THIS PICK FEATURES IN CENTRUM’S TOP DIWALI PICKS FOR FY 13.
THEY HAD PUT UP THE STOCK AT AROUND RS 6.3 WITH A ONE YEAR TARGET OF RS 12.
INVESTMENT ARGUMENT PUT FORWARD WAS THAT IT WAS AVAILABLE AT A MARKET CAP OF 35 CRORES (CURRENT MARKET CAP OF 40 CR AT CMP OF 7.1) AGAINST A REPLACEMENT COST OF 700 CRORES. IT IS A LG COIMBATORE GROUP COMPANY.
ATTACHED CHART SHOWS A BREAKOUT FROM SIX MONTHS TRADING RANGE AND NOW STOCK IS RETRACING ITS GAINS RECORDED EARLIER.
200 DEMA IS 6.96 AND STOCH HAS RETRACED MORE THAN 61.8% OF THE RISE FROM 5.86 TO 9.76.
THIS BEING A HIGH RISK HIGH RETURN KIND OF STOCK, ONE HAS TO DO ONE’S OWN DUE DILIGENCE AND DECIDE RISK REWARD POTENTIAL BEFORE VENTURING A BUY.
I like it that a lot of Textile Sectorstocksare discussed here these days… Looks good for my business
Well coming to Super Spinning… It is a very good company, one of our suppliers. And apreferredsupplier to a lot of weavers in Tamil Nadu. The quality of yarn is good of A-Grade. one of the best thing I like about this company is, in a market where most of the mills extend open credit of 45 - 60 days and in some cases even 90 days this mill has a strict payment policy of 30 days PDC. But then we are not looking into this company from a value investing prespective…
In spinning to ascertain the distress-value or Market Cap of Mills a thumb-rule formula of Rs.10000/- per spindle can be appplied. Ofcourse it matters on a lot of factors that what is the brand of machinery, It is RS/OE/Combed/Compact and lot of other stuff but Rs.10K per spindle will give a good ball park figure. This is just for the machinery not land, building and other things. Seeing that the company has 1.66lakh spindles, the market value of the machinery seems to 166Cr. This is only for the spinning unit. There is still Gassing unit we have not considered and also the Land and Building.
Seeing the M.Cap + All liabilities = 40 + 196 = 236Crs. So now the arbitrage is only in the Gassing Unit+Any ancillary units+Land+Building. Is that valued to 464Crs?
Other than these we have the following
Inventories - 36Crs
Debtors - 35Crs
Cash - 2.6Crs
loans & Advances Given - 28Crs (most of these is advance tax, etc… not worth considering)
Investment in subsidaries mainly
a. Sara Elgi Arteriors Ltd - 100% Equity
b.Elgi Building ProductsLtd - 41.68% of equity
May be the consolidated valuation is justified to 700Crs. A deeper view might is needed. Any link to the said report??
I have just a excel sheet list of centrum picks with me with a couple of lines of justification put in. maybe someone having centrum reports can help out.