Fundamental Stock picks

[hopkins]

My first stock is this series is Alps Industry

This is a really undervalued, fundamentally strong, multibagger stock which is going to give u very good return if u keep it for 1-2 years. My target eps for this company for the current year is 22-25 rupees which will be somewhere near 32-40 in March 2007. The Company is expanding very agressively and recently it has acquired some 25000 spindles on lease in Uttranchal. See the bse website announcement and u will know that on 18 Feb Mr Tiwari, chief minister of Uttranchal will inaugurate the new facility. The company has plans of floating ADR/GDR in near future. Already there is near 7% foreign holding which will increase after ADR/GDR issue. I beleive the company is set for a re-rating since it is basically a fashion accessory like retailer and exporter. Thus the P/E multiple should be on the same lines as of Bata, Liberty, Petaloons, Trent etc. Recently there has been increase in volumes as well as price which justify my point. My short term target (3-6 months) is 250-300 rupees and long term target (2-3 years) is more than 500. One of the best buy at current levels.
All information taken from company's website http://www.alpsindustries.com/ and other authentic websites like bseindia, moneycontrol etc.

 

[hopkins]

My second stock in this series is California Software.

Hongkong based Chemoil Corporation holds some 29 percent directly in this company. Its a CMM level 5 company, and it have a number of collaboration and affliations notably among them is arrangement with Macromedia Inc (Now part of Adobe group) for licencing of their product. The Company has recently acquired M/s Informed Decisions and amalgamated it with itself. The latest quarterly results show the effect of these acquisitons. On a small equity base of 4.90 crore, the company has shown a quarterly profit of 3.35 crore. This trend is expected to accelerate in future due to many positive steps taken by the company. One good news for the investors of this company is that the management has decided to make a right issue of 7 shares for every 10 held in the price range of 55-66 rupees. The enhanced capital will be 8.33 crore. In the next financial year the company is expected to post a profit of 18-22 crore which gives it a eps of Rs.22-25. Since the company is a niche player in its field having 48 percent foreign holdings, it will get a P/E multiple of arount 15-20which gives it a price target of around 330-500 in 1-2 years time frame. Against this if somebody buys any share of this company at present price of Rs.108, his average purchase price will be only Rs.90 per share assuming he will subscribe to rights issue. This script seems a real multibagger in medium term.

All information taken from the company's werbsite http://www.calsoft.co.in/ and other authentic sites like www.bseindia, www.moneycontrol etc.

 

[Saint]

Hi hopkins,

It's really great to see these two posts although I don't know much abt fundamentals......great because you haven't just shot a "Buy California Software coz'I say so" and instead gave proper reasons and tgts and stop losses,etc.

Great attitude n great stuff,my friend!

Saint

 

[pkjha30]

Hi
Will you please comment on the price action in california software since its inception. Chart is enclosed

 

[Traderji]

Hi
Will you please comment on the price action in california software since its inception. Chart is enclosed

The chart shows a long period of consolidation (rounding bottom in technical term) between mid 2001 to early 2005. During this period there is an orderly transfer of shares from anxious sellers to serious, value minded longer-term investors. The first part of the pattern will always take shape after an extended decline to new lows. Against the backdrop of very negative fundamental news, sellers become anxious and willing to sell their shares for progressively lower prices after the 1999 tech boom.

The reason for the stock strength since March 2005 is that longer-term investors are beginning to accumulate large positions for the longer-term. Then a brief rally in price affords a new selling opportunity for those that did not exit ahead of the first major decline and the price action reverses creating a small resistance level (reaction high). Once again the stock moves lower, testing the most recent new low before buyers mysteriously step-in and support the stock.

After a few sessions meandering at the new lower levels, the stock begins to rebound on better volume on hopes of good fundamental news. The rally lasts for a few sessions but it is stopped dead in its tracks at the short term resistance level. Another decline begins on more bad news but it too is short-lived and a rally back to resistance occurs. This process is repeated one more time before sellers get the idea that perhaps the stock is not going to move significantly lower anymore and only to head higher.

 

[tickerboy]

The most fundamental problem is that promoter's stake is vey low - at 6.8%.

My second stock in this series is California Software.

This company is promoted by US based Chemoil Corporation. Its a CMM level 5 company, which has a number of collaboration and affliations notably among them is agreement with Macromedia Inc (Now part of Adobe group) for licencing of their product. The Company has recently acquired M/s Informed Decisions and amalgamated it with itself. The latest quarterly results show the effect of these acquisitons. On a small equity base of 4.90 crore, the company has shown a quarterly profit of 3.35 crore. This trend is expected to accelerate in future due to many positive steps taken by the company. One good news for the investors of this company is that the management has decided to make a right issue of 7 shares for every 10 held in the price range of 55-66 rupees. The enhanced capital will be 8.33 crore. In the next financial year the company is expected to post a profit of 18-22 crore which gives it a eps of Rs.22-25. Since the company is a niche player in its field having 48 percent foreign holdings, it will get a P/E multiple of arount 15-20 which gives it a price target of around 330-500 in 1-2 years time frame. Against this if somebody buys any share of this company at present price of Rs.108, his average purchase price will be only Rs.90 per share assuming he will subscribe to rights issue. This script seems a real multibagger in medium term.

All information taken from the company's werbsite http://www.calsoft.co.in/ and other authentic sites like www.bseindia, www.moneycontrol etc.

Kindly let me know if I am correctly analysing this company. Any criticism will be accepted with a open heart and mind.

 

[hopkins]

Regarding promoter stake I will like to say that low promoter stake is not a problem when foreign entities (the promoter M/s Chemoil corp holds close to 29 percent alone) controls near to 48 percent of the equity. What matters most is the quality and vision of the management. Here practically the company is run on the professional basis by the promoter due to support of the foreign stakeholder. If u analyse the shareholding pattern of Infosys Technologies u will notice that promoters hold only 19 percent stake still the company is well managed. By the way there is practically no promoters holding in Larsen and Toubro Limited still u see the management and the Company ...............

 

[pkjha30]

The chart shows a long period of consolidation (rounding bottom in technical term) between mid 2001 to early 2005. .....

...... a rally back to resistance occurs. This process is repeated one more time before sellers get the idea that perhaps the stock is not going to move significantly lower anymore and only to head higher.

Hi Dear Traderji
Thanks a lot.I am flattered. As always explanation is very lucid.
If I were to invest for long term would you advise entering this counter now.
Awaiting Reply

With kind regards
Pankaj

 

[hopkins]

UB Engineering


UB Engineering is a leading player in the construction industry having exposure to project both in india and in overseas market. It offers project execution services in powers,refineries,steel plant,petrochemicals,hydropower projects e.t.c.the company has a solid track record of over 30 years in the project execution field. The company though in deep red but is aiming a turnaround this year. UB's topline more than doubled to around 150 cr in 2004-05 vs 74 crore in 03-04 fiscal but owing to shortage of working capital, accumulated interest and severe liquidity crisis the pat was negative to the tune of 12 crore. For the latest quarter ended December 2005, the Company has shown a topline of Rs.70 crore and net profit of Rs.30 lakh, thus the company has a turnaround this quarter.

Some interesting facts about the company:

1. The interesting factor to consider is presently all the first rung engineering and infrastructure companies like L&T, Punj Lloyd, IVRCL, Gammon, Hind Construction, Nagurjuna construction, Simplex concrete piles, etc are having a order book size of nearly more than 3 to 5 times their annual sales. It means that their order book is overflowing and they have enough orders which will be executed over the next three to five years. Thus these companies cannot accept any work which requires priority in execution or which is relatively small in value becuase they are very well engaged for the next 3-5 years. At the same time these comanies are not looking at small contracts. This is straightway helping companies like UB Engineers, which is showing very good topline growth and is on a very very quick turnaround path. UB Engineering is sitting on a hefty order book of 310 crore. The prospects and growth in the capital goods and infrastructure sector is so strong that each and every company is bound to get something out of it. Just see how the rising sugar prices is doing wonders to all the sugar stocks. The same logic applies here as well, the growing infrastructure spending will benefit even the second rung companies like UB Engineering.
2. UB Engineering is looking for an out-of-the court settlment of atleast 50% of the total debtors of 123 crore. If this happens then the comany will add atleast 6 crore to its bottomline considering 10 percent interest saving on half of its debts. This will give an incremental EPS of Rs.5 to this stock. UB Engineering is also desperately trying to arrange some working capital.
3. UB group is exiting non-core business and they have already exited from companies like Hind Dorr Oliver,so "UB Engineering is a genuine takeover candidate". Unconfirmed reports says that like Hind Dorr Oliver, UB Engineering will also go to IVCRL Infrastruture. If this happens, the price will shoot up atleast in the multiple of 10 becuase the management does makes a big difference.
4. UB Engineering's input costs is slowing coming down which will improve its bottomline.
5. UB Engineering is giving a huge thrust to exports and is confident of getting large orders from kuwait,dubai e.t.c.exports accounted for 50 crore of the total turnover in 04-05. The company operates in overseas markets as well.

For more details one can visit the website of the company www.ubengineering.com
I believe at Rs.33 this is a great buy at current level and expected to touch at least Rs.100 within the next 12 months. Any positive news about debt restructuring or stake sale will do wonders for this stock. Even otherwise a steady rise in topline and improving bottomline will take this stock to higher level, albeit, slowly.

 

[hopkins]

Friends,

I recommened three stocks in this forum so far.
1. Alps Industries on 15 Feb 2006
2. California software on 15 Feb 2006
3. UB Engineering on 6 March 2006

Now the time has come to review the performance of these stocks. Out of these three stocks. I recommended Alps industries at Rs.160 levels and recently the stock has touched 250 mark. Though I recommend the stocks for 3-6 months, Alps has achieved more than 50 percent gains even before 3 months from my recommendation. I believe that the stock has a long way to go. Those who want to book profit at these levels can do so and wait for another good opportunity. Those who want to hold this stock for long term, can keep it for long term gains but my view is that now the journey upwards will be a little bit slow though steady.

In case of California software the stock has not performed well as expected so far. But still I will give it another 5-7 months after which I am sure, it will outperform the markets. My call on this stock was at 108 levels before right issue. Thus the real cost price including rights is Rs.88 or so which is very near to its current price of 91. Thus there is a marginal gain of Rs.3 on this counter so far.

In case of UB Engineering I have recommended this stock at Rs.33 levels on 6 March 2006. To everybody's surprise this stock has almost doubled considering todays price of Rs.60. For long term its an excellent stock. For short term I think its time to book profit on this counter.

In last couple of days the market has turned very volatile and FII are selling heavily. So I believe the market will correct and will consolidate for a couple of months before resuming its upward journey. My advise to all and sundry is to remain in cash till May end to read into all the financial results and then take a considered view of the year 2006-07. My disclosure regarding the above stocks is
" I hold some small holding in above stocks considering the expected correction and heavy run up in prices recently".