Friday 31 October 2014

Kellton Tech Solutions - High potential Multibagger

Friday 31 October 2014 2 comments

 


Kellton Tech is a global IT company with a portfolio comprising an exhaustive list of IT services in the web, mobile, security, ERP and cloud Space. Kellton Tech boasts a global presence spanning three continents, three countries and five cities. Created with a vision to offer infinite possibilities with technology we are committed to providing end-to-end IT solutions, strategic technology consulting and product development services. 

Founded in 1993, Kellton Tech was created to offer infinite possibilities with technology. Interestingly, the word "Kellton" is derived from combining the school names Kellogg and Wharton - the alma maters of two of our founding members. In the last twenty years, Kellton Tech has come a long way, and has grown both organically and inorganically. The acquisition of three leading companies over the last three years (Tekriti Software, MCS Global and DbyDx Software) has added exponentially to Kellton Tech's knowledge and expertise.

Kellton Tech has over 4 years experience in Social Networking Software, creating world class platforms for facilitating networking between individuals or organizations based on a common grounds interest, profession, values, ambition, kinship, products and services.
Over this period Kellton Tech has deployed over a dozen Social Networking Software. Kellton Tech's expertise lies in making robust and scalable platforms based on innovative features that capture user interests.


Buy Kellton Tech Solutions for long term basis:


1. Company provides end  to end solution in the growing IT sector like ERP, cloud and mobile sector. We believe this choice of growing sector will help company to generate increasing revenue in coming quarters.

2. Company has very widely known clients like PVR , makemytrip DailyNews Newyork, Educomp, Nokia, Kaplan, Nielsen. Company provides quality solutions to the world's widely known companies.

3. Kellton Tech Selected Among the 'Top 20 Travel & Hospitality Solution Provider in June 2014.

4. Company's financial cyclefrom July to June. Consolidated net sales of Rs 48.6 Crs and PAT of Rs 3.7 Crs in FY 13. For first 3 quarters FY 14, Net Sales of Rs 91.8 Crs and PAT of Rs 3.83 Crs....full year FY 14 nos. to be much higer than Fy 13.

5.Promoters increased their shareholding by subscribing to the warrants at Rs 15 per share and they haven't pledge a single share till date.


My View- 

I expect company to post EPS into similar lines for rest of the Financial year which makes it 2.9 for the entire year. At CMP of 20.5 company is trading at the PE multiple of 7-8. Further, company has taken lot of acquisition on the book pursuing aggressive expansion strategy. (FYI - It acquired Kellton tech from USA and changed their own name to Kellton tech to focus better on their US market.) Further, promoters are steadily increased their stake in the company which shows their commitment to the company. We consider company is currently in the infant stage and has lot of potential to grow into multifold return. Hence I recommend this stock for long term investment at CMP 21.5.

Disclosure: Invested at 15rs, Accumulation and avg price at 20.45

Wednesday 29 October 2014

Kesar Terminals - Strong Multibagger

Wednesday 29 October 2014 2 comments



Kesar Terminals and Infrastructure Ltd. is in the business of tanking, warehousing, storage of liquid and logistics. The company has bulk liquid chemical terminals at Kandla, Gujarat , with a combined capacity of 127,000 Kilo Litres. The primary revenues of the company are through hire / rental income for providing liquid storage tanks and other related services. The demand for storage facility for bulk liquids are dependent on the export / import of chemicals and petrochemicals in the country. To have such storage facilities, availability of land near existing ports is very important and in that context, Kesar Terminals and Infrastructure Ltd. seems to be better placed as they are one of the early players in this business to have setup storage facilities near Kandla Port.







The company faces competition from other ports like Mundra, Dahej and Pipavav which can affect liquid cargo traffic at Kandla Port and in turn can have an impact on Terminaling charges. The company have various proposals for expansion and diversification like a container freight station (CFS) and Bulk Liquid terminal at Pipavav Port, Gujarat. It has also planned for dry cargo warehousing and Bulk Liquid Terminal facilities at Kakinada, Andhra Pradesh.




At current market capitalisation, the stock is trading at less than 11 PE. The growth in profits has been stupendous in the past four years and for its growth rates the current PE looks low. However I would like to wait and see the impact of moderation in tank terminal-ling charges on the financial performance of the company (as mentioned in its annual report) before coming to a conclusion.
With booming economic growth expected in the future for India and with so much of Import / Export of chemicals / petrochemicals happening the country, the demand for such liquid storage facilities should be healthy. This is definitely a stock to be watched out for but would prefer to take a neutral view at current market valuations.
Kesar Terminals and Infrastructure Ltd. is in the business of bulk liquid terminals at Kandla, Gujarat. The growth rate in profits has been excellent so far but somehow I’m  taking an optimistic view on the valuations at CMP of  RS 325. 

Tuesday 28 October 2014

Point of note for new investors - Important*

Tuesday 28 October 2014 5 comments
For all new investors out there, Please read this :-

1) Do not buy everything in one go. Invest slowly and accumulate with ease. If you plan to buy 100 shares, buy it in five or six times.

2) The best way to invest in markets remains in SIP,  Invest every month even if its Rs 500-1000 can make a huge deal in the long term.

3) Be a disciplined investor, Make a basket of 20 shares and allocate no more then 5% in each of them.

4) Don't make any personal favorites. History suggests whenever one has put much or biased anything, that has most of times disappointed.

5) Read my note time and again, Understand the business that you plan to buy. Only invest in a something that you feel your able to understand.

6) Stock Market in the short term only takes two emotions into factors, Greed & fear. Thus don't panic even if you see quality counter getting butchered. Have the conviction and accumulate with ease.

7) Don't lament if you miss anything which moves 5 times, You would find something else among my recommendations to make merry.

8) Don't haste and act. Be calm and relaxed. Impulsiveness causes destruction.

9) A very important thing is the price target. As my father always describes, there is nothing called targets. He would sit on something for 20 years provided the story was on. But one must remember cash is always king. So if you feel you have made much or met your target. Do book profits, Not fully 25% or 50% to be safe on both ends. If it moves higher, then you already have 50%. If it moves down, chill out as you have already booked 50% profits.

10) The best thing is the "Investment free strategy", You buy abc company of 100 shares at Rs 10. You sell 50 shares when it reaches Rs. 20 to fully recover your investment. You can keep the 50 shares  for eternity. It pays you dividend, becomes more likely an asset. Even if the share price of the company goes to nil, you still wont be loosing anything, as you have already your investment free by selling half the shares at double of the acquisition price.

Discipline is a must folks, Make these points a principle and I guarantee you stock market would be a better place to deal with. 

YBRANT DIGITAL LTD. (LYCOS INTERNET LTD) - SHINING DIGITAL FUTURE

0 comments





YBRANT DIGITAL MULTIBAGGER POTENTIAL STOCK
Ybrant Digital is a digital media marketing company with offices in over 20 countries. The potential market for this business is global. Ybrant is one of a kind company on the indian stock market. The digital channels on which advertising and marketing solutions are offered are Display, Social, Mobile, Video and Search. For more info check, http://www.ybrantdigital.com
The future prospects and growth of this company is directly related to the increased usage of the internet and its enhanced influence across the world. Increased adaptation of smart phones and mobile applications has a positive impact and directly benefits the company.

MULTIBAGGER POTENTIAL

Strategic acquisitions:
1. Ybrant Digital acquires Serbia based email marketing platform 'Volo MP' and US based 'Medios One' in the year 2006
2. Acquires US based online ad network company 'Ad Dynamix' for USD 10 million and Israel based 'Oridian' for USD 13 million in 2007
3. Further acquires Argentina company 'Dream Ad' and Australian company 'Max Interactive' in all cash deals in 2009. Max Interactive is strong in Asia Pacific.
4. Acquires US based Lycos Inc for USD 36 million in the year 2010, resulting in a wholly owned subsidiary. Lycos, headquartered in Massachusetts US, is a prominent internet brand with diverse businesses such as Gamesville.com, Tripod.com, HotBot.com and Angelfire.com
5. Acquires minority stake in Israel based 'Web 3.0'in April 2011
6. The company acquires PriceGrabber, LowerMyBills and ClassesUSA.com owned by UK based Experian for USD 175 million in the year 2012

MY TAKE
Digital revolution is here to stay. Internet, Search, Social media, Web portals, games and web applications will find increased usage all across the world. Increased adaptation and multitude of apps will keep smart phone and mobile phone usage on the growth path. All these will compel the corporations and companies across the world to advertise on the internet and mobile networks. The wallet share for advertising and marketing revenue by the new media will continue to increase in the coming years.
Due to the multitude of acquisitions over the last few years, and a foothold in diverse and significant space of Digital marketing and advertising; Ybrant Digital is well positioned to grow its revenues across multiple geographies and thereby increase its margins and profitability.


Disclosure: Ybrant Digital is a part of my core holdings (and I intend to add more)

Saturday 18 October 2014

SKM EGG PRODUCTS EXPORT: Good potential multibagger

Saturday 18 October 2014 0 comments





SKM EGG PRODUCTS EXPORTS  - A CLOSE LOOK


This company is jointly promoted by well known SKM group and Tamil Nadu Industrial Development Corporation Limited(TIDCO) .Out of the Rs.26 Crore equity , TIDCO holding about 7.58 % and Individuals from promoter group holding another  46 % stake.( This data is based on June quarter share holding and promoters made lot of market purchases in June-September period) .Belgium based Belovo Engineering holding another  5 % stake in SKM .Belovo Engineering is part of BNLfood Group which supplying  Egg Science & Technology ,producing and marketing eggs, egg derived nutraceutical ingredients and food ingredients. Plant of SKM itself established with the technical support and collaboration of BOLOVO.Company’s manufacturing facility is located at Cholangapalayam  , about 20 Km from Erode in Tamilnadu .This is one of the largest Egg processing facility in Asia and this state-of the art facility is located in a 35 Acre plot. Under stringent quality conditions , company processing around 18 lakhs eggs per day and manufacturing Whole egg powder, Albumen powder ( Powder form of Egg White), Yolk Powder(Yellow) and recently introduced liquid Eggs.These products are supplied mainly to Japanese and European companies for manufacturing products like cakes, biscuits , cookies, Confectionery products, Health foods, Soup mixes, Ice creams , dairy products ..etc. SKM established direct Subsidiary/marketing points in its major markets viz- Netherlands,Japan and Russia.Selling to other markets channelized through  third party distributors.Since the number of producers are less and India’s cost effective and competitive advantages ,company is getting repeat orders from its customers. SKM’s  products are ultimately used by large food product manufacturing MNC’s  like Kraft foods .Heinz..etc. for manufacturing bakery , health care and food items.

                                                                           SKM  is the only listed producer of Egg Powder and other value added products from Eggs .Even from the unlisted space , only very few companies are manufacturing similar products in India which includes an unlisted private company named Venkateswara Food Products Pvt Ltd owned by the same promoters of Venky’s India and another Bangalore based  company which listed in BSE but suspended from trading for more than 13 years.Among these few players ,SKM is the market leader in Egg powder exports and contributing more than 50% of India’s total egg powder export.As of now, company processing about 18 lakhs eggs per day and utilising close to  90 % capacity to manufacture its major products Viz- Egg Powder ,Bakery Mix and Liquid Egg.These products are exporting to overseas markets mainly Japan and EU countries.Out of 18 lakhs eggs , about 5 lakhs produced from  company owned farms and the remaining is sourcing through contract farming model( Mainly through an associate company  named SKM Universal Marketing Ltd) . In order to ensure the quality of Eggs , company itself supplying feeds manufactured by company controlled (leased)  feed mill  to the farmers and company appointed veterinary doctors and supervisors periodically visiting farms running under contract farming agreements.Earlier, during its tough times company's share holders approved the sale of feed mill and farm , but only the selling of feed mill executed ( now working on lease)  .This business model ensuring sourcing of quality eggs without interruption which is otherwise a herculean task to source close to 20 lakhs quality eggs per day.Promoter’s experience in poultry field is one important point to note. This company was originally promoted by Mr. SKM Maeilanandhan who is the doyen of poultry industry in India who also  honoured with the Padma Shri award for his outstanding contribution in the field of social work in 2013.



Having said , being a food product , export of these type products  to developed countries is not an easy task.Stringent quality standards and periodic quality  checking are usual in an industry like this before getting final approval for exports and usually these formalities take many years to complete.In the beginning, company faced many challenges in this front and it affected SKM’s past performance. From past troubled times company emerged as a winner under the able leadership of Mr. SKM Shree Shivkumar who is the MD of the company and son of Mr. SKM Maeilanandhan. 


FINANCIALS 


During the peak of recessionary period , it reported losses in FY 2011 and 2012 due to various reasons like lower demand, poor realization and most importantly some quality related issues due to its dependency on  outside quality testing laboratories. But with early signs of revival , company’s new products introduction and tapping new markets ,SKM made a remarkable turnaround in FY 2013 and further improvement in latest FY 2014.(See the below table for details) . 


To avoid any quality related  issues in future , company  established own quality testing lab  and R&D facilities.
   

As per the thoughts shared during recent AGM , company is now paying top priority to become a debt free company ( excluding working capital debt) in near future. As part of this effort , company already reduced its debt from Rs.51 Cr to Rs.34 Cr in last FY  and further reduced it in  first six months of ongoing FY .( Half of the loans are taken from promoters itself which they pumped into the company to keep it afloat at the time of extremely difficult periods few years back.) It is targeting a debt free status in next two years . After achieving this target ,SKM is planning to hike its capacity to reach a Rs.500 Cr company by 2017-18.


Major Negatives


Company is an export oriented unit and any  recession severe than the previous one  may negatively impact the demand scenario of its products.

Company’s earnings is in Dollar and Euro and its movements against Indian Rupee may impact its margins.


Though company sourcing part of its Egg requirements from own farms , any adverse change in the price of feed ingredients may affect its raw material cost.


Un-expected diseases affecting birds may create problems.



Major Positives.


As I mentioned in many of my previous  postings ,while investing in small cap stocks , promoter quality is the first point to note.The most important positive point about this company is its promoters and management , not only because of their experience in this field but due to their highly ethical business practices and ‘Nothing to Hide’ mentality even towards its minority retail share holders.I believe ,In these matters , it is difficult to find many companies with this standard from the small caps space .


Potential of company's product is very high and, there is only very few companies in this field. SKM is the market leader handling more than 50% of India’s total egg powder exports.


India is one of the low cost producer of Eggs and this giving added  competitive advantages to the company . SKM captured Japanese market by competing even with American companies which indicating its high quality standards.


Entry barrier - As mentioned earlier , procuring 18 lakhs Eggs per day is not easy to replicate by any new entrant in this field. Company established own farms to source part of this requirement and planning to expand the capacity of farm when it add more production capacity in its factory.Contact farming is also designed in a systematic way where company ensuring the quality of feed and arranging periodic visit of veterinary doctors to ensure the health of birds and provide awareness to farmers in order to ensure the quality of Eggs to be processed.Since the end consumers are large MNC food companies they ,always need large quantity at stringent quality standards . To ensure this quality standards ,it should be careful right from the beginning.Any available  egg can’t be processed but it can use only the eggs laid by birds fed with specially prepared diets , so special arrangements should be there to ensure this quality and any available eggs in the market or at the gate can’t be accepted.Sourcing close to 20 lakhs such eggs per day continuously is an extremely  difficult task.Situation is more tough in the selling side . By competing with foreign firms ,company took years to established the label of a reliable and quality supplier in overseas markets. Being a food ingredient ,import permission to developed countries is not easy and even in the case of Russian market ,SKM succeeded only recently after four years continuous efforts.Because of these reasons , still there is hardly four or five successful egg product processors existing in India. Full traceability of end product is an important factor in export oriented food stuff business. To ensure this ,SKM introduced a system named “TRACKKER” which helping the company  to trace from feed ingredients level to final product level.




   

Scope of company’s products is very vast and so far it not touched the biggest market –USA. Such opportunities may be tapped  once the production capacity hiked to double in next few years and company’s financial health improve further .


Using its own R&D , company introducing new products and its recently introduced liquid Eggs receiving  overwhelming response from customers. Considering the increasing cholesterol related health issues , liquid white egg may turned as a money spinner for SKM in the years to come. Company also succeeded in increasing the shelf life of products and this will help to penetrate more overseas markets.


During the time of  last recession its business badly affected mainly because of its higher concentration in few markets .To avoid such a situation in future SKM is now expanding its geographical presence .Company’s years long efforts to get an entry in Russian market succeeded recently and they got approval from Russia now. Company started trial shipment  and it is expected to become a priority market for SKM in future. Company also entered in Nigeria and South African Markets recently.



Promoters efforts to become a debt free company is not a gimmick and they are working sincerely for that ,which is evident from the reduction in debt levels in recent times. Targeted debt free status by next few years will give direct positive impact in its bottom line and make this already attractive company as a compelling buy.

Once, majority of the shares of promoters were pledged with banks to avail loan facility ,but now  only 24 % is pledged and balance released on repayment of loan.Remaining is  expected to become pledge free  in next 2-3 years.


Another most important factor is the multi angle benefit to the company due to global recovery. From  last few year’s financial performance , it is evident that even a small positive change in global economy augers well for SKM .It is helping the company in three different ways



·         * Increased Demand from foreign markets


·         * Being an Export Oriented Unit , appreciation of Dollar and Euro against Indian Rupee is positive for the company 


·         * Strengthening  of Dollar will reduce the competitiveness of US manufactures in foreign markets especially in Japan  where SKM’s major competitors are US manufactures.



There is no big local market for processed egg as of now. But history says , In case of India ,  imitating the trends of food habits from developed markets is an eventuality . This will happen in future for sure. In such a situation , the peer company with years experience will benefit a lot and it will help the company  to de-risk  its business model by reducing over dependence on export – if necessary – in future.


Cost control efforts taken by management and their attention even in minute factors is another important point if we look through the eyes of  a minority share holder. Usage of recycled waste water to irrigate the garden and lawn in front of the factory is an example for this zero wastage strategy. They are even selling egg shells and earning few thousands in each year.


Conclusion  



I believe SKM Egg Products Export is a company operating in an Industry with huge potential in future and at the same time with high entry barrier.Most important point is the management’s  high ethical standards they exhibited even during their tough times. I strongly believe , god will always with such people and lead them into more success . This is one rare company from the micro cap space I can assure one thing – if there is any  failure for this company in future ,it will be only because of a reason beyond the control of promoters and its management.That much is the efforts they are taking to bring back the company into the right direction and further growth.For FY 2013-14 , on a consolidated basis company reported a Sales of Rs.264 Cr , a net profit of 7.20 Cr and an EPS of Rs.2.76. Stock of SKM appreciated post declaration of full year result and currently trading around Rs.60 .Prima-facie on a P/E based valuation method , this is neither cheap nor expensive.But to get a fair picture about last year profit ,we should dig deep. This 7 .20 Crore profit arrived after providing an Exchange fluctuation loss  of Rs.7.36 Crore and another one time expense of Rs.4.15 Cr. Considering the chance for stability in Rupee value ( compared with last year)  less forex loss is a possibility in current year .In the case of the mentioned one time expense incurred in last year , there is no chance to repeat it again. If we consider these two important hidden factors,valuation picture will change positively. In addition to this , company’s debt reduction will directly impact its bottom line and EPS figures going forward.Along with this quantitative figures, SKM’s market leading position, robust business plans with introduction of new products and penetrating new markets supported by a highly ethical management which is taking every effort to reach a debt free   Rs.500 Cr company in next few years  makes its an attractive pick for long term investors even at current level.


 Listing

During its worse time in 2011-12 ,company sought share holders approval to de-list its stock from BSE and remain listed only in one exchange. In the 17th AGM of the company, share holders approved a special resolution for this purpose and hence at present SKM Egg Product Exports is trading only in NSE( De-listing procedures from BSE yet to completed and theoretically still it is listed in BSE but suspended from trading )  and currently trading around Rs.50

Long-Term investors should latch on to this hidden gem with a target price of Rs 180-220 in next 3 years.