Originally posted by kailasp4u Micro Technologies figures: Sales9M-11  / 2010-03 / 2009-03 / 2008-03 / 2007-03  /  2006-03 560.81 459.18 289.93 188.10 106.36 58.67 Net Profits 98.29 89.35 71.91 54.37 32.09 16.99 Except in last 9m, growth has been good. But could be issues with corporate governance and equity dilution are keeping stock low. Equity capital in last 6 years is as follows: 13.92, 12.82, 10.98, 10.95, 10.5, 10.07 This alongwith corp govt issues could be factors. Or is there anything below carpet? Anyone?

If it is corp govt issue then what exactly it is? I am very desperate to know why Micro tech is trading at such a cheap valuation even after posting a very good sales & profit figures in last 5 years. Here is the snapshot of FY11.
Micro Technology -->
Current Mak Cap = 161 Cr,
Total Assets (629 Cr) = Networth (421 Cr) + Long term debt (207 Cr)
Sales = 599 Cr, Net Profit = 77 Cr (On consolidated basis)
Revenues & profit has grown consistently in last 4-5 years.
No huge amount of inventory.....
+ve Operating cash flow....
Paying dividend consistently....
ROE has been around 11% to 20% in last 4 years.
The outstanding numbers of FCCB as of 31st Mar 2011 are 120 ($12 mn)
The number of outstanding shares increased from 1.28 cr to 1.39 cr. in FY11...
Company allotted 5,52,000 equity shares to promoters and again 1,00,000  shares were allotted upon conversion of warrants allotted at price of 138 (CMP = 115) --IS this matter of concern? The amount of

Everything looks good with this company so really confuse why the stock is trading at such a cheap valuation?
Please help me to find out what is wrong with this company & why the market is ignoring this stock?
 

Originally posted by smartcat There is a big difference between consistently paying dividends and consistently paying ENOUGH dividends. The only way small caps IT companies can gain marketcap is by paying out 30 or 40% of their profits as dividends. Eg: eClerx. Higher dividend payouts will attract dividend yield mutual funds & individual investors towards such stocks. There are basically two reasons why markets don't trust the numbers put out by small cap IT companies - because the markets don't trust the promoters. Markets worry about - - Promoters putting up cooked & deep fried profit numbers - Alternately, if the profits are real, markets worry about promoters siphoning off the money from the company with their ingenious methods. Basically, the only way companies like Micro Technologies can get re-rated is when the management decides to pay higher dividends. Till then, holding on to such a stock is a risky proposition (both in terms of possible capital loss or not enough capital gain).

Originally posted by smartcat There are many consumer/FMCG stocks like DFM Foods, ADF Foods, Amar remedies, Agro Tech Foods etc that are trading at decent P/Es inspite of not-so-great dividend payouts. That's possibly because investors can "see" the products made by these companies in supermarket shelves, and that gives them enough confidence to buy the company behind the maker of those products.

Hi,

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