-Mar quarter. (Please read this report on best-likely-worst case scenarios - Its a good one to get insights - http://s3.amazonaws.com/zanran_storage/www.cbcglobal.org/ContentPages/116502655.pdf Link: http://s3.amazonaws.com/zanran_storage/www.cbcglobal.org/ContentPages/116502655.pdf )
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We also believe that KMLL will be demerged into a different entity in 2-5 years which in itself makes KTIL debt free and also provide opportunity to existing KTIL shareholders to get KMLL shares.
@harbin, when will KMLL start contributing to the revenue? And what will be the approx figure aftermath. I am investigating ktll from all angles, at present hold around 2% in my PF.
@harbin, when will KMLL contribute to the revenue’s, from q3 or q4? and by how much approx…any update from the management? I heard from one of the shareholders that during agm management mentioned by october it would be fully functional. pl update if you have any info.
@Shak - We do not have any update from the mgmt. on this. We believe that KMLL could add about 75-100 cr/year in topline with Operating Profits being at 30-40% and Net profits to be between 15-25% range. Again these are purely our estimates - we DO NOT have anything from the mgmt. on this.
You might have also seen the notice that the company has sent to its shareholders on Monday about KTIL being able to borrow 400 cr and to consider putting in upto 300 cr in KMLL as being positive developments. (http://www.bseindia.com/xml-data/corpfiling/AttachLive/Kesar_Terminals_&Infrastructure_Ltd_250814.pdf Link: http://www.bseindia.com/xml-data/corpfiling/AttachLive/Kesar_Terminals&_Infrastructure_Ltd_250814.pdf )
We consider KMLL to be worth 350 cr as it stands right now (without operations).
Pls take note that there could be risks associated with borrowings and with dilution of equity in KMLL for the KTIL minority shareholders.
Members are advised to keep a close watch on the company that they invest in, changes occurring both +ve and -ve can change the course of your decision on your investments.
@harbin, noted, lets see what q2 is in store, i have a very small holding, lets see if this micro-cap turns out profitable.
A deep dive @screener and annual report, suggest that it is infact a very solid company, RoE > 30 % for last 3 years, the only logistic co to have such high RoE, Co is growing @ 25 %, PAT growth @ 30 %, Q1 results were superb, PAT up 45 %, Q2 going to be similar or better with MP facility going stream from June 14. MArgins are also best in the industry, so many financial ratios are best in industry better than GAti, TCI, Aegis. ROIC is also v high
A new CEO has been hired so, seems to be very aggresive.
The best part is it is cheapest amongst all logistic co, the PE is only 11, compared to industry avg of 40+, the stock got already re rated, but i think there cud be signififant re rating, during Snowman logistic listing. The re rating started with Snowpan IPO success.
The other thing it looks like a very boring industry and hasn’t caught market fancy. To me looks highly undervalued for their quality of business.
Wud be happy to listen from others, it seems worth discussing/watch !
Need to watch the heavy debt incurred for Itarsi project & when this will add to EPS.
Promoters are however ethical as per my scuttlebutt.
KTIL’s past numbers are really great and even on peer comparison it’s quite undervalued. The question is what KTIL has been doing differently which its peers have not been able to do so far and is it sustainable going forward? Also, I think, KTIL has been operating at full capacity with the best possible margins with no scope of improvement. In fact, Management speaks of pressure on margins at Kandla because of expanded capacities by competitors at Pipavav.
Future growth is only possible from capacity expansion and that’s why we see expansion in terms of KMLL, Kakinada and Pipavav, which would happen at a cost. With increased capital base, I think It will be difficult to maintain the same return ratios. This integration, if successful, can also be a game changer for KTIL.
Apart from this, KMLL is the cornerstone of KTIL story for which very little information is available in public domain. without which, It’s very difficult to commit any significant investment capital to this story. Makes a solid case to dig further though.
I feel the management is quite fair and transparent from the reading of the ARs.
Disc. Watching with No Investment
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greetings all, would like to paste firstcall research report on july 1st 2014, just a few months back, but a solid one:
http://www.moneycontrol.com/mccode/news/article/article_pdf.php?autono=1118277&num=0
KTIL is an overall un-noticed gem,atleast according to balance sheets. For logistic space even the latest ipo in logistic space-snowman logistics, assuming an issue price of rs47(atleast) the pe stands at a firm 25, i am expecting it to take a p/e of atleast 35-55 after listing(gati is 50+)
If things go well i expect KTIL to give 100% returns in the next 1 year.
@ santosh- boring industry- reminds me of peter lynch’s theory -the more boring industry/name -all the more better.