Ashish Chugh, Investment Analyst & Author of Hidden Gems is bullish on smallcap companies IL&FS Investment Managers and Kakatiya Cements.
IL&FS Investment Managers is a subsidiary of IL&FS limited. It is the only listed private equity player in the country. This company raises funds and manages those assets typically on a 220 model, wherein it gets a fixed management fee of about 1.5-2% of the assets which it manages. There is also performance linked income, which is generally called the carry, of about 20% of the total profit it makes after a certain threshold.
This company has got assets of about USD 3.2 billion under management currently. It invests primarily in infrastructure and real estate sectors and also in the other growth companies. If you look at the financials of the company, FY11 sales were about 200 crore, profit after tax was about 70 crore and the EPS was about Rs 3.50. In the first nine months of the current financial year, sales is about Rs 157 crore with a profit after tax of Rs 54 crore, equity is about Rs 41.5 crore, which means an EPS of around Rs 3.5 to Rs 3.6.
Now, there are a couple of reasons we like this stock. One is very high dividend payouts. This company has been giving dividends of about 75% for the past two-three years, which at the current price would result in a dividend yield of about 5-5.5%. The stock currently trades at about Rs 29, so the dividend yield is pretty good.
Second is this is a debt-free company. It's a company which does not require much capital. It's basically a knowledge business and the performance of the company is a function of two factors. One is the ability of the company to raise money and also to deploy the money in profitable businesses. Over the past two years the company has been going through a difficult phase primarily on account of the depressed economic conditions, which we have witnessed across the world. There has not been much growth in the assets under management, which the company has done.
In spite of all that, this company has rewarded its shareholders with 75% dividend in the past two years. In case the economic environment starts to improve the company would be able to raise more resources and more assets for management and also would be able to deploy those assets in more profitable investment opportunities. Both these things would be good for the company and would give a fillip to both the fixed income of the company which is the management fee and also the performance linked income which is the carry.
So in the difficult time this company has shown lot of resilience and has notched up a steady performance and also rewarded the shareholders with dividend payouts which are as high as about 40-45% of the profits of the company.
At the current price of about Rs 29-29.5, you have a company where you are getting great management with 5% dividend yield in times which were not very conducive for investment.
So, at the current price, the downside in the stock looks extremely low and investors who may have been left behind in the recent run of small and midcap stocks can accumulate the stock at about Rs 29-30. I don't see too much of downside in the stock from these levels.
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IL&FS Investment Managers is a subsidiary of IL&FS limited. It is the only listed private equity player in the country. This company raises funds and manages those assets typically on a 220 model, wherein it gets a fixed management fee of about 1.5-2% of the assets which it manages. There is also performance linked income, which is generally called the carry, of about 20% of the total profit it makes after a certain threshold.
This company has got assets of about USD 3.2 billion under management currently. It invests primarily in infrastructure and real estate sectors and also in the other growth companies. If you look at the financials of the company, FY11 sales were about 200 crore, profit after tax was about 70 crore and the EPS was about Rs 3.50. In the first nine months of the current financial year, sales is about Rs 157 crore with a profit after tax of Rs 54 crore, equity is about Rs 41.5 crore, which means an EPS of around Rs 3.5 to Rs 3.6.
Now, there are a couple of reasons we like this stock. One is very high dividend payouts. This company has been giving dividends of about 75% for the past two-three years, which at the current price would result in a dividend yield of about 5-5.5%. The stock currently trades at about Rs 29, so the dividend yield is pretty good.
Second is this is a debt-free company. It's a company which does not require much capital. It's basically a knowledge business and the performance of the company is a function of two factors. One is the ability of the company to raise money and also to deploy the money in profitable businesses. Over the past two years the company has been going through a difficult phase primarily on account of the depressed economic conditions, which we have witnessed across the world. There has not been much growth in the assets under management, which the company has done.
In spite of all that, this company has rewarded its shareholders with 75% dividend in the past two years. In case the economic environment starts to improve the company would be able to raise more resources and more assets for management and also would be able to deploy those assets in more profitable investment opportunities. Both these things would be good for the company and would give a fillip to both the fixed income of the company which is the management fee and also the performance linked income which is the carry.
So in the difficult time this company has shown lot of resilience and has notched up a steady performance and also rewarded the shareholders with dividend payouts which are as high as about 40-45% of the profits of the company.
At the current price of about Rs 29-29.5, you have a company where you are getting great management with 5% dividend yield in times which were not very conducive for investment.
So, at the current price, the downside in the stock looks extremely low and investors who may have been left behind in the recent run of small and midcap stocks can accumulate the stock at about Rs 29-30. I don't see too much of downside in the stock from these levels.
Source: moneycontrol.com
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