Winning Strokes

First of all let me begin by saying due to paucity of time, I'm not able to update my blog on regular basis. However, today I made my mind to put fresh inputs for my ardent followers and regular blog readers. 

The BSE Sensex closed at 52,386.19 down 182.75 points (-0.35%), while the Nifty ended the day at 15,689.80 down 38.10 (-0.24%) points. The consolidation is likely to continue in this coming week, with the marketing keeping a watch on the new (Delta) variant of Covid-19, macroeconomic data and the progress of monsoon. Photo: Ratefinanceinstitute.com.

However, stock specific action could continue, as the earning season kicks off with around 75 companies set to announce their June quarter numbers in this week.

These include Infosys, Wipro, Mindtree, HDFC Asset Management Company and Larsen & Toubro Infotech. The market is still buy on dips as long as Nifty holds 15,500/15,000. Buy beaten down companies with good fundamentals. 

#Den Networks Ltd (Rs.56.20), a zero debt company with high Piotroski Score  (Companies with strong financials) is consolidating around Rs.55/62 ranges. It has market cap of Rs.2,682 Cr, enterprise value of Rs.2,426.40 Cr, sales growth of 3.74%, ROE of 8.68 %, ROCE of 8.50 %, profit growth of 184.94 % and EPS of Rs.5.15. 

It has a TTM PE of 13.54 against the Sector PE of 24.33, showing that it is undervalued as compared to its peers. Book Value Per Share: Rs.59.51 and P/B: 0.94. Since it is a reputed company from the Reliance Industry group it should trade at a multiple to its book value. For example the book value of its parent company Reliance Industries Ltd is Rs.1240.37 against the market price of Rs.2071.20.

A - group companies like Den Networks Ltd are well-established successful business enterprises with steady streams of revenue. Their growth over time may be slow but generally remains steady. 

Also,  just because a stock has a low share price does not necessarily mean the company is not worth accumulating. For example look at the enterprise value of Den Networks which Rs.2,426.40 Cr against the market cap of Rs.2,682 Cr. 

The thumb rule is that a company with more cash than debt will have an enterprise value less than its market capitalization (Eg. Den Networks Ltd). In FY20, the company came out with a preference issue at Rs.72.66 each including premium of Rs. 62.66 per share.

With Mukhesh Ambani at the helm, the stock of this cash positive (Cash: Rs.2,326.91 Cr) is likely to triple (Rs.160/166) from the CMP. Keep accumulating on dips. The immediate targets could be Rs.64/71/76/86/91.

#The stock of Patel Engineering Ltd (Rs.18.40) is waiting for fresh news for upmove. The enterprise value of Rs.2,653.55 Cr against the market cap of Rs.856.43 Cr gives indication of the future share price. It has a debt of Rs.2,295.82 Cr (for which OTS has been done with the lenders) and Cash: Rs.113.73 Cr.

Promoters' ownership: 56.23%, which means they remain the decision maker. 

10 Years Aggregate:

• CFO: 2,133.75 Cr
• EBITDA: 4,363.96 Cr
• Net Profit: 305.96 Cr

#The stock of Future Retail Ltd (Rs.63.45) is trading near its book value of Rs.62.86. The company's e-commerce business has been a hit so far. The things are set to improve further as the Covid - 19 pandemic has given a solid impetus to the online shopping companies, because of the newly introduced Work From Home Culture. Now it seems most people want home deliveries. 

Also, I had mentioned several times earlier in various electronic platforms like Facebook, Twitter, LinkedIn, etc that Indian rules (laws) bar marketplaces from holding inventory. Buying a retail company is another name for holding inventory & taking control. Hence, Amazon I believe is standing on thin ice, as far as this case is concerned. 

Moreover, against the market cap of Rs.3,440.79 Cr, it has a whopping enterprise value of Rs.12,182.09 Cr, which makes it an attractive bet for value investors. This figure along with other factors can take the scrip to Rs.240/250 in the coming days. Keep accumulating in dips. 

Financials:

• Revenue (TTM): Rs.8,781.45 Cr.
• Earnings (TTM): Rs. (-) 2,577.89 Cr.
• Cash: Rs.156.20 Cr.
• Total Debt: Rs.8,889.42 Cr

You can see from the above that the total debt is almost equal to its revenues.

The Singapore International Arbitration Court will start hearing the case from tomorrow. But,  with company's online business clicking, it is irrelevant who wins the battle. However, whoever gets a positive verdict from the honourable Supreme Court of India, the company (FRL) would be ultimately benefited.

#I am thinking to recommend a moment counter  this week. If you want to join my #Crorepati #Scheme, you should send me a mail at: suman2005s@rediffmail.com.