Hello could anybody get clues of the companies that equitymaster had mailed as potential multibaggers? I could get only 2 one is Opto circuits and the other in the banking sector Bank of Baroda or Bank of India.
Some Facts...
Forbes, one of Americas most respected and popular business magazines, featured this company on its 200 Best Under a Billion in Asia Pacific list (this was one of only 22 Indian companies to make it to that list)
Outlook Money, an Indian Investment magazine, awarded this company for its outstanding performance
Business Standard, an Indian Business newspaper selected it as the star SME of the year
"With 3 major acquisitions over the last year,
65% increase in revenues and 47%
growth in profits in the third quarter,
this company has quickly created
A League of Its Own!"
How would you like to
grab this stock for dirt-cheap and make
three times your investment in the next 2-3 years?
Dear Profit-seeking investor,
Not often does a company make public outcries and expert opinions look like flat-out lies.
But now that has happened!
The CEO of the company were talking about proudly exclaims, "The healthcare industry is recession-proof!" And why wouldnt he?
His company has not just completely rebuffed the global downturn... it has made three sizeable acquisitions, including a couple in high-cost locations like N. America and Europe... and still managed an operating margin of 29% without getting burdened in a pile of debt.
In the last few years, business has taken off for it domestically and on the global front as well.
Between FY01 and FY08, the company witnessed a 13-fold growth in standalone sales and 17-fold growth in standalone profits.
And it has also opened a new R & D center in Bangalore recently.
So its no wonder that one popular business magazine called the company a surprise star in the current downturn.
But while you and many others may find this exciting, it was not really news to our team at Equitymaster...
For we had already seen this coming!
Heres the Full Story...
A couple of months back, we did a conference call with the company. It literally oozed confidence.
The management was confident that the company will be able to grow at a robust rate despite the slowdown and we could easily see why...
Most companies, as you know, compete in intensely crowded - and limited - markets.
Because of this, profits are usually razor-thin.
And when in a recession like now, they have to spend all their money on protecting their share of the market and keeping old customers rather than funding growth.
But not this company!
The first thing in favour of this company is that it operates in the recession-free healthcare sector.
People have to continue spending on healthcare whether they like it or not, so the prospects for healthcare on the whole are terrific.
Additionally, India is still lagging far, far behind in this sector and the Indian government wants to make this right fast. So it will be pumping a LOT of money into this sector in the coming years.
As per the Investment Commission, the Indian Healthcare market is estimated to more than double in five years, going from US$35 billion to US$ 80 billion by FY12.
This company will benefit immensely from the increase in spending because its products are sold directly in the hospitals.
Add to this the huge market for the companys products in the US and Europe and the final picture is awe inspiring.
But hold on!
The crux of the story is actually this...
69 million cardiac patients expected in India by 2017,
Up from 43 million in 2007
Although the potential of the medical equipment industry is huge, it is the companys entry into an altogether new segment that is creating waves.
A wholly-owned subsidiary of this company has received registration for a new type of balloon for use in heart surgeries in India.
In traditional angioplasty, a balloon just clears the blockage in the artery and makes way for a stent (a small mesh tube that ensures smooth flow of blood and prevents subsequent blockage of arteries) to be placed there.
The stent dispenses drugs in the artery to minimize the chances of recurrence of the blockage.
What this new balloon does is that it not only clears the blockage in the arteries but also performs the function of the stent, which is to prevent re-clogging of the arteries.
The market for this segment is growing at 15% annually and is expected to touch US$ 12 billion by 2013..
And this company, by virtue of being one of the largest players in this segment is expected to corner a significant chunk of the same.
In fact, this company is the only one in the world to have obtained certification for consumer safety, health and environmental requirements as per the standards set by the European Union..
This has brought the company and this product into the league of international players where world-class quality is appreciated and rewarded extremely well.
And taking into account all these factors, sales growth of the order of 30% over the medium term looks well within the realms of possibility.
Things that make it even more exciting...
You might be surprised to know that even though this company has grown rapidly of late, it is actually only 19 years old.
So what are the reasons for it growing so fast?
1) The Personnel...
The company has been able to retain the core team for many years now. People have stayed with it for more than 10 years.
When the same people work with a common aim for a long period of time, you know big things can be pulled off.
The company can afford to spend relatively less time on planning and more on implementation because most of its people already know what their goal is.
2) The Management...
The company has done seven acquisitions since inception, and all of them have been managed brilliantly.
Most of its acquisitions have proved value accretive for the company with its consolidated Return on Net Worth improving from 23% in FY03 to 43% in FY08 and its debt to equity ratio decreasing from 0.9x to 0.3x during the same period.
It has been nearly debt-free despite huge growth, and has also paid dividends to its investors consistently.
Between FY03 and FY08, the dividend per share increased at a CAGR of 12% -- nearly 2-fold increase
3) Low production cost and widespread distribution network
Within the next few years, the company is planning to shift ALL of its production activities to India which will help it reduce its production costs greatly.
At the same time, the overseas acquisitions that the company made have enabled it to utilize the distribution channels of those companies to reach into new markets.
But heres the real "NEWS"...
The promoter and MD of the company recently exercised 540,000 warrants (one share per warrant) at a price which was 55% higher than the market price at the date of exercise.
What this means is that the promoters bought a right (warrant) to buy shares in their own company for say Rs 155. When the time came to exercise the right, the market price was Rs 100.
Now, they could have simply allowed the warrants to lapse and bought the shares from the market.
But no! They chose to execute the warrants, thereby making a case for the company to be a lot more valuable than what the stock markets suggest it to be.
Who better in knowing the company inside out than the management, and if the management is buying more shares from the open market, it is the biggest indicator of the potential of the company to turn into a multi-bagger.
Future Prospects for the Company...
We expect both the companys topline as well as bottomline to more than double in a short span of three years i.e. between FY08 and FY11.
The 2.2-fold growth in profits could very well translate into 3-fold growth in stock price.
The company initially started off by selling its components to large healthcare makers but its now starting to compete with them by launching its own line of monitoring equipment as well.
The acquisitions it made have enabled it to enter and compete in foreign markets also.
At present, the company has its biggest international market in the US and its global opportunity is estimated at US$ 16 billion in the invasive (stents and balloons) sector and US$ 150 billion in the non-invasive (medical equipment) sector.
And like I told you before... if the promoter was not confident about the real value of the company, he wouldnt have paid a huge premium to buy his own shares, right?
On the contrary, if he had the slightest hint of doubt about the companys future, hed be finding every possible way to silently sell his shares off.
So how can you find out complete details about this company?
Weve provided detailed information on this company in our new report titled, "Multi-bagger Midcaps", which is available exclusively to Equitymaster subscribers.
But this is just one of the 4 opportunities you will discover in that report.
Opportunity #2:
A Low-cost Housing Company
Set to Grow by Leaps and Bounds
What started as a textile company 16 years before Indias independence manufacturing clothes (dhotis) for Indias freedom fighters, and then became a name to reckon with in the potable water preservation business, is now Indias leading player in the low cost housing and construction segment.
The management over the years has done well to concentrate and emerge as leader in India's low cost housing and infrastructure sectors, which are the priorities of the government.
And it has also been competitive and innovative enough to recognise the opportunity for lightweight auto components that help improve mileage of automobiles.
On an overall basis, the companys story is that of innovation in as unusual a sector as plastics.
In growing its sales nearly 20-fold and profits more than 50-fold over the past 15 years, the company has rewarded shareholders with an average dividend payout of 21%.
We expect companys topline to grow 1.6 times and bottomline to grow 1.4 times its current levels between FY08 and FY11.
The company is also fully funded for its expansion projects by virtue of its significant fund-raising in FY08.
So you could earn returns of around 140% over the next 2 to 3 years by investing in this company now.
Opportunity #3:
A Bank that is growing at nearly
5 times the industry rate
Being nimble footed and niche has its own set of advantages. These virtues may not hurl you instantaneously on the pedestal of stalwarts but will surely streamline your path to sustainable long term success.
One such bank in India that has a shorter track record compared to its larger peers has set itself apart despite competition from domestic and international entities.
More importantly, while adopting the latest technology based initiatives to gain competitive edge in fee income, the bank has also retained the domestic flavour of conservatism.
Due to this, even at a time of economic turmoil the bank has been able to report high capital adequacy and very low non performing assets.
The bank was founded by an industry veteran with 22 years of experience managing various institutions at the top level.
It has a huge potential to grow in the fee income space by catering to the emerging Indian companies through its wide array of technology based service offerings.
And it recently won many prestigious awards that have never been won by any other Indian bank before.
So going forward we see the bank clocking a more than 2-fold growth over the next three years, which will still make it 2 times the sector growth.
You could earn returns of around 200% over the next 2 to 3 years by investing in this company now.
Opportunity #4:
A Transport-finance Company
whose stock appreciated 55 times
in the last 10 years...
With most villages, towns and cities in India still being accessible only by road, this companys business of providing loans for buying trucks...and more specifically, used trucks... makes it a key player in Indian logistics.
It is commonly said that India's real wealth lies in its villages. And this wealth is yet to be unleashed.
While companies are doing their best selling everything from soaps and detergents to mobile phones and cars to the increasingly affluent Indian villagers, there is one that is helping them grow their wealth - trucks!
This company was established in 1979 to finance the much neglected small truck owner. It is estimated that 80% of trucks in the country are in the hands of individuals.
So it started out by lending to the small truck owner to buy new trucks, but soon found that while the truck operators were honest the equity at their command was not sufficient to support the credit levels required to buy a new truck.
They therefore bridged the gap between aspiration and ability by deciding to finance used-trucks instead.
Interestingly, therefore this company does not even have any competition as it is the only organised player offering loans for used trucks, a domain avoided by banks and serviced otherwise only by money lenders.
We have met the management twice in the last twelve months and every time they have reinforced our confidence in the uniqueness of the business model.
As per a recent interview published in a leading Indian Business Magazine, the Chairman of the company said that sixteen private equity (PE) funds have, in recent years, made 25 separate equity investments across this group of companies... cumulatively pumping in about Rs 19.4 billion.
The company has had an average dividend payout ratio of 18% in the last 5 years.
And we expect it to double its business between FY08 and FY11 despite the downturn given its differentiated approach of tapping the pre-owned vehicle segment.
So you could earn returns of around 185% over the next 2 to 3 years by investing in this company now.
How can you get access to in-depth
information on all these companies?
As I mentioned before, full details on these 4 opportunities have been provided in our special report titled, "Multi-bagger Midcaps".
We will give you this report for FREE.
All we ask in return is that you try out our Premium research service MidCapSelect for 30 days.
MidCapSelect, as the name reveals, is our Midcap Stock recommendation service.
If youre looking for Small-cap type returns, but without the same degree of risk... and also better stability and consistent dividends like that offered by Large caps, then MidCapSelect is the service you need to be subscribed to.
MidCapSelect tells you which mid-sized companies are a "must-have" for your portfolio... and more importantly, it notifies you as and when they're available at attractive valuations.
But heres the kicker...
You probably already know that the entire midcap segment has been in disarray of late. Despite this, the stocks we recommended have done quite well.
Here are just a few examples:
a) A cement company
Recommended on 17th Sep 08. The stock is up 22% as against the mid cap index decline of 43%. We recommended the stock because we believed that investor concerns with respect to the cement industry were way too exaggerated. Investors also feared that the high financial leverage of the company will hurt profits during downturn. We found all of these concerns to be overdone and our faith was vindicated as the stock has returned 22% since our recommendation. An annualized return of 44% is fabulous under any market conditions let alone the current environment. Although the stock had gotten even lower since our recommendation, we would like to point out that we do not believe in the business of timing the market to perfection but are of the opinion that over time, markets do reward well performing and undervalued stocks.
b) A tobacco company
Recommended on 4th Feb 2009. The stock is up 14% as against the mid cap index gain of 3%. We recommended the stock because we believed that irrespective of the slowdown, the companys products will always attract demand. And to top it, the company had a rock solid balance sheet, which would ensure that it not only continues to pay robust dividends but also have ample cash left to fund its growth needs.
c) A packaging company
Up 18% in a short span of little over a month, the stock has outperformed the BSE Mid cap index, which gained by 3% during the same time period. Certain FII investors dumped the stock into the market some time back for reasons entirely different than the companys fundamentals. In view of the massive correction and the companys exposure to virtually recession proof sectors like FMCG and Pharma, we felt the risk reward ratio of investing in the company was overwhelmingly in favor of the investor. Our faith has been vindicated by the sharp 18% jump in the companys share price since our recommendation.
Thanks
Vijay Bhaskar
Some Facts...
Forbes, one of Americas most respected and popular business magazines, featured this company on its 200 Best Under a Billion in Asia Pacific list (this was one of only 22 Indian companies to make it to that list)
Outlook Money, an Indian Investment magazine, awarded this company for its outstanding performance
Business Standard, an Indian Business newspaper selected it as the star SME of the year
"With 3 major acquisitions over the last year,
65% increase in revenues and 47%
growth in profits in the third quarter,
this company has quickly created
A League of Its Own!"
How would you like to
grab this stock for dirt-cheap and make
three times your investment in the next 2-3 years?
Dear Profit-seeking investor,
Not often does a company make public outcries and expert opinions look like flat-out lies.
But now that has happened!
The CEO of the company were talking about proudly exclaims, "The healthcare industry is recession-proof!" And why wouldnt he?
His company has not just completely rebuffed the global downturn... it has made three sizeable acquisitions, including a couple in high-cost locations like N. America and Europe... and still managed an operating margin of 29% without getting burdened in a pile of debt.
In the last few years, business has taken off for it domestically and on the global front as well.
Between FY01 and FY08, the company witnessed a 13-fold growth in standalone sales and 17-fold growth in standalone profits.
And it has also opened a new R & D center in Bangalore recently.
So its no wonder that one popular business magazine called the company a surprise star in the current downturn.
But while you and many others may find this exciting, it was not really news to our team at Equitymaster...
For we had already seen this coming!
Heres the Full Story...
A couple of months back, we did a conference call with the company. It literally oozed confidence.
The management was confident that the company will be able to grow at a robust rate despite the slowdown and we could easily see why...
Most companies, as you know, compete in intensely crowded - and limited - markets.
Because of this, profits are usually razor-thin.
And when in a recession like now, they have to spend all their money on protecting their share of the market and keeping old customers rather than funding growth.
But not this company!
The first thing in favour of this company is that it operates in the recession-free healthcare sector.
People have to continue spending on healthcare whether they like it or not, so the prospects for healthcare on the whole are terrific.
Additionally, India is still lagging far, far behind in this sector and the Indian government wants to make this right fast. So it will be pumping a LOT of money into this sector in the coming years.
As per the Investment Commission, the Indian Healthcare market is estimated to more than double in five years, going from US$35 billion to US$ 80 billion by FY12.
This company will benefit immensely from the increase in spending because its products are sold directly in the hospitals.
Add to this the huge market for the companys products in the US and Europe and the final picture is awe inspiring.
But hold on!
The crux of the story is actually this...
69 million cardiac patients expected in India by 2017,
Up from 43 million in 2007
Although the potential of the medical equipment industry is huge, it is the companys entry into an altogether new segment that is creating waves.
A wholly-owned subsidiary of this company has received registration for a new type of balloon for use in heart surgeries in India.
In traditional angioplasty, a balloon just clears the blockage in the artery and makes way for a stent (a small mesh tube that ensures smooth flow of blood and prevents subsequent blockage of arteries) to be placed there.
The stent dispenses drugs in the artery to minimize the chances of recurrence of the blockage.
What this new balloon does is that it not only clears the blockage in the arteries but also performs the function of the stent, which is to prevent re-clogging of the arteries.
The market for this segment is growing at 15% annually and is expected to touch US$ 12 billion by 2013..
And this company, by virtue of being one of the largest players in this segment is expected to corner a significant chunk of the same.
In fact, this company is the only one in the world to have obtained certification for consumer safety, health and environmental requirements as per the standards set by the European Union..
This has brought the company and this product into the league of international players where world-class quality is appreciated and rewarded extremely well.
And taking into account all these factors, sales growth of the order of 30% over the medium term looks well within the realms of possibility.
Things that make it even more exciting...
You might be surprised to know that even though this company has grown rapidly of late, it is actually only 19 years old.
So what are the reasons for it growing so fast?
1) The Personnel...
The company has been able to retain the core team for many years now. People have stayed with it for more than 10 years.
When the same people work with a common aim for a long period of time, you know big things can be pulled off.
The company can afford to spend relatively less time on planning and more on implementation because most of its people already know what their goal is.
2) The Management...
The company has done seven acquisitions since inception, and all of them have been managed brilliantly.
Most of its acquisitions have proved value accretive for the company with its consolidated Return on Net Worth improving from 23% in FY03 to 43% in FY08 and its debt to equity ratio decreasing from 0.9x to 0.3x during the same period.
It has been nearly debt-free despite huge growth, and has also paid dividends to its investors consistently.
Between FY03 and FY08, the dividend per share increased at a CAGR of 12% -- nearly 2-fold increase
3) Low production cost and widespread distribution network
Within the next few years, the company is planning to shift ALL of its production activities to India which will help it reduce its production costs greatly.
At the same time, the overseas acquisitions that the company made have enabled it to utilize the distribution channels of those companies to reach into new markets.
But heres the real "NEWS"...
The promoter and MD of the company recently exercised 540,000 warrants (one share per warrant) at a price which was 55% higher than the market price at the date of exercise.
What this means is that the promoters bought a right (warrant) to buy shares in their own company for say Rs 155. When the time came to exercise the right, the market price was Rs 100.
Now, they could have simply allowed the warrants to lapse and bought the shares from the market.
But no! They chose to execute the warrants, thereby making a case for the company to be a lot more valuable than what the stock markets suggest it to be.
Who better in knowing the company inside out than the management, and if the management is buying more shares from the open market, it is the biggest indicator of the potential of the company to turn into a multi-bagger.
Future Prospects for the Company...
We expect both the companys topline as well as bottomline to more than double in a short span of three years i.e. between FY08 and FY11.
The 2.2-fold growth in profits could very well translate into 3-fold growth in stock price.
The company initially started off by selling its components to large healthcare makers but its now starting to compete with them by launching its own line of monitoring equipment as well.
The acquisitions it made have enabled it to enter and compete in foreign markets also.
At present, the company has its biggest international market in the US and its global opportunity is estimated at US$ 16 billion in the invasive (stents and balloons) sector and US$ 150 billion in the non-invasive (medical equipment) sector.
And like I told you before... if the promoter was not confident about the real value of the company, he wouldnt have paid a huge premium to buy his own shares, right?
On the contrary, if he had the slightest hint of doubt about the companys future, hed be finding every possible way to silently sell his shares off.
So how can you find out complete details about this company?
Weve provided detailed information on this company in our new report titled, "Multi-bagger Midcaps", which is available exclusively to Equitymaster subscribers.
But this is just one of the 4 opportunities you will discover in that report.
Opportunity #2:
A Low-cost Housing Company
Set to Grow by Leaps and Bounds
What started as a textile company 16 years before Indias independence manufacturing clothes (dhotis) for Indias freedom fighters, and then became a name to reckon with in the potable water preservation business, is now Indias leading player in the low cost housing and construction segment.
The management over the years has done well to concentrate and emerge as leader in India's low cost housing and infrastructure sectors, which are the priorities of the government.
And it has also been competitive and innovative enough to recognise the opportunity for lightweight auto components that help improve mileage of automobiles.
On an overall basis, the companys story is that of innovation in as unusual a sector as plastics.
In growing its sales nearly 20-fold and profits more than 50-fold over the past 15 years, the company has rewarded shareholders with an average dividend payout of 21%.
We expect companys topline to grow 1.6 times and bottomline to grow 1.4 times its current levels between FY08 and FY11.
The company is also fully funded for its expansion projects by virtue of its significant fund-raising in FY08.
So you could earn returns of around 140% over the next 2 to 3 years by investing in this company now.
Opportunity #3:
A Bank that is growing at nearly
5 times the industry rate
Being nimble footed and niche has its own set of advantages. These virtues may not hurl you instantaneously on the pedestal of stalwarts but will surely streamline your path to sustainable long term success.
One such bank in India that has a shorter track record compared to its larger peers has set itself apart despite competition from domestic and international entities.
More importantly, while adopting the latest technology based initiatives to gain competitive edge in fee income, the bank has also retained the domestic flavour of conservatism.
Due to this, even at a time of economic turmoil the bank has been able to report high capital adequacy and very low non performing assets.
The bank was founded by an industry veteran with 22 years of experience managing various institutions at the top level.
It has a huge potential to grow in the fee income space by catering to the emerging Indian companies through its wide array of technology based service offerings.
And it recently won many prestigious awards that have never been won by any other Indian bank before.
So going forward we see the bank clocking a more than 2-fold growth over the next three years, which will still make it 2 times the sector growth.
You could earn returns of around 200% over the next 2 to 3 years by investing in this company now.
Opportunity #4:
A Transport-finance Company
whose stock appreciated 55 times
in the last 10 years...
With most villages, towns and cities in India still being accessible only by road, this companys business of providing loans for buying trucks...and more specifically, used trucks... makes it a key player in Indian logistics.
It is commonly said that India's real wealth lies in its villages. And this wealth is yet to be unleashed.
While companies are doing their best selling everything from soaps and detergents to mobile phones and cars to the increasingly affluent Indian villagers, there is one that is helping them grow their wealth - trucks!
This company was established in 1979 to finance the much neglected small truck owner. It is estimated that 80% of trucks in the country are in the hands of individuals.
So it started out by lending to the small truck owner to buy new trucks, but soon found that while the truck operators were honest the equity at their command was not sufficient to support the credit levels required to buy a new truck.
They therefore bridged the gap between aspiration and ability by deciding to finance used-trucks instead.
Interestingly, therefore this company does not even have any competition as it is the only organised player offering loans for used trucks, a domain avoided by banks and serviced otherwise only by money lenders.
We have met the management twice in the last twelve months and every time they have reinforced our confidence in the uniqueness of the business model.
As per a recent interview published in a leading Indian Business Magazine, the Chairman of the company said that sixteen private equity (PE) funds have, in recent years, made 25 separate equity investments across this group of companies... cumulatively pumping in about Rs 19.4 billion.
The company has had an average dividend payout ratio of 18% in the last 5 years.
And we expect it to double its business between FY08 and FY11 despite the downturn given its differentiated approach of tapping the pre-owned vehicle segment.
So you could earn returns of around 185% over the next 2 to 3 years by investing in this company now.
How can you get access to in-depth
information on all these companies?
As I mentioned before, full details on these 4 opportunities have been provided in our special report titled, "Multi-bagger Midcaps".
We will give you this report for FREE.
All we ask in return is that you try out our Premium research service MidCapSelect for 30 days.
MidCapSelect, as the name reveals, is our Midcap Stock recommendation service.
If youre looking for Small-cap type returns, but without the same degree of risk... and also better stability and consistent dividends like that offered by Large caps, then MidCapSelect is the service you need to be subscribed to.
MidCapSelect tells you which mid-sized companies are a "must-have" for your portfolio... and more importantly, it notifies you as and when they're available at attractive valuations.
But heres the kicker...
You probably already know that the entire midcap segment has been in disarray of late. Despite this, the stocks we recommended have done quite well.
Here are just a few examples:
a) A cement company
Recommended on 17th Sep 08. The stock is up 22% as against the mid cap index decline of 43%. We recommended the stock because we believed that investor concerns with respect to the cement industry were way too exaggerated. Investors also feared that the high financial leverage of the company will hurt profits during downturn. We found all of these concerns to be overdone and our faith was vindicated as the stock has returned 22% since our recommendation. An annualized return of 44% is fabulous under any market conditions let alone the current environment. Although the stock had gotten even lower since our recommendation, we would like to point out that we do not believe in the business of timing the market to perfection but are of the opinion that over time, markets do reward well performing and undervalued stocks.
b) A tobacco company
Recommended on 4th Feb 2009. The stock is up 14% as against the mid cap index gain of 3%. We recommended the stock because we believed that irrespective of the slowdown, the companys products will always attract demand. And to top it, the company had a rock solid balance sheet, which would ensure that it not only continues to pay robust dividends but also have ample cash left to fund its growth needs.
c) A packaging company
Up 18% in a short span of little over a month, the stock has outperformed the BSE Mid cap index, which gained by 3% during the same time period. Certain FII investors dumped the stock into the market some time back for reasons entirely different than the companys fundamentals. In view of the massive correction and the companys exposure to virtually recession proof sectors like FMCG and Pharma, we felt the risk reward ratio of investing in the company was overwhelmingly in favor of the investor. Our faith has been vindicated by the sharp 18% jump in the companys share price since our recommendation.
Thanks
Vijay Bhaskar
