SP Tulsian of sptulsian.com feels that First Winner is ruling at IPO price of about may be 50% or may be 60% with a P/E multiple of 4 to 5. It is a very aggressively priced issue; clear skip for the issue. Sejal Architectural Glass is a very risky venture inspite of having the project potential and highly priced.
Q: Lot’s of chhota (small) Initial Public Offering (IPOs) have opened the first one is the First Winner do you like the story there?
A: You have rightly put it that chhota IPOs (small IPOs) are coming because the badda IPOs (big IPOs) have no guts and courage to tap this capital market because of their plans of having or the drawing boards that they have done the calculation at a very stiff pricing.
Coming on the First Winner; it's a pure textile story. Their weaving capacity has gone on swing just last year and may be because of the working capital pressure, its entire capacity is being used on the job work basis and that too at a capacity utilization of close to 51% and it is very strange to see the companies going into further expansion. Right now they have about more than 100 handlooms and they are adding on about 60 handlooms further, they are also putting a stitching capacity of about 5,000 shirts per day. Already we have seen the fate of all the textile stocks, the leading one which are into the integrated, having their weaving capacity, processing, dyeing and all sort of things are not doing well. They are ruling at their IPO price of about may be 50% or may be 60% with a P/E (Price-Earnings ratio) multiple of 4 to 5.
I am not here to take a call on the P/E basis for this IPO, which would be any where about 25-30 times. So the call is that it is a very aggressively priced issue; no questions of giving any thoughts, clear skip for the issue.
Q: What about Sejal Architectural Glass. How do you rate that one?
A: I would say that project is very interesting. They are going into the float glass, which is on gas base; they have tied up the gas at USD 7.5 per million British thermal unit. They have this sand supply, which is a critical raw material they have this soda ash availability in the region because they are setting up their project in Dahej. See the promoter’s background - they have all along been into trading, they have been procuring float glass from outside executing the main direct contracts as well as the sub-contracts. Now they are setting up a project of Rs 480 crore of which about Rs 320 crore is debt with a clear-cut debt-equity ratio of 2:1. Definitely the listed peer is float glass, which is in fact their feedstock is naphtha so they are not able to make a good profit. Their profitability has been taking a hit. But unlisted stock the Gujarat Guardian Ltd they have been doing quite well.
When you compare with the listed peer definitely you get a scary picture for the industry inspite of having the good future ahead of this sector. Promoters capability could also come into the way because Rs 320 crore debts, Rs 160 crore financing of which about Rs 100 crore odd is coming from the IPO, I do not think that financial structuring is really very healthy. Any delay in execution or any non-establishment or not settling with the production could really spoil the financials of the company and even if they incur a loss of Rs 40-50 crore in the first year. The whole projects can start facing problems.
It’s a very risky venture inspite of having the project potential. But again the question comes is of the stiff valuation probably at Rs 60-70 a share would have been an attractive investment leaving some room for the prospective investors who make money but not at Rs 100 or maybe at Rs 110.
Q: What about the third one Avon Weighing Systems?
A: I think the promoters have understood the present state of the market. So straight away they have gone with the price tag of at par, inspite of the book value of the share at Rs 120. The company has been all along marketing the electronic weighing scale of two Japanese manufacturers and having gained the marketing experience, having gained the feel of the market for the last six to seven years, now they have started or thought of venturing into the production of the weighing scale setting up a unit in Himachal Pradesh and it is a very small project of about Rs 40 crore.
But if you see the equity of about Rs 17 crore and the project financing, probably at par looking to the book value of Rs 20 as on today, and the experience of the promoter at least one could take a chance though the expectation should not be too high because this is a typically a macro-cap company with a expected marketcap of about Rs 30-40 crore. But if somebody has to see the downside, I do not think the share price can go below Rs 10, you can have the chances of making 20-30% profits on listing or may be even if you remain invested for couple of years into the stock.
SP Tulsian Disclosure: I do not have any interest in the IPOs commented upon.
Source: Moneycontrol.com
Monday, June 9, 2008
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment