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Value buys - The intrinsic value is close to market price
 The Equity Desk Forum :Investment Ideas - Creating winning portfolios! :Value buys - The intrinsic value is close to market price
Message Icon Topic: Rayban Sun Optics- Co. has cash Rs30share Post Reply Post New Topic
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Vivek Sukhani
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Quote Vivek Sukhani Replybullet Posted: 26/Aug/2006 at 8:57am
Ajith and Basant,
 
I really dont know how I end yp getting against both of you all the time, but seriously speaking I get there quite unknowingly.
 
Coming to Rayban Opticals, I have certaun questuins to ask:
 
1.The company isnt paying any dividends, am I correct?
2.Price to Book is 2.5 times.
3.The book value I beleive is primarily built up with share capital and securities premium account.It has come yp with rights in 1993(1:2) and 1997(4:7).I beleive share premium account should be treated at par with share capital... after all you can also become cash rich by getting money from your dad....
4.Net Operating Income per share is just Rs.20.Which shows that sales level is pathetic given its Equity capital.
 
On the plus side, however, there are also some other things:
1.Good Current ratio & Quick ratio
2.Debt-free.
3.Operating margin is increasing.
 
Now, its a tricky call, if you ask me.I will have to see, how much margin expansion is possible. How much is volume expansion possible.Straightforwardly speaking, it doesnt merit an investment at this level.Wait for the time till the management declares its maiden dividend.
 
 
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Ajith
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Quote Ajith Replybullet Posted: 17/Sep/2006 at 11:10pm
Vivek,Mr. Basant
          As you note the current and quick ratios are excellent.The main plus
is market leadership-Rayban is dominant in the midpremium segment and a host of brands command a good share of the designer segments though there is competition from the liks of Armani,Police...
Rising disposable incomes,fashion trends all favour a spurt in demand and meeting this does not require any capital investment in the designer segment and there is unutulized manufacturing capacity so ROE and other ratios will turn highly favourable.
 Further margin expansion is unlikely.In fact margins may come down depending on management strategy.
This is a longterm call because you can never really be sure when the demand spurt will come.
But I think the "TIPPING POINT"will be breached within a year and given the underpinnings the PE may expand along with EPS.


Edited by Ajith - 17/Sep/2006 at 11:20pm
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Quote Ajith Replybullet Posted: 05/Oct/2006 at 10:54pm
News that Titan is venturing into Rayban's mid premium shades category is good  for the dominant Rayban as competition will boost the size of the branded sunglasses market which is unnaturally low at around Rs. 200  crores as Titan would have to advertise heavily in this very difficullt(to survive)industry thereby expanding the total pie.
 However,Rayban may be forced to become agressive  to defend its market share  if Titan performs well.


Edited by Ajith - 05/Oct/2006 at 10:58pm
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basant
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Quote basant Replybullet Posted: 05/Oct/2006 at 11:20pm
I liked your perspective
 
Titan would have to advertise heavily in this very difficullt(to survive)industry thereby expanding the total pie
 
Yes, generally monopoly markets do expand with the entry of new players.


Edited by basant - 05/Oct/2006 at 11:23pm
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India_Bull
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Quote India_Bull Replybullet Posted: 22/Oct/2006 at 11:10pm
Hi,
 
Rayban is a premier and must have brand amongst youngsters. Growth of malls and retail industry will help brands like Rayband, VIP Industries,Bata,Archies etc.
 
Basantji, could we have your views on the brands which are likely to scale up or grow up with a correlation to the increase in spend power and consumption patterns?
 
 
India_Bull forever Bull !
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basant
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Quote basant Replybullet Posted: 22/Oct/2006 at 8:54am
Rayban is a huge style cum status symbol but what prohibits me from getting invested into this stock is the limited market size for such costly frames. india continues to be a "Big Bazaar" market. How many of us on this forum have bought a Rayban sunglass?
 
Maybe over the next 2-3 years as consumption spends increase we could have Rayban dominating but for anything more to happen Rayban should launch a cheaper variant or else it would have a limited market size.
 
Now at the current levels there is hardly any downside risk and this is a classic value cum growth play. The thing is that growth could still be a few quarters away. Buy this stock with a 2010 vision and investors should be able to do well since by that time our income levels would have increased or Rayban would get more interested in the Indian markets and launch newer and cheaper products.
 
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Quote surajmnair Replybullet Posted: 22/Oct/2006 at 10:37am
Ray ban had a big brand equity even before they came into India.Their Aviator model( Top Gun - Tom Cruise fame) was a big hit all over the world.Rayban's inabilty to bring in new models resulted in the uprising of many brands like police, sting etc in the 90's.Till that time all the sunglasses companies were purely sunglasses companies.But by late 90's leading fashion houses like Gucci, Armaani,D&G also ventured into sunglass business.This really began to crack the market base of rayban , Police and all other excluisve sunglasses companies.
What i think the failure of Rayban is - inspite of having a huge brand equity and loyal client base in India,  they were unable to tap the markets with their retail endeavours and new models.
What we infer form this is, either Rayban should have a rebranding strategy or their is some serious concerns with the management.
Psychology of an average Indian sunglss consumer is - why you spend such a huge buck on sunglasses, when the fashion changes every 5 months.Better to stck to low priced '' chinese stuff'' which has got good looks.Indeed true, when your house or apartment which is Reinforced Cement concrete(RCC) gives you a strength of only 50 years, why you want your furnitures to made with teak wood which lasts over 100 years and at the same time the fashion trend in furniture changesevery 3-4 years.
If you look closely, in both the issues above said, the consumer spending pattern changed with the coming of  sunglasses from china and furniture from Malaysia.
Ray ban is not gonna die and holds a premium, but defenitely some rework has to happen.We need to continously monitor the company.....
Thanks Borad
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bub100
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Quote bub100 Replybullet Posted: 23/Oct/2006 at 8:01pm
rayban had good future no doubt but first they  will  go for buyback than go for expansion as most of the MNC do to get most of the benefit - losser is the shareholder who had no faith in the company.

thanks
gs
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