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Vivek Sukhani
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Joined: 23/Jul/2006
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   Posted: 21/Mar/2008 at 11:43am |
Originally posted by smartcat
JP Associates: Market assigned it a market cap of Rs. 45,000 crores discounting FY11 earnings. By the way, if you look at FY11 earnings (3rd largest cement manufacturer in India, 1000 MW hydro power going onstream, real estate, construction contracts etc), it is still a fairly decent buy at Rs. 400.
But when things go bad, the markets don't seem to look beyond the next financial year. |
Smartcat, fear the period when market starts looking into the past 5 years of performance......
When I landed up in this investment world, do you have any clue how was I told to work out the EPS(E) while calculating P/E.....????
I was told to take an average of the last 10 years' worst performance and last 10 year's best EPS, with constant equity. Then find out the EPS.
Taking TTM was told to be the most liberal estimate.
Taking the last 10 year's worst EPS was told the most conservative estimate.
Coming to Jaiprakash, doing all these costs money bhai......and heavens forbid, if they have to leave anything in between for paucity of funds, the stock will get battered beyond any shape.
Regards,
Vivek
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kulman
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Joined: 02/Sep/2006
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Posted: 21/Mar/2008 at 11:55am |
One of the biggest lessons for me:
- Value & Growth are joined at the hip. But you must value yours.
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Life can only be understood backwards—but it must be lived forwards
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smartcat
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Posted: 22/Mar/2008 at 12:03pm |
| and heavens forbid, if they have to leave anything in between for paucity of funds, the stock will get battered beyond any shape. |
Over the next 5 years, they will need around $7 billion cash to execute their hydro power and real estate projects. Emkay Research spoke to the mangement and according to them, the capex will be funded on a debt to equity ratio of 2:1.
They won't be any dilution of equity because cash flows from cement and hydro projects will take care of the equity component. Debt should be easily available for hydro power projects because of assured cash flows. Their hydro power plants should have an RoE of around 25%.
Most power generation companies like NTPC, GMR, GVK etc outsource everything to EPC players. They are just operators of the power plants. JP Associates not only builds their own hydro power plants (strong EPC capabilities) but also uses its own cement and now steel (after purchase of Malvika Steel).
So execution risks are comparitively lower. Plus hydro power has the advantage of zero cost raw material (river water - it's free). EBIDTA margins will be incredibly high.
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Vivek Sukhani
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Posted: 22/Mar/2008 at 12:16pm |
Hey Smartcat,
Basant Sir may know about a company called hindustan Development Corporation( HDC Limited). This company was the star of 2000's and it took very aggressive expansion and bought a steel company for a much bigger amount. The rest that followed is history for some, nightmare for some, and a shake-out experience for some.
Perhaps, thats why I am a bit iffy about Tata Steel and Corus as well. However, one smart thing they have done is they have raised a very handsome amount from public. And its brownfield as well, where costs over-run can be reasonably budgeted and provided for, and there is no element for time over-run......
I have known very few companies which speak the whole truth about the state of affairs in case things are not going great. Perhaps, thats why I dont talk to dad about his companies. Most of the best decisons I have taken, have been entirely mine, without the crutches of any estimate.....so somehow i have no trust on anyone apart from myself when it comes to stock-picking.
Regards,
vivek
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smartcat
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Posted: 22/Mar/2008 at 12:28pm |
JP Associates paid Rs. 200 crores for the steel company - it is just backward integration. They are not exactly trying to compete with Arcelor Mittal.
Diversified portfolios can take some risks with can-go-bankrupt-anytime companies like Edelweiss, JP Associates, Pantaloon, Adani Enterprises etc - because my portfolio is propped up by players like RIL, ITC, Marico and Tata Motors.
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Vivek Sukhani
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Posted: 22/Mar/2008 at 12:46pm |
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good, you didnt write Pidilite there......
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basant
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Posted: 22/Mar/2008 at 12:47pm |
I am aware of HDC and the hype that surrounded it. This got in all the FIIs as well as local institutions at that point in time.
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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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Vivek Sukhani
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Joined: 23/Jul/2006
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Posted: 22/Mar/2008 at 1:34pm |
Originally posted by basant
I am aware of HDC and the hype that surrounded it. This got in all the FIIs as well as local institutions at that point in time.
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Good old people are seeing a HDC in JP Associates as well.....any thoughts then where it can land JP and its shareholders in?
By the way, my portfolio boasts of 740 tickets in Malanpur Steel.....as a matter of disclosure. Dad's purchase, not mine.
Regards,
Vivek
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