As I wake up into an early “ monday morning”(its four pm , but hey jab jago tabhi savera ,right?) , the buzz from last night still going through the senses, I understand, as it finally sinks through that some important decisions have to be made- IM DEFINITELY NOT ONE FOR IMPERIAL BLUE ( guess one of the cheapest whiskey s ever…but not for mere mortals as I’ve learnt),that’s one for sure. Anyways WARNING- SERIOUS FOOD FOR THOUGHT TO FOLLOW,IF U R HERE 4 A STOCK IDEA ,SKIP A FEW SECTIONS .
I’m not sure about most things in life but you ‘ve got to admit, THERES REALLY NO INVESTING WORTH DOING WITHOUT A BIG MARGIN OF SAFETY, that’s one thing I’m pretty sure about. Margin of safety,(much like the SWEET LIFE!) is kind of different for kinds of investors, for some it’s all about buying above average businesses at average prices(joel greenblatt) while others are more about finding average businesses at below average prices(buffet in the early years, walter schloss, while we re at it this was basically grahams whole deal!), some truly hold safety as paramount and for them the deal is more like one strike and out ( mr.marathe and rohit) while some are more willing to experiment and embrace a little risk for bigger reward (ayush,Rajeev desai and of course, amit the multibagger guy).Right now ,for me, margin of safety means sticking to companies with strong balance sheets ,high promoter holding and cheap on BOTH assets as well as (usually) earnings basis.
Let me give it to you straight, whatever style we follow ,we, armchair generals make a lot of spoken as well as unspoken assumptions ,(as the wise guys said all knowledge is divided into known known,unknown known,known unknown and unknown unknown…right mr.greenspan?) thankfully by God s grace we just have to get a FEW KEY ONES right to make real money AND YEAH IT REALLY PAYS TO BE HUMBLE KNOWING FULLY WELL THAT WHATEVER INVESTING THESIS WE COME UP ,IT IS AT BEST A VAGUE EDUCATED GUESS ,REALITY IS TOO UNPREDICTABLE A BEAST TO BE MODELED PRECISELY.
THANKFULLY KEYNES DICTUM”I D RATHER BE VAGUELY RIGHT THAN PRECISELY WRONG APPLIES HERE” IS INDEED THE MOTTO OF ANY TIME TESTED INVESTING PHILOSOPHY, WITH THAT IN MIND IM GOING TO BEGIN MY 2 CENTS ON ONE OF THE MOST INTRIGUING FAT PITCHES IVE EVER SEEN IN MY INCREDIBLY SHORT “CAREER” AS AN INVESTOR .HOPEFULLY I VE GIVEN YOU SOMETHING TO THINK ABOUT ,IF NOT SORRY FOR THE LECTURE(AND INCASE SOME OF YOU ARE WONDERING ,YEAH IM HEAVILY INFLUENCED BY A FEW BLOGGERS ….SUE ME MR.GANNON!).YES IT IS GOING TO BE A HELLUVA RIDE,IT IS REALLY GONNA TEST YOUR PATIENCE AND YOU BET IT’S PRETTY MUCH ONE OF THE MOST HATED STOCKS AROUND.IF YOU WANT A BETTER ,BRUTALLY SHORT AND SHARPER ANALYSIS THAN MINE(ILL TRY TO KEEP IT SHORT AS WELL) JUST GO HERE
LADIES( IF ANY ,OF THE PRETTY ONES WHO READ INVESTING BLOGS) AND GENTLEMEN PRESENTING
MONEY MATTERS FINANCIAL SERVICES LTD.
THOSE OF YOU WHO BOTHER PICKING UP THE MORNING PAPER WOULD PROBABLY HAVE HEARD OF THIS ONE…LET ME REFRESH SOME MEMORIES ,LIC HOUSING SCAM ,REMEMBER?
YEAH THIS IS THE VERY SAME NBFC WHOSE CEO AND A FEW KEY PERSONELL WERE CAUGHT BRIBING THE LIC HOUSING OFFICIALS FOR APPROVING LOANS TO BUILDERS , THE CASE IS RIGHT NOW SUB JUDICE I BELIEVE AND HENCE I COULDN’T FIND ANYTHING MEANINGFUL APART FROM THAT THE CO. CEO IS PROBABLY,ACCORDING TO MY PHONE CALL(SERIOUSLY MORE OF US SHOULD TRY IT) CONVERSATION WITH THE NEW COMPANY SECRETARY (I THINK THE 2ND OR 3RD ONE AFTER THE SCANDAL), I GUESS THEY WANTED TO DIVERSIFY INTO OTHER BUISSNESSES , IRONICALLY ,IT SEEMS (ATLEAST ACCORDING TO THE QUARTERLY FILINGS) THAT THIS IS GOING TO BE THEIR CORE BIZ NOW.LET ME EXPLAIN MMFSL IS BASICALLY FOUR BIZ –TRADING ,FINANCING ,ADVISORY AND BROKING. ADVISORY WAS ONCE THE CORE BIZ OF THE CO. AND ALSO ONE OF ITS MOST PROFITABLE ONES,BUT I GUESS THAT SHIP HAS SAILED WITH MOST CORPORATES DISSASSOCIATING WIH IT,BROKING WAS NOT THAT BIG TO BEGIN WITH(UNLESS YOU GO WAY BACK WHEN THE FIRM WAS CALLED DOVER SECURITIES), TOGETHER THESE 2 REPRESENTED EFFECTIVELY THEIR MOST RISK FREE REVENUE SOURCES. AS CAN BE SEEN IN THE QUARTERLIES, THE REVENUE MIX HAS SHIFTED MORE TO THE RISKIER PARTS OF THE BIZ –TRADING AND FINANCING(ALTHOUGH I LIKE THIS SOURCE CONSIDERING THAT ITSCONSIDERING ‘UNLINKED” TO THE STATE OF CAPITAL MARKETS AND REALTY SECTOR DEFINITELY NEEDS DOUGH AND IS OFFERING PRETTY SWEET DEALS ESPECIALLY FOR THOSE WILLING TO DO THEIR HOMEWORK)
THINKING ABOUT IT ,I GUESS THEY TOO ARE THINKING ALONG THE SAME LINES APPARENTLY. AS CAN BE SEEN FROM THE LAST QUARTERLIES THEY HAVE BEEN QUIETLY SHIFTING CAPITAL AWAY FROM ADVISORY(BOY ARE WE GONNA MISS THAT HIGH MARGIN ,ALMOST RISK FREE BIZ) TO FINANCING AND PROBABLY TRADING AS WELL .HERES THE STATS-
CAPITAL EMPLOYED
SEPTEMBER 2010 SEPTEMBER 2011 ADVISORY – 69 CRORES 39 CRORES
(DEBT)TRADING -230 CRORES 250 CRORES
STOCK BROKING- 9 CRORES 15 CRORES
FINANCING- 63 CRORES 503 CRORES
(IN CASE YOU DIDN’T NOTICE, DEBT IS THIS NBFC’S THING,THE CEO WASN’T CALLED THE KING OF THE BOND MARKET FOR NOTHING)
HERE ARE THE (HALF YEARLY) PROFITABILITY STATS-
REVENUE PROFIT B4 TAX &INTEREST
2010 2011 2010 2011
ADVISORY 124 CR 2.25 CR 105CR -.27CR
TRADING 146 CR 215 CR 2.8CR 4.6CR
STOCK BROKING 2 CRORES .01 CR -.1CR -.89CR
FINANCING 7.2 CR 27 CR 7.3 CR 18 CR
BEFORE YOU SKIP THIS POST (YEAH YEAH, I GET IT THIS REALLY LOOKS LIKE THE AFTERMATH OF A KARDASHIAN WEDDING) REST ASSURED THE REST OF THE NEWS IS FOR THE OPTIMIST,AND LETS FACE IT ,ITS REALLY NOT A GOOD IDEA TO READ TOO MUCH INTO 6 MONTHS WORTH OF FINANCIALS,ILL KEEP IT SHORT AND SIMPLE.
SO WHERES THE FAT PITCH?
FOR STARTERS IN AN YEAR WITH GLOBAL ECONOMIC TURMOIL NOT TO MENTION NOT SO AWESOME CONDITIONS BACK HOME COMBINED WITH THEIR OWN PROBLEMS WHICH HAS GOT CLIENTS FLEEING AWAY THEY VE MANAGED TO HAVE POSITIVE RETURNS.
THEY’VE SIGNALLED A STRATEGY CHANGE IN THE ANNUAL REPORT IN THE BEGINNING OF THE YEAR ITSELF,EFFECTIVELY BY STATING THAT THEY LL BE CONCENTRATING ON “FUND BASED ACTIVITIES”(WHATEVER THAT REALLY MEANS).
THE CEO/PROMOTER HAS INCREASED HIS PERSONAL STAKE IN THE COMPANY TO 60% THIS YEAR.HENCE GREATLY REDUCING THE CHANCES OF MISALIGNED INCENTIVES THAT PLAGUE I-BANKS.ALSO APPARENTLY IT SEEMS NONE OF THE FII’S(INCLUDING GOLDMAN SACHS I BELIEVE) WHO PARTICIPATED IN LAST YEARS QIP SEEM TO HAVE SOLD THEIR HOLDINGS.
ALONGWITH THIS COMPANY HAS A PRETTY SOLID BALANCE SHEET WITH NEGLIGIBLE DEBT AND AS OF LAST YEAR AROUND 775 CRORES IN CASH.YES,THIS AINT A TYPING MISTAKE AFTER THE QIP THE CO. CASH BALANCE HAS SWELLED TO A TOTAL OF SEVEN HUNDRED AND SEVENTY FIVE CRORES APPROXIMATELY(THESE FUNDS HAVE BEEN RELEASED BY THE CBI EARLIER THIS YEAR AND IT SEEMS THEY VE ALREADY STARTED INVESTING THEM).OH BY THE WAY ,THE MARKET CAP OF THE COMPANY IS AT THE TIME OF THIS WRITING 350 CRORES.
IN SHORT FOLKS,WE HAVE THE POTENTIAL OF A TURNAROUND TYPE RETURNS WITHOUT THE NEGATING INFLUENCE OF DEBT AND MOST OTHER HEADACHES ASSOCIATED WITH IT AT THE PRICE OF A FREAKING NET – NET!
MERRY CHRISTMAS,EH?
EAGER TO HEAR YOUR COMMENTS.
DISCLOSURE:THIS AMATEUR ANALYST IS PRETTY BIASED ON THIS STOCK AND DESPERATELY NEEDS TO HEAR THE NEGATIVES ON THIS SITUATION.HE HAS INVESTED AROUND 33% OF HIS NET WORTH/POCKET MONEY HERE,YOU ARE ADVISED TO CAREFULLY MAKE YOUR DECISION AND DO A TON OF YOUR OWN RESEARCH.
