My stock screener threw 'Asian Electronics' this week. Here's why -
a) From an asset perspective :
At an NCA (Mar-07) was Rs. 431 crores and total debt of Rs. 165 crores, Asian Electronic's NCAV is at 95.5 rupees per share. At a CMP of 196 rupees per share (May 1, 2008) ... the CMP/NCAV is 205% (I have started to move away from Grahamian's 66% rule .. it's too tough)
b) From an earnings perspective :
The business operates at an NPM of 25%. Barring the quarter of Dec '07, the business does over 100 crs of sales, yielding 25 crores of net profits on an average. Excluding the Dec quarter, the annual EPS is around Rs. 80. At a CMP of Rs. 196, we are looking at a normal PE of 2.45
Since the 400-500 levels the stock was in - about 4-5 months back - the stock has been beaten down to the sub-200 levels. This is owing to a disastrous Dec '07 quarter and general fall in the markets. This may be a special situation in the making ... if Asian Electronics can bounce back with it's usual 20 crores of profits for the next quarter then we have a story in our hands. (The research house, Prabhudas Lilladher, expects AEL to deliver 87 crs next quarter at a PAT of Rs. 13 crs (here)).
I have not invested in the stock yet .. wont mind a second opinion though.
Friday, May 2, 2008
Asian Electronics
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11 comments:
well the more thn expected fall is due to failure or not so expected results of energy frm plastic project...besides its lighting business is expected frm face competition frm listed like havells n unlisted like philips etc
besides in jan -feb some kind of court hearings are also going on
Hi shankar
not sure if i can see value in this company ..had a cursory look and a few points stand out
- the company's performance spiked in 2007. so we need to be sure if the current drop is a blip or return of earlier levels of profitability (pre 2007)
- sundry debtors have shot up to 365 days of sale!! (almost same as annual turnonver) in 2007. a major part of the capital raised in 2007 via equity and debt was used in funding sundry debtors.
- cash flows were negative in 2007
quite a few red flags ...would personally wait for the AR to see whats happening on these points
regards
rohit
Hi Rohit,
I agree on all points. I found the negative FCF part quite appaling. I put up this post to see if there was any short-term opportunity ... it sure doesnt seem like a value buy. You will however be surprised that a number of research houses had actually put AEL as the multi-bagger of the year (when it was at 450 rupees) .. strange !
Hi Nitin,
It would be interesting to see why the sales fell by e of competition quarter. Was it because of competition or lack or orders or shortage of raw materials .. understanding that will help. The arbitration is with GTF (Global trade finance ... this company was in the news recently. SBI bought a 91% stake).
In summary, I'll still approach a wait & watch approach. The best time to invest maybe after the Mar quarter results. The low PE is quite tempting.
Warm Regards
Shankar
Well I am stuck in this stock at avg price of Rs 335/- The third quarter was pathetic and there are lot of rumors concerning about there future earnings in terms of energy from plastics.Few ppl also say the numbers in earlier were all exaggerated numbers even though AEL has not actually achieved that kind of sales/bottom line ? Please suggest.Stuck badly.
Hi Anonymous,
I suggest you hold onto your investment in Asian Electronics for 2 more quarters. There is a higher probability of the stock going up rather than down.
The greater fool theory (others might see the low PE or beaten down price and start buying) is applicable here!
Warm Regards
Shankar
Hi Shankar,
Would you be able to share your stock screener ... ?
Regards,
SG
Hi Saurabh,
I'll send it ... You might need to revise a lot of numbers. It tracks about 500 stocks. I hv your email id.
Warm Regards
Shankar
Saurabh : your profile occupation reads 'UnEmployed' ... am I already gazing at the crystal ball, or are you being a bit pre-mature :-)
Hi Shankar,
I bought AEL after reading a review of the company's prospects in Moneylife. I was amazed with the plastic2power business and the management's target of 1000 crs revenues in 3 years from this business but after going thru the IDFC-SSKI report, i sold it off as the company was facing some problems in scaling up the new business and other reason was massive equity dilution. Fortunately, i sold at 520 after having bought the stock at 472.
Followup: Asian Electronics rises on block deals (14 May) (http://www.moneycontrol.com/mccode/news/article/news_article.php?autono=338229)
Pl send me the screener too.
Manmeet Narang
manmeet.narang@gmail.com
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