Consolidation & Multibaggers!
Printed From: The Equity Desk
Category: Market Strategies
Forum Name: Identifying Multibaggers
Forum Discription: Discuss specific attributes that investors could look at while choosing multibaggers. Also point out certain factors that investors tend to overlook while finding multibaggers.
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=556
Printed Date: 26/Jun/2024 at 4:02pm
Topic: Consolidation & Multibaggers!
Posted By: Equity Buff
Subject: Consolidation & Multibaggers!
Date Posted: 04/Nov/2006 at 10:02am
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Stocks in Industries in which consolidation is happening and where it is likely to happen can give us multibaggers. Let us try and identify them. To get things rolling, a few ideas:
Gitanjali - Jewellery.
Pantaloon, Trent - Retail.
Ashai - Glass.
Mahindra Gesco - Real Estate/ Construction.
ACC & Gujarat Ambuja- Cement. But I personally dont have a high preference for cyclical/commodity industries for investment.
Other ideas ?
Rgds.
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Replies:
Posted By: basant
Date Posted: 04/Nov/2006 at 10:34am
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Here we need to buy the companies that are being talken over not the ones that is making the take over. For eg. after the ACC buy out Gujarat AMbuja was saddled withn investment in its books that yields only dividend as income but ACC which was in demand and also had a high RoE jumped up.
Generally unless it is a promoter company (United SPirits, Tv18) it would make sense to buy the company that is being taken over. ------------- '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 |
Posted By: Equity Buff
Date Posted: 04/Nov/2006 at 10:50am
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Basantjee,
But in many cases the company which is taken over is not listed but going forward the earnings are reflected on the consolidated P/L of the company which has taken it over. In other cases a listed company can be taken over and merged with the company which has taken it over. So I think the above cases and also what you have mentioned all could work depending on how things are done. Ultimately as long as the earnings increase and ROE/ROCE increase is what will matter. These are my views and I stand to be corrected by the Expert (You).
Thanks & Rgds.
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Posted By: kulman
Date Posted: 04/Nov/2006 at 10:56am
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Asahi Glass from the list above needs to be looked at closely. Basantjee, we had some basic discussions on the same few days ago on other thread. Could you carry out your analysis on the same? Asahi is planning to start a unit in the Gulf/ME Asia.------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 04/Nov/2006 at 10:59am
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company which is taken over is not listed but going forward the earnings are reflected on the consolidated P/L of the company which has taken it over: I have found this creates value since idle cash/debt used for take over is lower then the return on operating assets of the company being taken over this adds to RoE and is EPS accreative.
In other cases a listed company can be taken over and merged with the company which has taken it over - Taking over a listed company is always costly unless it is a distress sale and that too affects RoE. Unlisted coimpanies do not have liquidity hence lower valuations.
Ultimately as long as the earnings increase and ROE/ROCE increase is what will matter: Absolutely. This is the end thing but we are just trying to discuss whether RoE will go up or not!
These are my views and I stand to be corrected by the Expert (You).:I hope that Expert has the same meaning in as is reflected in the Oxford disctionary and not on theequitydesk.com.
 ------------- '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 |
Posted By: Equity Buff
Date Posted: 05/Nov/2006 at 7:03pm
Basantjee,
A) Yes, taking over a listed company is costly unless it is a distress sale. But I feel if it is a distress sale and the company can be turned around, nothing like it, this is a great situation. But even if it is not a distress sale and the company which is taken over is managed well and earnings increased and it is intergarted (merged) well into the company which has taken it over, due to synergies and economies of scale the earnings can be increased along with the ROE over a period of time. Also with consolidation in the industry it is very likey that the industry and the companies can be rerated with a higher P/E.
B) Expert, I meant it in the true meaning of the word, with respectful regards.
 Regards.
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Posted By: pinki_kotak
Date Posted: 20/Aug/2009 at 11:45pm
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