I had a good look at Nesco some time back and have a small investment in the biz. The under valuation is obvious given the land value, and also the fact that the company is slowly sweating the assets to generate cash, which will likely be the catalyst.
The issue really is about how much to trust the promoters, and I had noticed some on the edge kind of moves from the past reports, which prevent me from making a more substantial move. Would be nice to hear comments from others.
)- The Engg business was merged with the BEC / Realty business during 2004-05. It has always been a low return business. But the ratio of merger increased promoter shareholding from 53% to 62%. The merger ratio valued the 2 companies at a value ratio of 2.5 (BEC/Realty) to 1 (Engg Biz). At that time, BEC/Realty biz made profit of 11cr and Engg biz lost 2cr. The Engg biz though did have 85,000 sft of premises in Mumbai. Most of the time post the merger, Engg biz returns have been nothing to write about.
)- In years 04-06, couple of strange transactions happened: approx 10cr of doubtful debts were written off (not mentioned if these were from Engg biz or Realty biz); repair & maint expenses jumped from 30lac to 5cr which could be due to some restructuring in accounting, but has been pretty high since in the range of 5cr or more.
)- In 0607, a provision was created and a contingent liability was mentioned about a 16cr claim. Again not clear to which division it belongs.
)- The whole concept of directors declaring a claim to higher salary and not taking it seems a little strange. It has been mentioned in a number of annual reports.
)- The state of Blg 3 is same over last one year. Mgmt has not bothered to mention what’s holding back the renting out. In general, the management is fairly quiet on issues that really matter.
I have spoken to the IR and tried to get response to some of the above questions. She told me that Blg 3 si complete but is awaiting NOC from Municipality which is stuck due to some court order (not sure what). Was asked to write an email about others, but have not got a response.