Bimetal Bearings

Bimetal Bearings would faintly fit in a Grahamian definition of a value stock. It has some unique features which makes the stock very enticing. Bimetal Bearings is a small-cap company with the following stats -
Outstanding shares - 0.33 crores
Loans (secured and unsecured) - 1.53 crores
Investments - 28.03 crores
Net CA - 37.14 crores
Face Value - 10 rupees
LY dividend - 6.25
CMP - 286 rupees
PAT - 10.98 crores

Lets examine this company using our principles of value investing and other derived techniques

a) Graham puts good focus on the net CA per share. In this case we are looking at 109 rupees per share. This is much lower than the CMP of the scrip (albeit a very good number when compared to most other stocks in the Sensex). We need cushion.

b) Investments are at 28.03 crores. If the investments are of a quantifiable and liquid nature then we should go for it. Unfortunately I was not able to locate the website of the company and hence couldn't go through the balance sheet. At liquid investments, the contribution of investments to the value of the company is 73.18 rupees. Being conservative, I'll take only 50% of this amount i.e. 47 rupees to our calculation. Thus, we have a net NCA (incl invt) of 156 rupees (109+47).

c) Bimetal Bearing has been giving positive profits for the last 5 years in a row. Sales have been increasing on an year-on-year basis for the last 4 years albeit at a slow pace of 10%.

d) The company has been giving dividend for the last 5 year. The last two yrs, the dividend ratio has been a healthy 6.00% and 6.25%. Two things are important here - the dividend yeild and the ability of the company to give the same or more dividend. Firstly, the dividend yeild would come 2.18% which is rather low (a risk free bond would give 5.5% over a one-year period). Secondly, the quarterly results indicate that PAT will close at the same levels as last year, so we can expect a similar dividend payout. I am doubly confident of a similar payout of dividend as the company has a good 22.1 rupees of cash in hand in it's books. So 6.25 rupees should not be dificult.

The company is a safe bet and I cant see too much of a roll down from current levels. I would recommend a small investment in the company and buy further on declines. Donot have too much of exposure in the company. I will have a further update on the company in another 2 quarters.