Dear Mokhtar,
Ayush & Donald work together by default.
This call is to get the best of the rest, involved in due process :). Especially those who have contributed generously before and have dug up/asked hard questions before like bagdu, vinod ms and others.
Thanks Donald and Ayush for doing this, I have a couple of thoughts and Iāll list them as such - I am sure you would do a much better job converting into right questions.
Pricing Power: When I first started tracking MPS (over a year ago) and bought some, my understanding of the business model was that they have some kind of stickiness with the publishers and its not easy for a competition to take away the business just by outbidding them. However in Q2FY14 results there was not much benefit of dollar appreciation and the management said in the call that they most of their projects gots re-negotiated. Does that mean they have little pricing power ?
Market Opportunity: While the overall market is obviously huge, what is the range of business opportunity they are targeting at over next 2-3 years ?
Hi,
I have been an investor since more than a year now, would like to ask the mgt following questions -
MPS Management Q&A is now confirmed - 2nd week Jan,2014.
Keep pouring in your questions. All inputs are welcome.
Hi,
Here is a competitor who looks like having similar platform (check PPT in their site) and the client names are also samehttp://www.rsicms.com/Their presentation might help us in knowing more about the technology part.
Based on Q-1 PPT, MPSās revenues were supported by a 25% growth in journals which is the biggest segment at 37%. What is the edge we have here? Market share? How is journals as a segment growing in the industry?
The other segments of the business shows a decline in revenues. Comments.
Revenues are still at 2008 levels inspite of the market opening up after Mcmillan selling out. Comments. (If you take out the INR depreciation effect)
In 2012 a similar company by name Aptara was acquired for USD 144 Million. The industry is seeing consolidation due to end-to-end requirements for publishing houses. What exactly is the game now? End-to-end - doesMPShave the capability for this? Who are the other players capable of providing end-to-end solutions?
How sticky is this business? Does the client become dependent on the technology related platform? But company keeps mentioning about pressure on pricing.
Will the big boys continue to have an advantage in publishing or will the industry become increasingly fragmented riding on the digital wave? What will give big publishing houses advantage over small players? And if the dynamics are indeed changing where will back-end service providers likeMPSbe placed?
Cheers
Vinod
Recently there was a good article on MPS -http://business.outlookindia.com/article_v3.aspx?artid=288877
@Jigar - The revenue of US Co was about $5 mln and at the time of acquisition it was loss making. The co intends to turn it around and bring the profitability to the level of Indian co.
Please keep contributing for the questionnaire.
Thanks & Regards,
Ayush
Hi,
I have entered this stock at Rs. 220.
Here is my valuation basis and I request boarders to cross verify this.
1). I am assuming that the current year EPS will be around Rs. 24.
2). Even assuming that the company does not grow from year and assuming the long term bond yield to be 10 per cent the minimum price for this stock on a no growth basis is Rs. 240.
3). But this company is growing and assuming that it grows at a conservative 10% per annumbasis the price should be Rs. 425.
4). I use the concept of owners fund by Warren Buffett. I am extremely comfortable with the fact that this company has almost no capex (Rs. 4-5 crores per annum) and very low working capital needs. So as a shareholder what you earn (basically EPS) is what you get.
5). The company has excess real estate to the extent of around 60 -70 per share which I see as a good margin of safety and a potential for raising cash in case of acquisitions.
6). The company is debt free and has good cash and extra assets to fund acquistions without resorting to leverage.
7). The ROE is awesome around 40%.
8). A similar comparison can be made with Eclerx. Eclerx has a similar ROE and has EPS double of MPS. However Eclerx is trading at 2x PE as MPS is doing.
9). If as the management says this is a 2 billion dollar opportunity to pan out the growth prospects seem humungous. If they manage to grow at 20% the probability of rerating of this stock from 10 PE to 20 PE is extremely probable.
10). And of course there is a 5% dividend yield
I have entered this stock with a 3-5 year horizon.
new technical levels
buy above 207
target 1 245
target 2 289
sl 195
A block buster performance by MPS in Q3.
Turnover has increased by 25% which is a record for MPS. They have grown not by more than 10% on an average over the last 5 years.
Profits have grown by 67 % Q to Q and that too after a hefty increase in tax provision.
Dividend at Rs. 7.
There will be a rerating of this stock to a PE of 20 over time. Expect a price of Rs 500
A block buster performance by MPS in Q3.
Turnover has increased by 25% which is a record for MPS. They have grown not by more than 10% on an average over the last 5 years.
Profits have grown by 67 % Q to Q and that too after a hefty increase in tax provision.
Dividend at Rs. 7.
There will be a rerating of this stock to a PE of 20 over time. Expect a price of Rs 500
new technical orbit
buy over 235/-
target 356/-
S.L.216/-
total dividend rs.17/-
to make dividend yield of 5% market price should be rs. 340/-
MPS has been one of the best performing stocks in my portfolio. I bought around six months ago at around 110-115, and the price has more than doubled, while I also received a dividend.
However, I think one needs to sound a note of caution about the above targets. The companyās growth has been tepid, except in this quarter, where I guess they have gotten advantage of the new acquisition of Element, and rupee depreciation both. While the acquisition related growth will keep accruing over the next 2 quarters, rupee depreciation might not. There is a sharp profit growth, because even with growth of business, there is no growth of employee expenses. But how much can you milk the bench?
The company also does not seem to be investing for growth. Out of the total EPS for 9 months of 18.7 Rs., they have given away 17 Rs. as interimdividend. The dividend + dividend tax is higher than the earnings so far this year. Unless they sell property or something, how long can this continue?
The company is in the ITES space. When long term players with established track records of growth in the space (like eclerx) do not trade at 20 PE, why should one expect MPS to do so?
Regards
Samir
Disc: Hold, expect to continue to hold.
Hi Samir bhai,
Yes, MPS has been a super performer, it continues to beat expectations on dividend 
I think this qtr nos are standalone and hence there wouldnāt be any contribution from Element. Hence if true, then its good to see growth finally happeningā¦if this growth can continue, then there could be a longer term story.
The management has been saying that the current staff is kind of enough to derive growth ahead if it comesā¦so I think margin expansion may remain if growth comes (yes, 45% is too highā¦and some of it may be due to rupee)
Also, the management has said that the model is such that they wonāt be needing much Capex for growth for sometimeā¦hence they are paying out the earnings by way of dividends. The clarity of the promoter on this front is really appreciable.
Regards,
Ayush
interimdividend.
I dont think the approach of paying liberal dividends is bad. MPS due to its business nature does not need to plough back its funds to sustain growth. They have more than enough capacity in their dehradun site to absorb any incremental business. Rather than hoarding cash or making acquisitions which reduce per share value it is better to give the shareholders choice to decide how to spend their profits.
When there is a good acquisition candidate like Element they have skipped dividend so this is a great policy to follow
The margins will only increase as more and more business moves to dehradun from chennai and bangalore.
In the management talk they had said that there is a 2 billion dollar opportunity lying there and they are not looking beyond their core business areas in the publishing outsourcing space. So the prospects of growth are humungous.
I am looking at this stock with a 5 years perspective
Hi Ayush and Samir,
During Q2 conference call, management had said that consolidated results will be out only with 31 march results so which means standalone numbers are starting to grow, finally!! 
Also, management had said they are coming up with new cloud based platform called ādigicoreā(sorry if i heard wrong-im nt exactly sure of name) and they beginning trails with their journal and with one of their big client. though im note sure of potential of new platform, surely this shows management is investing for further growth.
Regards,
Augustine
hiā¦
mps looks for a rerating again as growth in revenues acceleratesā¦
had been bullish/holding since 70-80 levelsā¦div already received of abt 20 rupeeā¦div yield at 25% on my investmentā¦
looking out for stocks where present div yield is above 4%ā¦and with capital appreciation and increase in div payoutā¦yield expected to touch above 10%ā¦
Dear Ayush and Augustine
Thanks for your clarifications and concall details.
Regards
Samir
Hi Ayush,
I am deeply impressed with your discovery of MPS. I went through most of the thread, from the start, and was spell bound by what you have done. A true multibagger.
From 30+ during Dec 2012 when you first discovered, to almost 300+ in almost one year is stupendous. While reading the thread, I also traversed the 2 year graph.
The way you have travelled the journey with the company, tracked the company, persisted and answered the questions of fellow investors. Almost surreal. This is stuff of true legend.
It is a big lesson for me. Really happy. No book, no university can ever teach this.
Hats off!! Best wishes!!
And may you repeat many more of these.
Cheers!!
Hemanth
Please find attached MPS Investor presentation uploaded on BSE website n Moneycontrolā¦
regards,
Ashish
Recently there was a good article on MPS -http://business.outlookindia.com/article_v3.aspx?artid=288877 Link: http://business.outlookindia.com/article_v3.aspx?artid=288877
@Jigar - The revenue of US Co was about $5 mln and at the time of acquisition it was loss making. The co intends to turn it around and bring the profitability to the level of Indian co.
Please keep contributing for the questionnaire.
Thanks & Regards,
Ayush
