Helios & Matheson
1) The outstanding feature is that it spends in proportion to what it generates from core business. It has around 1 Cr of left over free cash. While it spend 46 Crore is Capex.
2) Last year it spend 32 Crores on purchase of fixed assest. All of this was for, the annual statement put it... for future growth...
"the company incurred capital expenditure of `. 32.61 crore during the year and major part of capex is in the nature of plant and
machinery consisting of investment in computer equipment, software products, high end servers, net work solutions, infrastructure and
communication facilities connecting our global and domestic offices. this increase in capital expenditure has been necessitated by
routine need for replacement / renewal and support anticipated business growth. this capital expenditure has been funded out of our
internal accruals."
I like these words "support anticipated business growth" and "internal accruals".
3) The company is using these internal accruals to purchase other companies. This generates additional revenue while putting the cash-pile to good use. More importantly, these companies help strengthen the core operations. They have not bought any oil-wells thus far, so thats good news.
4) The exec salaries are leveled. Around Rs.13 lakhs for top execs.
5) Bad debts could be an issue in services industry. But with HM, debts more than 6 months old are 2% of total. So its a green.
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All in all, this is a good company and is here to stay. It is bullish about its future and is investing heavily in it, to the tune of 40 to 50 Crore each year. It is not debt laden, has home base in California, USA, generates strong cash flow and most importantly it is mid-sized and has clients spread in the most important sectors requiring IT serivces, viz Banks, Heathcare, capital market institutions, insurance businesses.
Even read the report from Crisil, which marks its fair value at Rs.97.