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mragarwal
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Joined: 08/Jun/2007
Location: India
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   Topic: HB Stockholdings
Posted: 16/Jul/2007 at 12:53pm |
HB Stockholdings Ltd.
CMP – Rs.25
HB Stockholdings Ltd. is an Investment company belonging to the Delhi based HB Group & has huge value in investments in various quoted equities.
Investment Holdings
HB Stockholdings has an Equity Capital of Rs.25.44 crores. The company has zero debt. The company has investments of Rs.69.87 crores (Book Value), primarily in quoted and unquoted equities. The company has investments of Rs.48.09 crores in Quoted Equities.
The single largest investment of the company is Rs.12 crores for 30.37 Lakh shares of Jaiprakash Associates. The shares were acquired by the company a few years back at an average price of less than Rs.40 per share. The stock currently trades at Rs.725 which translates into Rs.220 crores as market value of its investment in
Jaiprakash Associates. (Rs.86 per share).
Besides its investments in Jaiprakash Associates, the company has investments in many other listed companies – these include DCM Shriram Industries (Current Market Value Rs.5.50 crores), Chemplast Sanmar (Current Market Value Rs.1.9 crores), Greaves Cotton (Current Market Value Rs.1.62 crores). The total number of quoted equities comprise over 150 stocks, whose value at the current price is roughly Rs.250 crores. Besides, the company has investments of around Rs.13 crores in unquoted equities. This includes investment in Credit Capital Asset Management Co. Ltd. which manages Taurus Mutual Fund.
Deep Discount to the Value of Investments
The stock of HB Stockholdings currently trades at Rs.25 and is available at a deep discount to the market value of its investments. Even considering its single largest investment in Jaiprakash Associates, the huge discount to the intrinsic value is not justified since HB Stockholding is not a holding company holding shares in group companies (where values rarely get unlocked).
Value Unlocking
The investment in Jaiprakash Associates made a few years back by the company is long term in nature and long term capital gains being exempt from tax will result in tax free profits for the company. This would result in a windfall whenever shares of Jaiprakash Associates are sold.
Risks & Concerns
Any effort on the part of management to dilute the value of the minority shareholder is the major risk we see with the investment in HB Stockholding.
Conclusion
HB Stockholding is a totally debt free company holding quoted equities whose market value at the current price is Rs.250 crores. The company has a market cap of just Rs. 65 crores. The stock thus trades at just 25% of the value of investments in quoted equities – not to mention its investments in unquoted equities where value unlocking may take place as and when these companies decide to plan listing; and the loans and advances of Rs.9.0 crores that the company has advanced to its group companies.
Consider an optimistic scenario – incase the stock price of Jaiprakash
Associates moves up to Rs.1000 and the company decides to liquidate its investment, this will translate into Cash Flow of over Rs.300 crores and a profit of Rs.290 crores (all exempt from tax). This would mean an EPS of over Rs.100. The Cash of Rs.300 crores if put to good use can work wonders for the company and its shareholders.
Whether and when the management will sell shares of Jaiprakash Associates; whether the money realized will be used prudently by the management; are questions that we donot have the answers to at this point in time, only thing we can say is that the stock which has been lackluster till now will witness great action when the management sells its holding in Jaiprakash.
At the current price of Rs.25 and current market cap of Rs.65 crores, the downside however looks restricted. Long term investors can choose to accumulate the stock.
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tyler_durden
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Joined: 24/Oct/2006
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Posted: 17/Jul/2007 at 1:02pm |
2 month old article from dalal street...the stock was in momentum post that article but has again lost the steam...if eps goes to 100...from current eps of 0.63 can you imagine where will the stock go!!!! current PE is 43....basant ji if they sell their shares PE rerating will happen or derating???
case 1 : if rerating happens then stock will reach the sky 
case 2: if derating happens even then it is bound to become a multibagger....
whats the catch in this scrip...if its so good then why it is lying dirt cheap??
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If you aren't fired with enthusiasm, you will be fired with enthusiasm.
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basant
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Posted: 17/Jul/2007 at 1:36pm |
The second last para pf the article explains the situation quite eloquently. Value will be unlocked only if the ocmpany disposes off JP Associates and distributes this money to the shareholders.
We should try and understand that if the company disposes off JP and invests in another company which is a lousy investment then shareholders will lose so the call is on a disoc**t to value of investments only oif that investments does not lose value!!!
Quite easily this is no Bershire Hathway so we should buy only if there is news of the com[pamny exiting and distributing that money amons shareholders. A look at the [promoters holding should throw some light on that if the holding is high then there is a chance of that value unlocking happening or else not.
Most of the time companies like these remian painfully valuable for longer periods of time.
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tyler_durden
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Posted: 17/Jul/2007 at 2:10pm |
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the promoters stake has been between 45-47% for past 2 years...so no clues from here
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If you aren't fired with enthusiasm, you will be fired with enthusiasm.
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basant
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Posted: 17/Jul/2007 at 9:21am |
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Ideally if the stake had been closer to 70% and above then promoters would have sold stocks and paid dividend but 45% reduces the incentive to do just that.
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'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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nav_1996
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Posted: 17/Jul/2007 at 9:36am |
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"the loans and advances of Rs.9.0 crores that the company has advanced to its group companies" -
Now things like this can continue to destroy wealth if they invest proceeds of the sale from their investments in businesses which don't scale up.
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basant
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Posted: 17/Jul/2007 at 10:12am |
Originally posted by nawendu
"the loans and advances of Rs.9.0 crores that the company has advanced to its group companies" -
Now things like this can continue to destroy wealth if they invest proceeds of the sale from their investments in businesses which don't scale up. |
Absolutely and this is what happens when promoters work with small stakes!
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'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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tyler_durden
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Posted: 17/Jul/2007 at 11:53am |
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i have spoken to someone who has got some insider links in this company....not worth holding....and even if we see past 3 years ...this stock has hovered between 14-37 ..thats it....
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If you aren't fired with enthusiasm, you will be fired with enthusiasm.
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