Your Stock Queries

Sandesh Ltd.

I am holding 500 shares of Sandesh Ltd. purchased at Rs 246 per share. Should I hold these or sell them off?
- Munal Roy, Via email

HOLD

When was the last time you read something as an alternative to the newspaper of your choice? Assuming that you did do this, were you immediately hooked and did you give up on reading your favourite newspaper? No, these questions are not a part of any readership survey that we are conducting. The purpose of these questions was to tell you that print media is still alive and kicking, and companies with a correct business model are doing well. The obvious answers to those questions will tell you why you should be holding on to the stock of Sandesh Ltd. for at least some time in the future.

Starting as a single edition newspaper from Ahmedabad in 1923, Sandesh has flourished and extended its footprints to five editions. New editions were launched in Baroda, Surat, Rajkot and Bhavnagar in 1985, 1989, 1990 and 1998 respectively. The company’s publications include Sandesh (a Gujarati daily), Stree (a women’s weekly) and Sandesh Pratyaksha Panchang (a periodical). It also engages in financing and trading in shares.

On the financial front, for H1FY13, its topline witnessed a growth of 26.12 per cent on a YoY basis, coming to Rs 151.20 crore. At Rs 36.42 crore, the bottomline witnessed a growth of 74.26 per cent as against Rs 20.90 crore last year. On the valuations front, the stock discounts its trailing 12-month earnings by a mere 4.20x and the EV/EBITDA stands at 4.11x. More importantly, the company has only a small debt of Rs 90 crore, which keeps its debt-to-equity ratio at 0.27x. Another key point that cannot be missed is the company’s healthy dividend paying history. It has paid dividends to its shareholders for the last 10 years, with the exception of just one year (2005), and the present dividend yield of the stock stands at 1.34 per cent.

Considering that its financials are in place and reflect the company’s foothold in regional media, we suggest that you hold on to the shares from a long-term perspective to garner better returns.
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Gujarat Fluorochemicals

I had purchased 200 shares at Rs 404 per share. Should I buy more to average them out, hold the shares or exit the counter?
-Sandeep Bang, Udaipur, Rajasthan

EXIT

Investors talk about averaging the moment they see their holdings go down in value. How well does this work? Does it really yield the desired results? These may be some fundamental questions that need to be given deeper thought. But since you raised the question, let’s look at whether averaging your cost in this particular case of Gujarat Flourochemicals make sense.

Part of the Inox Group and a subsidiary of Inox Leasing and Finance, Gujarat Fluorochemicals is into the manufacture and sale of chemicals, industrial gases and refrigerants. Catering largely to the industrial segment, its fortunes are more or less tied to the overall economic activity in the country. Though it is on a rebound, the fact still remains that the economy has been facing some serious headwinds over the past couple of years, and this has impacted businesses across various segments. Will it improve? While we expect it to do so, it is always better to tread with caution on uncharted territory.

While the broader view on the stock can be summed up from what we have said so far, let’s take a look at the fundamentals of the company. Our concerns on the overall scenario are well reflected in how this company has been doing on the financial front. Its topline witnessed de-growth of 15.11 per cent on a YoY basis, to stand at Rs 896.08 crore in H1FY13 as against Rs 1055.58 crore in H1FY12. The bottomline too witnessed de-growth of 22.60 per cent on a YoY basis, and stood at Rs 269.37 crore as against Rs 348.03 crore in the same quarter of the previous year. On the valuations front, the stock discounts its trailing 12-month earnings by 5.44x and the EV/EBITDA stands at 3.70x. The company has a debt of Rs 1720 crore in its books, which leaves it with a debt-to-equity ratio of 0.63s. The dividend yield on the stock stands at 1.14 per cent, which is not very impressive either.

Considering all this, we suggest that you exit the stock even if you have to book losses and look for some other opportunities.
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Great Eastern Shipping Company

I am holding 250 shares of Great Eastern Shipping Company bought at Rs 260 per share. What should my next step be with regard to these?
-Ashok Karel, Via Email

HOLD

The fortunes of shipping companies are closely or rather completely tied up with foreign trade. The healthier the trade between countries, the better is the business of these companies. With the global economy not going through a particularly good phase (the US economy isn’t going anywhere decisively, Europe still remains a huge problem, the conflict-ridden Middle East and North Africa are some other examples), shipping companies have surely borne the brunt of a dull business environment. However, this company (Great Eastern Shipping) is an exception in that it is involved in the transportation of crude oil, petroleum products, gas and dry bulk commodities, which gives it an advantage. It operates a fleet of 32 vessels, including 22 tankers and 10 dry bulk carriers that aggregate to a capacity of 2.55 Mn DWT (million dead weight tonnage). The company also offers offshore exploration and production services to oil companies.

So, how has its business been in recent times? Like we said, it does have an advantage in terms of the areas in which it operates. For H1FY13, its topline remained flat, registering a growth of just 4.67 per cent on a YoY basis to stand at Rs 1472 crore. But the bottomline for the same period stood at Rs 262.19 crore, marking a growth of 38.07 per cent from the figure of Rs 189.90 crore for H1FY12. This was primarily on account of better cost management during the first half of this fiscal.

On the valuation front the stock discounts its trailing 12-month earnings by 9.87x and the EV/EBITDA stands at 5.47x. The company has brought down its debt to Rs 7088 crore, pegging its debt-to-equity ratio at 1.18x. The dividend yield on this stock stands at 2.57 per cent. We suggest that you hold on to the counter for one more quarter.
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Anant Raj Industries

I have bought 250 shares of Anant Raj Industries at Rs 52 per share. Should I hold or exit this counter?
-Bharat Oza, Via Email

BPP

Real estate and infrastructure, as a sector, has been beaten down quite badly over the past year or so. As regards real estate, a lower demand has not dampened prices, while infrastructure would pick up once the reforms process accelerates. Anant Raj Industries operates as a construction and infrastructure developer in the northern part of the country. The company constructs and develops special economic zones (SEZs), IT parks, hotels, commercial complexes, malls, residential/service apartments and other infrastructure projects. Its executed portfolio so far includes two IT parks, one IT SEZ, three commercial complexes, two shopping malls and five hotels. It has a land bank of approximately 1150 acres in Delhi and the National Capital Region (NCR).

On the financial front, the company presented a good set of numbers for H1FY13. The topline witnessed a growth of 28.90 per cent on a YoY basis, to stand at Rs 220.36 crore as against Rs 170.95 crore during the first half of last year. It reported a net profit of Rs 81.76 crore, registering a growth of 20.41 per cent YoY. On the valuations front, the stock discounts its trailing 12-month earnings by 22.96x and the EV/EBITDA stands 21.28x. The dividend yield on the stock stands at 0.43 per cent.

At present, we suggest that you book partial profits to recover your capital and stay invested for a longer term in the rest.