Ashish Tater on moneycontrol:
One reason why I like this is stock is their strong balance sheet. The stock might bore you from a longer term perspective. It may be hovering around Rs 400-500 mark. As of now it is trading at Rs 407-410 levels. One can take a call of 20% from eight-12 months perspective.
From a balance sheet perspective, it owns almost 51% in Britannia Industries through its subsidiaries. Current market cap of Britannia is around Rs 5,600 crore. This 51% roughly works out to be Rs 2,800 crore and the market cap is Rs 560 crore. As a holding company it warrants that 20% discount. So it is fairly valued.
Its exposure to Bombay Dyeing was almost 14% so it is again a safe bet. Interestingly, Britannia Industries is available at a dividend yield of 1.6%, similar is the case with Bombay Burmah. They will be getting Rs 35-40 crore in terms of free cash flows to equities through dividends from Britannia.
Last year they sold their JV into the rubber JV. This year they have sold their sunmica division so there is some reorganization happening in Bombay Burmah or the Wadia group. There is lot of potential going forward. Their core business is tea and plantations and they have good presence in Tamil Nadu and Karnataka.
They have good ability to generate pre-cash flow to equity. So from fundamental perspective, if one ignores the balance sheet value it will be somewhere around Rs 180-200. On conservative side, the replacement value of this plantation business works out to be Rs 180-200 so Rs 400 plus the investment.
People try to get in the stock at Rs 380 to 400 because they have actually generated free cash flow of equity of close to Rs 165 crore. This year they have fetched Rs 100 crore on sunmica division and Rs 65 crore from JV ventures sell. It is a cash rage company with limited downside and has a potential target of Rs 500. One can take a trading bet in this turmoil times.
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HNIs raising stake in Bombay Burmah in moneycontrol
Most of the HNIs are looking for stories where there are embedded values and there is valuation in the subsidiaries. There are stocks that invest into group companies and other companies; the values of which are significantly above the market cap of the company. One such company is Bombay Burmah.
Bombay Burmah ’s market cap is at Rs 1,165 crore. Its total investment is Rs 1,710 crore. The total value of its investment is nearly 50% more than market capital. This would mean that the value of subsidiaries would be nearly 50% more than the market cap. In Bombay Dyeing , they hold 15% stake. In Britannia , they hold 25% stake. In Go Air , they control around 40% stake.
It’s investment in Bombay Dyeing, Britannia and Go Air is as follows:
Investment (Rs Cr)
Bombay Dyeing 400
Britannia 910
Go Air 400
Total 1710
Go Air is an unlisted entity. CNBC-TV18’s analysis has taken the valuations on the basis of Spice Jet. Spice Jet was having an 8.3% market share and is commanding a market cap of about Rs 1500 crore. If one sees the latest figures that are released, Go Air has a market share of around 5.5 % and by that valuation, the figure should come at around Rs 1000 crore.
Also, there are media reports suggesting that Paramount is looking at buying the company. The management of Go Air denies this. But, the valuation that they are likely to pay for the 40% stake is around USD 100-150 billion. So even on the basis of this, it will command around Rs 1000 crore market-cap; and 40% will be around Rs 400 crore.
Thus, the total valuation of Bombay Dyeing, Go Air and Britannia would be around Rs 1700 crore.
Since all the investment is done via subsidiary companies, one would not see all the value of investments on the balance sheet side. Hence, it’s very important to see all the investments that are there in the subsidiary companies. This could be a good company for investment, as per CNBC-TV18 analysis.
This is not a holding company. It has operations in tea, coffee plantations, rubber, palm-oil segment. So it commands an EPS of its own. On trading basis, for FY07, it had an EPS of around Rs 34 and in FY06, it was around Rs 35. This means it is trading at around 24-25 times.
In the kind of business that they are in, this looks a bit expensive, if compared with the peers. But the valuations of the company make it attractive.
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