I will start with a small cap company. It is a known fact that investing in small cap, brings in additional risk like low liquidity, low safety net and huge swings in the price. Small cap shares are the first one which get beaten down in bear phase. But I still persist with a small cap because they have a high risk-high return theme.
Also, it goes without saying that I am putting just my views here, if anyone wants to take any exposure they should do there own research and then only come to a decision.
So the company is Mazda Ltd.(Mazda Ltd.)
Mazda Ltd. was incorporated in 1990. It is promoted by Sorab R Mody. It made its public issue in the year 1993.The company has two divisions: Engineering and Food division.
The food division has a brand: BCOOL (BCOOL)
Under this division, the company produces fruit jams, sauces, syrup, food colors, baking and custard powder. Other then the various certifications, the company's factory has also got US FDA certification. The main idea of this division to exports its products ensuring stringent product quality. It has entered into food business in year 2008 only.
It is the Vacuum and Evaporator Division under Engineering division, which has been the main revenue generator for the company, using the expertise the group has in engineering.The company has a technical agreement for purchase of designs and drawings with
M/s Croll-Reynolds Inc. of USA. M/s Croll-Reynolds Inc. also has a equity stale of 7% in the company. It mainly manufactures Engineering products like Vacuum Systems,
De-Superheaters, ,steam jet thermo compressors,Air jet ejectors,Evaporators and Air pollution control equipment. Most of these products finds applications in sectors like ,refinery, power,petrochemical ,sugar ..etc .Croll Raynolds using Mazda as a sourcing hub to meet its international demand which helps the company a lot and expected to strengthen this relations going forward. Company has another technical collaboration with Germany based Kauer Engineering for Turbine Bypass Valves and Evaporators.
During FY'11, the company has sold its valve division, for 22Crore, of which 18.70 crore has been received. The food division adds negligibly to the bottom line of the company, but is growing at 30% p.a. Exports form nearly 20% of the revenues. Even after selling its valve business the company hasn't allowed its revenues to fall.
The stock of the company has been beaten down with the whole market. the EPS for the company of the half yearly basis is 8.22, and the expected full year EPS could be around 16.5. On that basis the stock is trading at a PE of 4.6 of FY12. the book value of the company is Rs. 133. The company has been able to preserve its margin even during the recession, that shows that the company do has some bargaining power.
But buying the stock, just because it is trading at below the book price during bear phase isn't good enough. But when we that being posting profits year-on year without posting any kind of losses, that increases our faith that the company can not trade below this PE.
But the main margin of safety comes from the dividend paying history of the company. the company hasn't missed a single dividend from FY 1998. during FY'11 the company paid dividend of Rs. 6.
This might be due to the sale of valve division. But even during this year the company has paid a dividend of Rs. 3.5. That gives it a dividend yield of 4.6% with a good chance of capital appreciation with the market. The company also holds some 20,000 shares of State Bank of India, which gives us a bit more of safety margin.
At CMP of Rs. 76, I believe all the negatives are already factored into the stock price and the stock price should move in the positive direction from here on.
Also, it goes without saying that I am putting just my views here, if anyone wants to take any exposure they should do there own research and then only come to a decision.
So the company is Mazda Ltd.(Mazda Ltd.)
Mazda Ltd. was incorporated in 1990. It is promoted by Sorab R Mody. It made its public issue in the year 1993.The company has two divisions: Engineering and Food division.
The food division has a brand: BCOOL (BCOOL)
Under this division, the company produces fruit jams, sauces, syrup, food colors, baking and custard powder. Other then the various certifications, the company's factory has also got US FDA certification. The main idea of this division to exports its products ensuring stringent product quality. It has entered into food business in year 2008 only.
It is the Vacuum and Evaporator Division under Engineering division, which has been the main revenue generator for the company, using the expertise the group has in engineering.The company has a technical agreement for purchase of designs and drawings with
M/s Croll-Reynolds Inc. of USA. M/s Croll-Reynolds Inc. also has a equity stale of 7% in the company. It mainly manufactures Engineering products like Vacuum Systems,
De-Superheaters, ,steam jet thermo compressors,Air jet ejectors,Evaporators and Air pollution control equipment. Most of these products finds applications in sectors like ,refinery, power,petrochemical ,sugar ..etc .Croll Raynolds using Mazda as a sourcing hub to meet its international demand which helps the company a lot and expected to strengthen this relations going forward. Company has another technical collaboration with Germany based Kauer Engineering for Turbine Bypass Valves and Evaporators.
During FY'11, the company has sold its valve division, for 22Crore, of which 18.70 crore has been received. The food division adds negligibly to the bottom line of the company, but is growing at 30% p.a. Exports form nearly 20% of the revenues. Even after selling its valve business the company hasn't allowed its revenues to fall.
The stock of the company has been beaten down with the whole market. the EPS for the company of the half yearly basis is 8.22, and the expected full year EPS could be around 16.5. On that basis the stock is trading at a PE of 4.6 of FY12. the book value of the company is Rs. 133. The company has been able to preserve its margin even during the recession, that shows that the company do has some bargaining power.
But buying the stock, just because it is trading at below the book price during bear phase isn't good enough. But when we that being posting profits year-on year without posting any kind of losses, that increases our faith that the company can not trade below this PE.
But the main margin of safety comes from the dividend paying history of the company. the company hasn't missed a single dividend from FY 1998. during FY'11 the company paid dividend of Rs. 6.
This might be due to the sale of valve division. But even during this year the company has paid a dividend of Rs. 3.5. That gives it a dividend yield of 4.6% with a good chance of capital appreciation with the market. The company also holds some 20,000 shares of State Bank of India, which gives us a bit more of safety margin.
At CMP of Rs. 76, I believe all the negatives are already factored into the stock price and the stock price should move in the positive direction from here on.
