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April 30, 2015






originally published April 30, 2015. Updated with new photo via deposit photos @bhofack 4/15


Day 121.



We had a busy Saturday this past week and I didn't have a meal planned. Usually that means take-out or macaroni and cheese, but instead I dug into the depths of the freezer and found a forgotten bag of frozen stew meat.


I wasn't sure exactly what to do with it, so just kept pulling
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April 28, 2015
Issue Highlights

Issue Period
28/4/2015-30/4/15
Price Band
R. 615-625
Issue Size
Rs. 600 crore
Issue type
100 % book built
Minimum bid lot
24
Face Value
Rs. 10
Registrar
Karvy Computershare Pvt. Ltd.
Listing
Bse, Nse

Issue Details


Offer for sale: mainly by 3I research Mauritius and P5 Asia (and a few promoters)
OS share prior to the issue: 2, 58, 97,669
OS shares after the issue: 3, 54, 97,669 #

Allocation:
QIB (Qualified Institutional Investors): At least 50 % of the issue size
            NB: Out of which Rs.180 crore already raised from the anchor investors.
NII (Non Institutional Investors):  Up to 15 % of the issue size
RII (Retail Individual Investors): Up to 35 % of the issue size

Company Profile

The company was initially incorporated as Valuable Media Private Limited in 2004 at Mumbai and finally the name was changed to ‘UFO Moviez India Ltd.”.
Presently, UFO Movies is India’s largest digital cinema distribution network and in-cinema advertising platform. The company operates India’s largest satellite based digital cinema distribution network and D-cinema network with an overall 54 % market share.
UFP Moviez delivers its content through -

(1)UFO M4 : It is the satellite based E-cinema movie delivery platform with a wide reach around 3,462 cinema screens across India.

(2) D-cinema network: This format is used mainly by major Hollywood movie studios and UFO movies collects d-cinema VPF from these studios and provides D-cinema equipments to D-screens-cinema across India.

The company receives revenue from-

      (1)   Advertisers: through in-cinema advertising
Revenue Breakup



     (1)   Advertisers: through in-cinema advertising

Impressive CAGR growth

   (2)   Movie producers and distributors: for secure delivery and screening of their movies


The modus-operendi


Strengths:

     (1)   The company enjoys a leadership position in the digital cinema space with a market share of 54 % and enjoys a status of an essential partner for movie producers, distributors and exhibitors as a majority of films are released on its network.
     (2)   The digital model has significantly reduced the distribution costs for producers and audience too get a faster access to new movie releases that too with a high quality viewing experience.

Risks:

     (1)   Patents infringement disputes with Real Image going against the company could adversely affect the financial viability of the company.
     (2)   Rising clout of alternative avenues of entertainment like TV and internet providing options like ‘Video on Demand’, direct streaming to mobile/pc etc besides movie DVDs could be detrimental for the company.

Objects of the Issue

     (1)   To avail the benefits of listing of the stock exchanges and to provide an exit to selling share holders. The company shall not receive any proceeds from the issue and all the proceeds will go to the selling stake-holders

     (2)   Towards the  issue related expenses

Financial Profile #

Parameter
FY 15
P/E ###
41.1
P/B ###
5
PEG(profit) 3 year ###
.4
PEG(profit)  2 year ###
2.3
Net profit Margin (%)
11.4
EBITDA Margin (%)
33.9
ROCE (%)
28.1
 ROE (%)
12.2
Interest Cover
7.7
EV/EBITDA
12
ROIC (%)
10.4
Sales CAGR (3 years) %
31.77
Total Liability/Equity
.8
AR Collection Period
86

#   using annualized consolidated data at the upper price band
### Using post issue OS shares

Comparison with the Peers #
Parameter
UFO Movies
PVR Limited
Inox Leisure
ENIL
Eros International Media
P/E
41.1
46.67
61.16
30.16
31.46
P/B
5
6.63
3.78
5.29
4.35
N PM %
11.4
4.12
.65
20.5
17.52
ROCE %
28.1
14.12
8.15
19.93
18.82
ROE %
12.2
14.03
1.31
14.4
15.99
PEG Profit  % (3 Year)
.4
NM
NM
1.78
1.76

# consolidated data as latest as available on moneycontrol

Inference

The valuations of the company are stretched and the stake-sellers are charging a significant premium for company’s profitability and the leadership position in the industry.  Its overall sales and the in-cinema ad revenue are growing at an impressive CAGRof   32 % and 20 % respectively.
UFO Moviez’ gross profit too is soaring spectacularly but higher depreciation and to some extent finance costs are eating up a major chunk of it and thus net profit is not showing similar growth.
Accounts Receivable collection period is higher than Eros International and the same is reflected in reduced OCF.
Though higher PEG justifies higher price-to-earnings multiple but it is important to note that things change dramatically when we consider 2 years CAGR instead of a 3-year one as then thisissue appears pricey.
But despite all these quantitative dampening, qualitative future prospects of the company seems great.  The way Indian cine-industry is growing and a paradigm shift in Indian economy- especially in so-far unexplored rural and semi-urban areas- is awaited, and there lies a huge potential for digital way of releasing movies. This shall not only ensure the same day release in interior parts of the country but shall be a major dampener for rising piracy besides providing a great viewing experience to the audience.
I also see a huge opportunity in in-cinema advertising as advertising in a country like India with regional diversities where ads with multi-lingual support that too with high transparency and last-minute-scheduling flexibility, can do wonders for advertisers and advert service provider company like UFO Moviez enjoying a market leadership position.
 I shall go for the issue and as usual using the ASBA option through net-banking
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April 26, 2015






photo updated 4/15 from Deposit Photos bhofack2

Day 118.


We went to a birthday party last weekend and they had a bunch of vegetables roasted in balsamic vinegar and olive oil. Along with the roasted zucchini and peppers were slices of portabella mushroom. I couldn't get enough, and kept finding my way back at the buffet table to sneak a little bit more.


Portabella mushrooms are nice
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April 20, 2015

Issue Highlights

Issue Period
21/4/15-23/4/15
Price Band
Rs. 63-65
Issue size
Rs. 324 crore
Face Value
Rs. 10
Issue Type
100 % Bookbuilding
Minimum bid lot
225 equity shares
Listing
BSE,NSE
Industry
Toll Management
Registrar
Link Intime India Pvt. Ltd.
Maximum Retail Subscription Amount
Rs. 1,90,125 (13 lots)

Business Profile


The company was originally incorporated as MEP Toll Road Pvt. Ltd. at Mumbai in 2002 and the name was later changed to MEP infrastructure Developers Limited. MEP infra Developers is involved in the business of tolling operations with a pan-India presence. The company focuses on toll collection and OMT (Operate-Maintain-Transfer) projects.
The company has so far completed 75 projects with an aggregate of 133 toll plazas and 841 lanes across 12 states in India.

Risks:
(1)    A significant amount of revenue comes from 5 Mumbai Entry Points contributing around 30 % of the total revenue and any disruption or termination in revenue due to political reasons or policy changes might adversely impact its profitability as getting compensation is not at all an easy task.
Presently, around 40 % of the total revenue comes from short term projects and such projects can be terminated by concerned authorities without assigning any reasons.

(2) Falling operating cash flow, widening negative net-worth and huge piled-up debt are big concerns.


Objects of the issue
                (1)Repayment/prepayment of loans availed by the subsidiary MIPL:  Rs. 262 crore
    (2) General corporate purposes: NA

Inference

There was no need to delve deeper into fundamentals of this company as it is clearly a wealth destroyer for its shareholders and the continuously rising loan is the sole reason for floating this issue. Though revenue is rising but soaring operating expenses coupled with the finance costs are not letting this company to come out of the losses. There is no sense in investing and hoping the company to perform well in future years.
As per CRISIL the OMT business from NHAI and states combined is supposed to double in FY 18 than the same in FY 14 but infrastructure and toll-collection business in India are still not that transparent and free from political vested-interests, and  it is quite difficult to see clear profits appearing on financial statements.
As far as toll business is concerned leakages of traffic and toll-collection reduces the amount of capital invested in other projects and either stalls or delays those projects, and to avoid this company is forced to take a plunge into a spiralling debt trap.
No doubt MEP infra developers is a key player in the OMT market having special in-house capabilities for road-infrastructure maintenance and with a focus on long term projects, but it will be too premature to consider this company for investment.
So, a clear avoid for me.
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April 16, 2015

Issue Highlights

Issue Period
15/4/15-17/4/15
Minimum Order Quantity
65 shares
Price Band
Rs. 195-205
Issue Size
2,31,16,000 equity shares
Issue Size (in Rs.)
450.76 -473.88 crore
Issue Type
100%  Book Building
Face Value
Rs. 10
Listing
BSE,NSE
Registrar
Karvy Computershare Pvt. Ltd.

Company Profile


Source: the Hindu BL
The company was originally incorporated as a private limited company under the name of ‘Vijayanand Roadlines Pvt. Ltd’ and later it was renamed as VRL Logistics Ltd. with its status changed to public limited company. The company is mainly engaged in the business of surface logistics and parcel delivery on pan-India level with the presence of its wide-spread network in 28 cities and 4 union territories across India. The company also provides luxury bus services in few states like Karnataka, MS, Gujarat, Goa ,Telangana ,AP,TN and Rajasthan.
The company is also involved in the business of Wind Power Generation, Air Charter Services and Hospitality though with minor business interests.

Issue Details:

Fresh Issue: 60, 00, 000 equity shares
Offer for Sale: 1, 71, 16, 000 equity shares
OS Shares before the Issue: 8, 55, 36,162 equity shares
OS shares after the Issue: 9, 15, 36,162 equity shares

Objects of the Issue:
(1)    Purchase of goods-transportation vehicles: Rs. 67.42 crore
(2)    Repayment/prepayment of debt: Rs. 28 crore
(3)    General corporate purposes: NA

Strengths:
(1)    VRL Logistics is a pan-India surface logistics service provider with one of the largest distribution network in India. The company enjoys a leadership position in India with a proven track record of 38 years of operations.
(2)    The company boasts a large fleet of owned vehicles and by December 2014, it had 3,546 owned vehicles and 455 buses.
(3)    VRL enjoys a diversified customer-base ranging from industries like FMCG, Food, Textile, Apparel, Furniture, Appliances, Pharmaceutical, Automotive Parts and many more.
(4)    The ‘Hub-And-Spoke Operating Model’ ensures higher efficiency in operations.
(5)    A thrust on adopting cutting edge software technologies helps the company in achieving higher operating efficiencies.
Risks:
(1)    The business being a capital intensive one and it needs time-to-time capital infusion and high-interest scenario is detrimental for the company.
(2)    High indebtedness of the company could be fatal in case of an economic downturn.
(3)    Competition in the logistics industry is stiff and any slippages or in-efficiencies either in services or pricing could be fatal for the company.
(4)    Environmental laws are becoming stringent day by day and to comply with the same company may require a few additional outlays of funds in future.

Financial Profile #:

Parameters
Value
P/E ##
19.7
PEG (profit) ##
2.5
PEG (EPS) ##
1
P/B ##
5.6
ROCE %
16.3
ROE %
28.3
Total Liability/Equity
1.9
NPM %
5.6
EV/EBITDA ##
17
# FY 15 annualized data using upper-end price of the band, Rs. 205
 ## using post-issue OS shares

Comparison with Peers:

Parameter
VRL
Blue Dart #
All Cargo #
GDL #
Gati #
PEG(profit)
2.5
6.36
NM
NM
6.68
NPM %
5.6
6.29
5.49
18.48
7.82
ROCE %
16.3
29.49
7.06
9.02
2.12
ROE %
28.3
19.58
4.61
6.08
3.21
Interest Cover
23.5
6247
3.46
27.35
3.74
# moneycontrol data -latest as available

Inference:

The fundamentals of this company are satisfactory but not great. What makes this issue lucrative is its pan-India presence and future potential of e-commerce boom which is supposed to increase by leaps and bounds with rising prowess of app-base buying in India.
VRL lags behind Blue Dart on return-ratios front but it is also being offered at lower valuations than BD. The present government is supposed to lay a great thrust on the infrastructure development and present minister of Road Transport and Highways, Nitin Gadkari , who had earned a sobriquet of Roadkari (one who makes roads), is supposed to do a lot in road development and the same is supposed to be favourable for a logistics company like VRL.
Higher debt of the company is a concern but to some little extent the same shall be lowered as the company plans to repay its loan up to Rs. 28 crore by the issue proceeds.
The stock of Gati had soared significantly (much ahead of its fundamentals) after Ramkrishna Damani bought a stake in it, as he was bullish on oncoming future growth of Indian e-commerce industry.
The future of this stock shall depend on overall global and Indian economy, crude prices and overall market sentiments but providing all these factors as favourable this company is definitely supposed to perform well in future.
These days market is honouring stocks with an emphasis on their future prospects rather than the current financial statements and this is why VRL is supposed to do well on the bourses.
I shall go for this issue.


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