Hi Hitesh Sir and other fellow Valuepickrs,
I just want to get my thought process validated about the company âRS Softwareâ. Some of my observations, mostly based on past five years performance.
Quantitative
The company has delivered exceptional growth in the last five years by increasing its revenues from Rs 150 crores to Rs 382 crores and Net profit after everything from Rs 5 crores to Rs 51 crores (Although I would have liked if the revenue growth would have been somewhat higher). The Diluted EPS has grown from Rs 6 to Rs 43.
The ROE and ROCE have always been in excess of 30%-35%, Debt is Zero, Dividend is almost 14% of Net Profits (Should have been ideally more), Tax paid is 30%
Technicals (no knowledge)
But in the past five years the share price has increased almost 30 times, In the past five year in any two years the share price has not delivered negative returns, but at present along with pharma companies it is a little bit of weak stock and while other mid-cap stocks are hitting upper circuits, this stock is not doing much.
Opportunity size
I am personally witnessing a big change in my office and my friendsâ offices, that people are now ordering multiple times in a week from various e-commerce websites, shopping portals, food sites, movie sites etc. Also since itâs a products based company, these types of companies have huge valuations in U.S. but somehow in India they are never in limelight. Some reports are suggestion that the online shopping market place in India will grow at a very healthy rate -Well all reports say this about all the industries!!!
Some points which I am not able to understand
This is quite an Old company. While other companies which started alongside have become big global companies, this company has somehow never lived to its potential. This company openly mentions that it is interested in making acquisitions and indeed has a lot of cash on its balance sheet but nothing ever materializes.
Also one things seems to be very strange to me, that in an era when even small unlisted companies take Pride in mentioning the names of their clients on their websites, this company even after being a Public Listed company never mentions its clients even in its own Annual Reports. I must admit that I have only read its 2012-2013 annual report.
Why I bought it? After going through all the above points I purchased it at around 180 odd levels as I have already posted around that time on this thread. I am hoping for a PE re rating and an acceleration of companyâs growth if Indiaâs economy recovers. But still cannot get that âanonymous clientsâ point out of my head.
Hoping this will contribute positively to the discussion and analysis in this thread.
Regards
Amit Goyal