Shivalik global came out with an IPO last year at Rs. 60 per share and got thoroughly battered down since then.

Details as of May 07, 2007:

Price Range: Rs. 29 - to Rs. 31
Market cap: approx Rs. 70 Cr

Results for the year ending Mar 2007

Revenues = Rs. 212 cror (stand alone)
Net profit = Rs. 8.5 Cr (stand alone)
Depreciation = Rs. 6 Cr (stand alone)

Equity = Rs. 24.25 Cr
Promoter Shareholding = 58.77% (Promoter is increasing the shareholding)

Price-to-Earnings < 9
Price-to-cashflow < 5.5
Price-to-Sales < 0.25 (on consolidated revenue of Rs. 300 Cr)

Debt: Status as of 31 Mar 07, Not known to me, but Interest exp is increasing

The results above are on stand alone basis, but they have recently amalgamated with their group company called Shyam Tex and consolidated revenue is probably upwards of Rs. 300 Cr and Net profit of about Rs. 10 Cr.

They have a land base of over 4.5 acres and 2,50,000 sq ft f constructed area near Mathura Road, Faridabad (near Delhi). Back of the envelop calculation results in land base value would close to equal the current market cap of Rs. 70Cr.

Company acquired another land and just started on the process for relocating the existing factory and has stated that they will develop the current land that they are vacating into a real estate property.

Market price has been fluctuating around Rs. 30 mark.

Coverage by Analysts ..

I have not read much coverage on this stock, except for the advices not to "subscribe to their IPO". The only exceptions are articles on Value Notes website with recommendations from Mr. Kunal Bhakta and Mr. Ashish Chugh.

From my perspective "Margin of Safety" seems high on this stock at the current price range of Rs. 29 to Rs. 30; in view of:

a) P-E Ratio and PCF ratio (there are better textile stocks purely on PE basis),

b) low PSR (even some improvement in margins will have ignificant impact on bottom line)

c) Land value


Do you see any fallacies in the arguments above and what are the downsides that I may have ignored?

Bottom line .. would you think this stock is a BUY????





Edited by geek - 07/May/2007 at 2:13pm

Same problem that so many micro caps face. When will value be unlocked? Will the promoter sell off the land and use the money to create high return businesses or just squander it off.

These calls are either too difficult or too easy. That is because the management factor comes into play now and there lies all the assumptions.

Basantji,

On a related note, I notice that there are similar stories in "Micro Cap" section where there could be "value unlocking" due to real estate holdings, but the question is will the value be unlocked wisely in a manner that benefits the investors, and when this unlocking would happen.

I realize that the "story (Shivalik Global)" I am forcing myself to "believe in" may equally be true for many other companies .. but there certainly is a lot of uncertainty and many of these stories could just remain what they are today .. a mirage of value that is seen only on paper!

I do need to take these with a pinch of salt.

Thanks again for your response.