Thursday 19 March 2015

VALUE PICK - WATERBASE LTD.

About The Company & Products 
Waterbase Ltd. is a aquaculture company which started its operations in 1993 headquartered in Nellore, Andhra Pradesh.
The company is promoted by the respected Thapar Group. Thapar Group's past and present ventures include names like: KCT Coal, Crompton Greaves, Greaves Cotton, JCT, English India Clays, Ballarpur and many other companies.

The company as stated is into aquaculture and its main products are Shrimp Feed, Organic Feed and Processed Shrimp.

The feed mill of the company is into operation since 1993 and at present its capacity is 30,000 T.P.A. it is a smaller company when compared to Avanti Feeds which is more into prawn and fish rather than shrimp.

The Ace Investor - Value Pick
(BSE:523660) WATERBASE LTD.
Company listed on BSE, currently trading around 54 with a market cap of about 200 crores.
Promoter holding is at 52.47%, total debt on the books is at just around 12 crores as the company has reduced its debt.
The current price to earning ratio is around 11 and the stock looks very under-valued.

The company as mentioned above is into Aquaculture. Recent times for Shrimp industry has been bad, since the second half of CY2014 the industry is going through troubled times. More recently there has been news that Running mortality syndrome (RMS) is affecting the shrimp industry and India might miss the export target. But at the same time, there is a raw material shortage in Thailand which increases the chance of exports from Indian companies like Waterbase which is doing fairly well in troubled times.

The news about RMS and India missing the export target in the media has resulted in a correction in the share price of Waterbase, it was hovering around 95+ and now down to 50s so it is safe to assume that all bad news are now discounted and a healthy consolidation has already taken place.

Even in the testing times, Waterbase has reported good financial performance as for Dec14 quarter the company announced 10.45% sales growth and 30% profit growth YoY.
Check the annual result table below :-



Particulars
FY10
FY11
FY12
FY13
FY14
FY15
Period
12 months
12 months
12 months
12 months
12 months
Trailing
Sales
27.76
46.31
103.47
157.02
228.21
281.71
Operating Profit
1.20
4.09
10.47
12.05
23.74
32.33
OPM
-4.32%
8.83%
10.12%
7.67%
10.40%
11.43%
Other Income
0.61
0.8
0.66
0.58
1.38
2.13
EBIDT
-0.59
4.89
11.13
12.63
25.12
34.36
Interest
2.42
2.39
1.82
2.2
2.87
1.80
Depreciation
2.31
2.34
2.46
2.81
1.80
1.24
Profit before tax
-5.32
0.17
6.85
7.61
20.45
31.32
Tax
-0.38
-0.55
0.97
1.58
6.87
13.20
Net profit
-3.61
0.69
5.63
6.01
13.57
18.01
EPS
-1.46
0.28
2.19
2.34
3.52
4.66

As it can be understood from above result table, the company has turned around brilliantly in the last 5 years and even the trailing earnings show that in the testing times the company has performed well and exceeded the expectations.

Coming back to the industry, Aquaculture companies have requested the Andhra Pradesh govt. to take necessary steps to ensure seed quality as the vannamei shrimp farming seems to be under-threat from defective seeds by unauthorized hatcheries. It is feared that Vannamei shrimp could face the same problems as black tiger had years ago. I believe, that the govt. will be quick to act on it since there are no quarantine facilities in the state for the broomstick from the U.S. coming through port of Chennai.

Govt. policy plays an important part when any industry at whole is looking for a turnaround and for Aquaculture it looks awesome. Recent statement from A.P. C.M. N Chandrababu Naidu is: "Aquaculture to be a leading employment generator" at the Aqua Aquaria 2015 he asked officials and farmers to adopt the best technology and seeds to improve production so that sector could contribute Rs 2 Lac crores to the state's GDP by 2029. He also exhorted them to achieve a ten-fold increase in production in ten years to make the country leading one in aquaculture.

Another recent development is that the Chief Minister has also made a statement which states that aquaculture will get agriculture status in A.P. to increase fund inflows in the sector. A new aquaculture policy is also soon going to be announced to make A.P. the top exporter of marine products in the world.

Malaysian and Australian governments have expressed interest to work with the A.P. govt. in Aquaculture field R&D to improve feed and sustainability.

On the valuations front, as stated above Price to Earnings Ratio for the company is around 11. The key here is growth, Waterbase looks like Avanti Feeds of FY11 when Avanti had 200 crores sales and Net Profit of 4.28 crores. Now Avanti Feeds has transformed into a 1500 crores+ sales and 100 crores+ profit company.
At end of FY-11, Avanti Feeds too was hovering in the 30s and the 60s and now recently it was trading at 2000+.

All in All, I feel Waterbase is a value pick at current market price of 54. The future growth can make this a future Avanti Feeds, early to expect but i am really hopeful looking at the performance of the company. If we do not buy at these levels then we might have to buy after it would already have turned into a multibagger which is what has happened with many investors in Avanti Feeds.

Technically above 59 there is an medium-term triangle pattern breakout which suggests a target in triple digit but that is the technical charts part, this stock offers huge value for the long-term investors and hence a compelling buy.

Note: The above is not a research report but information as available on public domain and it should not be treated as a research report.

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

Disclosure: It is safe to assume that i might have Waterbase in my portfolio and hence my point of view can be biased. Readers should conduct their financial advisory before any investments.

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Monday 16 March 2015

Attention: Fresh Value Pick

Fresh value pick will be updated on our blog after 3:20:PM this thursday (i.e. 19th March 2015 after 3:20:00 PM)
 
Happy Investing!!

Sunday 8 March 2015

Interesting Stock To Watch

Zenotech Laboratories
BSE:532039
CMP: 31.20
This small company with a market cap of under 100 crores is looking like a "NOTHING" till today, It has losses it has debt and it has closed its manufacturing unit.
But the point here is: This company is owned by Ranbaxy Laboratories and Daichii Sankyo.
Ranbaxy holds 46.84%, Daiichi Sankyo holds 20% that is 66.84% promoter holding. Its ex-promoters (Chigurupati family) from whom Daiichi had acquired the shares is still holding more than 20% stake.
Which means a total of 86.84% is with ex and present promoters.

Now with the Sun Pharma - Ranbaxy deal, Sun Pharma becomes the owner of this small company and it also made a mandatory open offer last year to acquire Daiichi Sankyo's 20%+ in Zenotech at Rs 18 per share but now the open offer price has to be changed according to SEBI regulations.

Years back, Chigurupati did not want to sell his shares under 160 rs per share and yet Daiichi managed to acquire the company but till date the issue is sub judice and the case is going on.

I think it is mandatory for Sun Pharma to make the open offer and acquire the company fully. Via Ranbaxy, Sun Pharma already owns 46.84% and by buying additional it will further increase Sun Pharma's holding in Zenotech.

Now what about the future? Either, Sun Pharma can buy Chigurupati's stake too and delist the company or else Sun Pharma may start the operations for this company, In any case Chigurupati will not be easy to deal with as his earlier case against Daiichi is still stretched up.

I think Sun Pharma after gaining full control over Zenotech will start the business but this is a pure assumption, Company is not in good health.

Sun Pharma is on a acquisition drive, Last week it has purchased opiates manufacturing unit of Glaxo in Australia and i assume that Sun Pharma should do something with the Zenotech manufacturing units too.

Recently shares of another shut down company KREBS BIO rallied from 30s in Feb 2015 to almost 100 now after being taken over by IPCA Laboratories via open market and open offer route.

WE ARE BACK

Dear friends,
Due to unavoidable circumstances I had to take the blog off-air from 23rd February 2015 but I have realized that to push the important updates about already discussed stocks the platform needs to kept on.

Due to time constraints i am not sure if there will be any fresh stocks but at present the focus is on providing important updates on already discussed stocks.


Thanks for your patience,
Cheers!
The Ace Investor