Print Page | Close Window

Shivalik Global

Printed From: The Equity Desk
Category: Investment Ideas - Creating winning portfolios!
Forum Name: Microcaps-When will value.be unlocked?
Forum Discription: Micro cap companies waiting for value unlocking. This is for the patient long term investor These companies are neglected by the markets and are waiting for a catalyst.
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=893
Printed Date: 18/Apr/2025 at 6:49am


Topic: Shivalik Global
Posted By: geek
Subject: Shivalik Global
Date Posted: 07/May/2007 at 2:11pm
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????


Replies:
Posted By: xbox
Date Posted: 07/May/2007 at 2:18pm
Avoidable.

-------------
Don't bet on pig after all bull & bear in circle.

Posted By: basant
Date Posted: 07/May/2007 at 3:11pm
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.
 
Most of the promoters are not interested in encashing their assets unless it is absolutely necessary for them and that is a problem - generally people are more satisfied in calculating their assets on spreadsheet rather then see it on the bank statement!!!
 
Unless we can locate a good value unlocking catalysts these businesses should always be looked at with a pinch of salt.


-------------
'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: geek
Date Posted: 07/May/2007 at 6:00pm
Thank you Mr. Basant and Mr. Vipul ..

Following is some additional information wherein the company has stated that they will develop the real estate on the existing land:

1. Company wants to realize the land value and have started on relocating the factory to new premises and then develop the existing land bank. Following is an announcement from the company:

Source: NSE - Shivalik Global Limited has informed the Exchange that "4 Acres of Land has been allotted to the Company by HUDA in sector 58, Faridabad, Haryana and the possession of same has already been taken by the company. The above land will be used for re-location of the Company's plant presently situated at 12/6, Mile Stones, Sarai Khawaza, Faridabad, Haryana. The existing land admeasuring 23504 sq. yards will become surplus and will be available for development on commercial basis, for which the company would initiate suitable steps shortly".          Date: 2007-03-21

2. Company's estimates on realizable value from the Land = Rs.300Cr

In the interview below, the company management estimates that the realizable value will be above Rs.300 crore (I saw another estimate at Rs.200 Crore) and even assuming 25% of this number accruing to the company, the net inflow to the company may be about Rs. 70 Cr to Rs. 75 Cr - which is the same as the current market cap of the company.

http://www.indiaearnings.com/sub_india/compnews.php?autono=225462&sr_no=1

Does the above provide reasonably good pointers, in your experience and views?

Thanks.

Posted By: basant
Date Posted: 07/May/2007 at 6:07pm
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.
 
Generally I would have liked the company to sell the land and take the money and do something that it is more efficient at.But in these situations one has to go by that broad call.
 
Personally I avoid investing in such situations becomes the returns are depenmdent upon an uncertain variable!


-------------
'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: geek
Date Posted: 07/May/2007 at 6:18pm
Mr. Basant,

That is a great point on "uncertain variables".

Yes, I too would have preferred a situation wherein the company sells the land & eliminates the debt - which will directly remove Rs. 9Cr of interest expense which adds over Rs.3.5 to the EPS & cuts the PE by half and distribute the rest as dividend.

I have already invested some amount (I am a small investor) in this stock.

I will hold on to the stock for now and take it as a lesson that Time will teach me .... what I take from your advice here is "Do not add to my position". based on the promise of uncertain variables.

Thanks a lot for taking the time to respond.

Posted By: geek
Date Posted: 07/May/2007 at 6:30pm
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.


Print Page | Close Window