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Tuesday, February 12, 2013
Crest Animation Studios Ltd
The government should immediately buy out the toxic assets of the companies or give cheap loans to those companies who are in the distressed stage. When the loans are being restructured in record number of cases, when credit off-take is falling, when we still have menacing interest rate regime---the markets will rise, only when it is MANIPULATED TO THE HILT. This is what is happening. There is no rise in the small and mid caps. The INDEX MANAGEMENT is going on to give a feel good factor among the ignorant voters, who will think that since the Indices of the Indian Stock Markets are doing fine----hence the markets are doing fine. THIS FALLASY IS BEING EXPLOITED BY THE GOVERNMENT TO THE HILT OR ELSE WHAT EXPLIANS THE RISE IN THE LARGE CAPS AND A VIRTUL ROUT IN THE SMALL AND MID CAPS. ALL THE FII MONEY IS BASICALLY USED FOR INDEX MANAGMENT. I do not know what the governmemnt is doing at this juncture and public wealth is being destoryed everyday.....? The steriods which the RBI unfortunately applied during the last one and half years is taking its toll as is expected. In the efforts of inflation management, the whole economy has been ruined. I have been vocal about such stereotypes, but then who cares.........!! Economic Principles are never linear, there were economies where even at 10% plus inflation, they had good growth. So, one cannot say, that because inflation is high one needs to keep interest high for eternity. A small rise in the Indices (Sensex and Nifty) is MASKING a BROADER FALL in the markets. Indian markets are collapsing and if the government does not act fast, it could be disastrous. I again reiterate, there is genuine effort of indices management going on for the reasons best known to all. When the shares like Unitech Ltd and D B Realty are down around 20% in a single day, and HDIL collapses to almost half its value in just one month, we need to rethink and calibrate our goals and asprirations, or we need to get confirmation, whether the retail investors should join this DEATH TRAP or NOT.........??!! Yes, the market is totally manipulated: Kingfisher Airlies Ltd is hitting upper circuits and United Spirits Ltd is also up, but U B Holdings Ltd, insptie of better resutls is coming down.......DOES IT MAKE ANY SENSE.....??!! In the US, the economists, the government and the Fed works in tandem to lift the sagging economy. Here our over smart economists will say, "It is not the duty of the RBI to clear up the mess of the government or more pathetic, RBI's action is limited to inflation management only". These are all stupid comments---because the work of any Central Bank is to maintain a balance between inflation and growth. We are now in STAGFLATION STATE----so who is responsible? Is the RBI not more responsible than the government who has been indirectly asking the RBI to cool down its hawkishness? During the last 4-5 years due to the policies of the RBI (and two disastrous years when Dr.Pranab Mukherjee was the FM) no one did make too much money from the markets. Look at the US markets....they are booming,....and look at our economy----WE HAVE DESTROYED IT.....!!
Many of you I know perhaps got perturbed by a 20% decline in the shares of Crest Animation Studios Ltd, yesterday and around 10% today. But again yesterday, I spoke with the sources close to me and they said it is due to external factors and has not much bearing with the fundamentals of the company. But what I could understand from the discussion is that probably due to some financial crunch, which it is trying to negotiate with the lenders.
But having said that, let us see the Asset Composition of the company: (i) Investments---39.83% (ii) Fixed Assets--4.94% (iii) Inventories--16.48% (iv) Trade Receivables--11% (v) Loans and Advances--18.43% (vi) Other Current Assets--9.28% (vii) Cash and Bank Balance--0.04%.
The scheme of things look quite healthy as of 31st March, 2012. Also, the debt equity ratio has come down from 2.11 in FY11 to 1.60 in FY12. Now, lower of debt-to-equity ratio is favorable indicating less risk. Higher debt-to-equity ratio could be potentially hazardous because it means that the business relies more on external lenders thus it is at higher risk, especially at higher interest rates. An increasing trend in of debt-to-equity ratio is also alarming because it means that the percentage of assets of a business which are financed by the debts is increasing. But here we have a decreasing trend and hence favourable for the shareholders.
The company's Indian Feature film which got struck up in the last fiscal is expected to be released in Summer of 2013. However the worst seems well behind the company as the 1st quarter of 2012-13 (FY13) has shown results on the work put in by the Company on different DVD/Television contracts, as the collections have been robust enough to take care of ongoing operational requirements as well retiring small portion of short term borrowings.Continued negotiations and discussions are on for new contracts as well as for new Joint Venture initiatives for ensuring a robust and predictable future pipeline and guaranteed work for hire services.
CHANGES IN GROUP STRUCTURE:
By Virtue of Amalgamation which came in to effect 26 July, 2011, the following downstream subsidiaries have become direct subsidiaries now.
1. Crest Animation Inc. (CAI)
2. Crest Animation Productions Inc.(CAP)
3. Roop BDR Productions Inc. (RBP)
During FY12, the company entered into television contract with Moonscoop LLC for producing 13 episodes of 11 minutes each titled "Gloe". The company took television contract for Ireland based studio Brown Bag Films Ltd, for producing 52 episodes of television series titled "Octonauts".
The company has successfully completed and delivered DVD project Swan princess 4 for Sony pictures in FY12. Due to success of fourth series of Swan Princess, the company has bagged the contract for the fifth series of Swan Princess.
The company continued to work on the second feature film "Norm of the North" which is a part of Lionsgate deal. However, one of the financiers to this project defaulted their obligation to fund due to financial crisis in their region. The company is reviewing intended legal recourse to be initiated against the financier. Alternate
financing arrangements are also under negotiation. The company continued to work on "Ribbit", another CGI feature for limited release which your company is co-producing with KRU Capital Sdn. Bhd, Malaysia
The Company’s information technology division known as “STG” i.e System and Technical Group which has been innovating and deploying technology successfully since past few years through various means like high-performance storage, workflow and asset management tools, grid computing based render farm etc. These deployments have enhanced project delivery capabilities removed bottle necks related to transfer of files and approval delays.
Currently the Company is working on next-generation computing based on “Hardware Accelerators” for visualization and computation to increase the productivity of the studio at highest level. Crest is the only studio in the Asia-Pacific region working on such technologies to enhance the performance of studio. The Company has adequate positive net worth remaining after adjusting losses and has not witnessed the loss of any of its critical clients nor the stoppage of work from them.
In such a situation I do not find any valid reason why the scrip tanked around 20% yesterday. I think investors should accumulate the scrip in distress selling and wait for sometime to make money. CMP: Rs.7.65