Before I start, here is a CAUTION.
This is not a potential portfolio stock, nor a potential multibagger.
How ever this could be a soggie cigarette butt (of Ben Graham philosophy); which could be good for one last puff (and give huge profits)
Normally my focus area is potential multibaggers. This is an attempt to do something different.
Stumbled upon this stock due to a friend’s friend. He tries finding very cheap companies in cyclicals. And I stay as far as possible from cyclicals.Under normal circumstances I would not have spent more than 15 - 20 min taking a look at this company. And then put it in the “not for me” list.How ever my friend’s friend made a statement “This is a company with strong fundamentals available at throwaway price”.
As he is a sensible person, this invoked a curiosity in me. Over the next few days(with reluctance), I went through their AR FY2013.In the process, I came aross some very pleasant surprises. Almost sort of amazing.
1). Zero debt (very hard to believe, for a steel company)
2). SIEL is actually a on-going business concern that really does business (makes products, trades in them, generate revenue and earn profits)
3). Own a land parcel of 4 acres in Kerala on which they have their factory and store house
4). Have some real good and sensible plans for expansion and growth.
One SHOCKING surprise was:
Promoter holding is less than 1% (god knows how he is controlling the company).Logical reasoning; probably through entities or persons acting in concert.The Chairman and MD is Vivek Agarwal, and there are couple of people with Agarwal surname who between them hold around 5%.
ABOUT SIEL:
Southern Ispat and Energy Ltd (SIEL) is an 18-year old company (incorporated in 1995). SIEL is based in Pallakkad district in Kerala. The company is into manufacture of steel products (ingots, billets, etc).More info can be found at http://southernispatltd.com
SOME NUMBERS:
FY2013 top line at 928 cr, and bottom line at 42 cr. A Zero debt company.
Market cap: 33 cr CMP: 2.55 PE: 0.8 FV: 10 BV: 24
FY13 EPS: 3.23RoE / RoCE: Around 14%
Good sales growth and profit growth over last 3 years.
(hard to believe, but true)
MY TAKE:
SIEL is at a 10-year low. This could be that Graham cigarette butt which could give 200% to 400% profit in the next 1, 2, 3 years.
Observations to support the thought:
Since year 2005 till date, this stock has had positive outbursts over 8 - 10 times where by the price crossed 10 rs in a flash.
Some instances:
May 2006(18), Feb 2008(40 rs), July 2009(20), Jan 2010(40 rs), Mar 2013(14)
Well, this could well happen again in the future. WHY?
1). SIEL posting good results and profits
2). Steel sector revival
3). Some of their expansion plans working well
4). BJP winning a clear majority
5). Growth improvement in China
6). Some one attempting to take over the company
MY PLAN:
Invest 10 or 20,000 rupees, and wait patiently till that outburst happens.
If it works well, sell at profit and be happy. If it does not work, then write it off as an experiment gone wrong.
HOW EVER,
If some sane voices in VALUEPICKR, find that there is a method in this madness; and express positive views / opinions;Then, perhaps increase the stake and wait for that upswing, whenever it happens
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View, thoughts, opinions appreciated!!
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Thanks and Regards!!