Saturday, July 23, 2016

Don't Miss Wondrela Holidays CMP 400 For Long Term

Wondrela Holidays @400 & Deeps. Expect 3x to 4x in next 2/3 Year.

Market Cap.: ₹ 2,268.78 Cr.
Current Price: ₹ 400
Book Value: ₹ 71.33
Stock P/E: 37.93
Dividend Yield: 0.50%
Face Value: ₹ 10.00
52 Week High/Low: ₹ 429.85 / ₹245.25

More parks on the Anwil .. After Hyderabad & Chennai . Bangalore to expan further and new park in Andra(Vizag ?)

Wonderla Holidays has signed an MoU with the Karnataka Government at the Invest Karnataka 2016 – global investors meet.

The company has announced an investment of Rs 150 crore in the next two years in Karnataka.

Wonderla Holidays announced that the Company has signed Memorandum Of Understanding (MOU) with the Government of Tamil Nadu at the Global Investors Meet (GIM) held on 10 September 2015 to set up a large scale amusement park at Chennai.

As per the MOU, the government of Tamil Nadu will facilitate speedy clearance to the project through single window clearance and will provide uninterrupted power and water supply.

The Company proposes to make an investment of Rs. 300 crores in the project over a period of next three years. The Company proposes to fund the project through combination of debt and internal accruals

Wonderla Holidays Limited announced an investment of Rs 250 crore in the next five years in Andhra Pradesh to set up an amusement park in Andhra Pradesh.

The company inked an MoU with the Andhra Pradesh Government expressing its plans to set up a park and thereby help create 500 jobs after the first phase and 200 jobs in the second phase.

Wednesday, May 18, 2016

Deepak Nitrite Ltd Commodity Chemicals CMP 70

CORPORATE PRESENTATION FOR STUDY.

http://deepaknitrite.com/pdf/investor/DNL_PPT__250715.pdf 





DISCLAIMER  NO  contents of this message should be construed   as buy/sell/hold advise . Investment in equity shares has its own risks.  all discussions  may be taken  as educational & for information purpose..

At the time of  discussion  the author or  dependent family
members  may or may not have  investment  in the stocks mentioned above thus having vested interest. .
.

 Investors need to develop own conviction through self study or  after consulting qualified financial adviser at own risk & cost.
.
 I accept no liability for any of the interpretation  from the said discussion/comments/sharing of  reports from research team of broking house or  public media.

Thursday, May 12, 2016

Simplifying Stock Market Investing for a Common Investor By Vijay Malik

Understanding the Annual Report of a Company


http://www.drvijaymalik.com/2014/10/selecting-top-stocks-to-buy-part-4_25.html?utm_campaign=shareaholic&utm_medium=twitter&utm_source=socialnetwork&m=1
"Selecting Top Stocks to Buy" is a series of articles that focuses on the process of selection of stocks for investment. Until now, we have learnt about:

  • Getting the right perspective towards stocks investing & the qualities required to become a successful investor (Part 1),
  • Different stock picking approaches & the guidelines for selecting the suitable stock picking approach (Part 2),
  • The process of shortlisting stocks for detailed analysis & various tool available to an investor for shortlisting of stocks (Part 3) and
  • The framework of detailed analysis of a company (Part 4).

The current article of this series focuses on the annual report of companies. This article seeks to describe the sources for getting the annual report and understanding various sections of the annual report along with their importance for an investor.

Annual Report

 


At the end of each financial year, every company is required by law to prepare a report for shareholders, which provides the details of performance of the company over the year. This report is called annual report. Annual report is the single most important source of information for an investor. Importance of annual report to an investor is akin to alphabets for any language or periodic table for Chemistry.

The detailed analysis of any company starts with reading of the annual report of the company. I believe that if an investor does not read annual reports of companies, she would not be able to become a successful investor.


Sources for getting the annual report



An individual investor can get annual reports of any company from multiple sources. These sources are free as well as paid sources.

Free Sources:


Free sources are sufficient for most of the requirements of any individual investor.  Some of the common sources are:

A) Company Website > Investor Section:


This is the most common source and should be the first place to look for information about any company. Many companies provide annual report for almost 10-12 years on their website. Below is the screenshot of investor’s section on website of Larsen & Toubro Ltd, which provides annual reports from 2002 onwards.

How to study the annual report of a company understand balance sheet profit and loss cash flow statement management discussion and analysis director's report


However, there are many companies, which do not publish annual reports at their websites. For example Mayur Uniquoters Ltd (MUL) does not have links for annual reports at its website:

How to study the annual report of a company understand balance sheet profit and loss cash flow statement management discussion and analysis director's report


Most of the companies, which lack annual reports on their websites, are small-cap and mid-cap companies, which are yet to have an investor friendly interface. As these companies grow in size, they start investing in public relations & investor friendly initiatives and improve significantly in dissemination of information. Therefore, the absence of annual reports on the website should not be seen negatively. It should be accepted merely as a phase in company’s life cycle. There are many other public sources from where we can get the required information. Some of such sources are mentioned below.

B) Stock Exchange Websites:


Stock exchanges are an important source of information distribution for companies. Many stock exchanges around the world host much more information, financial and otherwise, about companies than mere press releases and corporate announcements. In India, Bombay Stock Exchange (BSE www.bseindia.com) is one such stock exchange, which provides annual reports as well as financial results of the companies listed on BSE:

How to study the annual report of a company understand balance sheet profit and loss cash flow statement management discussion and analysis director's report


As we can see above, the annual reports of MUL are available on website of BSE. Therefore, an individual investor can get the annual reports of the companies that do not provide annual reports on their websites, from websites of stock exchanges.

C) Financial Websites:


Many financial websites also provide annual reports of companies. e.g. www.moneycontorl.com. I have provided a screenshot of webpage providing links of annual reports for MUL on website of moneycontrol.com

How to study the annual report of a company understand balance sheet profit and loss cash flow statement management discussion and analysis director's report


Paid Sources:


The sources mentioned above are free sources available to any investor. Free sources of financial information are sufficient for most of the requirement of individual investors. However, there are many paid sources as well that can provide the annual reports to investors. Some of such sources are:





Understanding the Annual Report



Annual report provides yearly account of performance of a company. We should read the annual report of a company with same vigor be it when analyzing it for investment for the first time or when monitoring it as part of our portfolio. While analyzing companies for first time investment, I prefer reading annual reports going back as far as possible, preferably for last 10 years or more.

Annual report contains financial as well as non-financial information about the company. Both financial and non-financial information are equally important for investors.


Non-financial Information:


A) Communications from Promoters and Senior Management:


Annual report is an yearly occasion when owners/managers communicate with the shareholders and inform them about the vision of the company, its performance during past year, its achievements, hurdles & challenges being faced, steps taken to overcome such hurdles, status of past expansion plans & other projects undertaken by the company etc.


Many promoters take this opportunity very seriously and inform the shareholders about the company and their philosophy in such details that their communications become a collector’s affair. Warren Buffett is one such person. His letters to shareholders of Berkshire Hathaway as part of annual report are read by investors world over.  I would suggest that every person who wishes to be a successful investor in stock market should read all his letters.

The communication of a company’s management to its shareholders is a very important source for judging the status of the company as well as the industry. In fact, whenever I want to know about the status of any industry, I read the annual report of any company belonging to that industry. One reading of management’s communication and the Management Discussion & Analysis (MDA) section would give an investor an authentic brief snapshot about the industry and the company.

B) Directors' Report:


In this section, the directors as representatives of shareholders intimate them about the financial performance of the company during past year, status of projects under implementation, major customers, status of conversion of new customers, other major initiatives taken by company. We should analyse the current performance of the company by comparing it with the outlook presented by directors in past years in the annual report. Special focus should be on the projects under implementation. We should check whether company is able to finish projects on time and whether the company has abandoned projects midway. I have provided below a snapshot of the director's report from the FY2013 annual report of MUL.

How to study the annual report of a company understand balance sheet profit and loss cash flow statement management discussion and analysis director's report


C) Management Discussion & Analysis (MDA):


MDA is another important section where management informs the shareholders about the business environment being faced by the company. The management informs the shareholders about the industry outlook, company outlook, opportunities, challenges, risks, updates on research & development, human resources etc. A snapshot of the MDA from the FY2013 annual report of MUL is provided:

How to study the annual report of a company understand balance sheet profit and loss cash flow statement management discussion and analysis director's report


D) Details of Personnel in-Charge of running the Company:


The annual report provides details qualification of all the directors, key management people responsible for decisions of the company. It provides details of employees who are being paid in excess of Rs. 60 lakh (Rs. 6.0 million) per annum in annexure to director’s report and disclosures. Below screenshot provides details of salaries of most of the directors including promoter-directors of MUL for FY2013:

How to study the annual report of a company understand balance sheet profit and loss cash flow statement management discussion and analysis director's report


We get to know about the salary being drawn by most of promoter directors in this section. We can analyze whether salary drawn is in line with the industry norms/profits of the company.

In case of a company, Ambika Cotton Mills Ltd (ACML), I was surprised to see that the salary being drawn by promoter-chairman & managing director (CMD) was Rs. 75 lakh (Rs. 7.5 million) per annum and the salary of his daughter who was working as executive director was Rs. 1.5 lakh (Rs. 0.15 million) per annum. In FY2013, ACML had reported sales of Rs. 400 crore (Rs. 4,000.0 million) and net profit of Rs. 31 crore (Rs. 310.0 million). Salary being drawn by the promoter’s daughter was mere Rs. 12,500 per month, which is equal to any lowest level employee of any government organization in India. The screenshot from annual report of ACML for FY2013 showing salaries of Mr. Chandran (promoter-CMD) and Ms. Bhavya (his daughter, executive director) is given below:

How to study the annual report of a company understand balance sheet profit and loss cash flow statement management discussion and analysis director's report


E) Report on Corporate Governance:


This section contains the details composition of board of directors, quorum of various committees of the board, attendance record of various directors in different meeting, details of past and upcoming annual general meetings, information of listing on various exchanges, past dividend record, proposed dividend, stock market data, distribution of shares etc. It also contains details of registrar & transfer agent of the company. Following screenshot from 2013 annual report of MUL shows the attendance of composition of board and attendance of directors in last AGM:

How to study the annual report of a company understand balance sheet profit and loss cash flow statement management discussion and analysis director's report


F) Notice of Annual General Meeting (AGM):


This would contain the information about the upcoming AGM as well as different decisions that require shareholder’s ascent by way of a vote. We get to know of salary hike sought by promoter managers, plans of taking further debt, new expansion projects, entry of next generation of leaders in board positions etc by the items listed to be voted in AGM.


Financial Information:


The annual report contains almost entire financial data that an investor needs to form her views about the company:

A) The Independent Auditor’s Report:


The financial section starts with the report of an independent auditor in which an independent entity provides its views about the financial information presented in the annual report. Auditor’s report comments on the key items like any deviation from the accepted accounting practices, any amounts that are not paid to government authorities, any default in payments to lenders, sufficiency of control systems to the size of the company, any frauds conducted by company or its employees, proper utilization of funds raised by company from lenders/IPOs etc.

Auditor’s report gives you a snapshot of authenticity of financial information that follows in the annual report.

B) Financial Statements:


These consist of three important sections: balance sheet, profit and loss statement and cash-flow statement. Financial statements of current year are always shown in parallel to figures of previous year so that performance of current year can be compared with immediately preceding year.

1) Balance Sheet:

This section of financials provides details of all the assets and liabilities of a company at the last date of the financial year. Liabilities are the sources of funds, which a company has utilized to purchase all the assets it owns. Balance sheet of MUL at March 31, 2013 is shown below:

How to study the annual report of a company understand balance sheet profit and loss cash flow statement management discussion and analysis director's report

We can see the comparative position of MUL at March 31, 2013 & March 31, 2012 and observe the way the balance sheet size has increased from Rs. 15,3850.16 lakh (Rs. 1.58 billion) to Rs. 21,349.20 lakhs (Rs. 2.13 billion). Almost half of the increase of Rs. 5,499.04 lakhs (Rs. 0.54 billion) has been contributed by increase in reserves & surplus by Rs. 2,700 lakhs (Rs. 0.27 billion). This is a sign of healthy growth by a company.

2) Profit & Loss (P/L) Statement:

This section of financials provides details of total sales that a company has achieved in a year and all the expenses the company has incurred to achieve these sales. The balance after expenses and taxes constitutes the net profit for the shareholders. Given below is the P/L statement of MUL for FY2013:

How to study the annual report of a company understand balance sheet profit and loss cash flow statement management discussion and analysis director's report

We can see that total revenues have grown by 20% from Rs. 31,909.37 lakh (Rs. 3.19 billion) in FY2012 to Rs. 38,327.47 lakh (Rs. 3.83 billion) in FY2013. Such revenue growth is very good. On top of it, we can see that in the same period net profit has grown by 30% from Rs. 3,3337.06 lakh (Rs. 0.33 billion) in FY2012 to Rs. 4,362.55 lakh (Rs. 0.44 billion) in FY2013. This higher growth in net profit is an indication of improvement in operating efficiency of the company.

3) Cash-Flow Statement:

This section provides details of the cash that a company has generated in last financial year from operation (cash-flow from operations or CFO). This section also includes details of cash used in making investments or received from selling investments (cash-flow from investing activities or CFI) and cash raised from financial institutions as borrowings or repaid to them during the last year (cash-flow from financing activities or CFF). Given below is the cash-flow statement of MUL for FY2013:


How to study the annual report of a company understand balance sheet profit and loss cash flow statement management discussion and analysis director's report

We can see that in FY2013, MUL generated Rs. 2,723.54 lakh (Rs. 0.27 billion) of cash from operations and raised Rs. 766.70 lakh (Rs. 0.07 billion) of cash from financing and used it for investing Rs. 3,586.26 lakh (Rs. 0.35 billion) in assets of the company. Thus, we can observe that MUL has funded most of its investments in FY2013 from its operations (aka internal accruals), which is a sign of healthy growth.

C) Schedules/Notes to Financial Statements:


Schedules contain the detailed breakup of numbers shown in financial statements. They are an integral part of financial statements and are studied along with financial statements to get better understanding of financial statements. For example, if we want to see the details of long term borrowings in the balance sheet of MUL shown above, we should refer to note/schedule no.5 of the annual report of MUL, for more details:

How to study the annual report of a company understand balance sheet profit and loss cash flow statement management discussion and analysis director's report


Thus we get to know the details of the lenders, their respective loan amounts, repayment schedules and the security offered for different loans availed by company from its lenders.

If we want to see whether MUL has invested in a new plant/assets during the year, then we can see its details in schedule/note on fixed assets:

How to study the annual report of a company understand balance sheet profit and loss cash flow statement management discussion and analysis director's report


We can see that the company has invested Rs. 1,493.94 lakh (Rs. 149.3 million) in current year, which was mainly invested in building & premises and plant & equipment. It indicates that the company is probably investing in a new manufacturing unit. If we see the figures for previous year in the last row, then we realize that last year the company had invested Rs. 1,772.80 lakh (Rs. 177.2 million) in its assets. This gives an investor an indication that the company is in the expansion phase and continuously investing in assets.

Schedules/Notes are very important and should be studied with patience and due care. Quality of schedules is an important reflection of the quality of management of the company. Warren Buffett says that if you are unable to understand the notes, it is because the CEO does not want you to understand them. A lot of information/financial jugglery is often hidden in schedules.

D) Related Party Disclosures:


Every company is required to disclose every transaction it enters into with its promoters and other related entities. A careful analysis of these transactions can reflect whether the promoter is using different transactions to transfer money from the company to itself. We should look at the transactions between company and promoter owned entities (POE, enterprises over which promoters are able to exercise significant influence). Presence of transactions like interest free loans to POE, taking assets owned by POE on lease/purchase at prices higher than market value are some of the examples by which we can get a sense of promoters who are taking out funds from the company and gaining at the cost of minority shareholders.

Thus, we can see that the annual report is one such document that can throw light on the status of the company, provide information to gauge its potential of future growth and provide insight on the character of the management of the company. It is single most important document that every investor should read.

Future articles in this series would build upon the understanding of annual report to further the discussion on financial, business & industry, management and valuation analysis of companies. We would learn in detail about the concepts and parameters of such analysis by applying it to analysis of a sample company.


I would be happy to learn about your feedback on this series of articles and your learning from reading of annual reports. You may share your inputs in comments section below.

Wednesday, May 11, 2016

You are the Slave of your House!!! By Nooresh Merani

This is a post totally opposite to the topics which I write. This is not on markets and is some crazy Sunday Thoughts.
Its a biased/stupid/senseless view of a Full Time Equity Professional and in love with Equity who has bought a Flat recently part EMI ( ah tax benefits etc ) but still stays on rent and has been for many years for various logical reasons. ( Needs a Different Post) .
If you do not like the post its fine :) This is not what am good at so can just trash it.
In my profession i meet people from various backgrounds/profession and a very peculiar section is a lot of mid-aged people frustrated with their jobs or at a plateau in their careers either because they hate the work they do or many other reasons .Constantly in a race to earn more with not much of savings left from their salaries but live in a superb locality thanks to their parents or themselves having pitched in with the EMIs.
Let me tell you about a couple of sample cases.  ( One can change the nos as per their city and friends.)
This example only is for a particular sample of working professionals. City in Example - Mumbai.
1) A 35-45 year old Spouse and Spouse with 1/2 kids in a 12 lakhs in hand per annum job. Could be both working or only one. Roughly 18-48 lakhs p.a family income.
( if you are not in the above set or will not be in the future please do not read ahead )
Financial and Personal Condtion.
Parents have either expired or one of them is around and some stay independent.  ( Lots of probable medical expenses in future )
Flat of 1 bhk/2 bhk at Khar to Town  - Worth 4 crores. ( you can take a good locality in your city.)
So there are 3-6 people staying in this house and family income is roughly 12 lakhs with single earning member or 18-24 lakhs with two earning members.
Annual Expenses - 10-15 lakhs.
Liquid Savings in FD/MFs etc – 10-20 lakhs
LICs ULIPs etc  – 5-10 lakhs
Credit Card Loans/Emis. ( Car Loans, Home Loans )
For the last many months Mr X is trying to find a new job or start a new business. Nayi Job mil nahi rahi aur business karne ka risk apetite hai nahi. Totally frustrated and irritated all the time. Not able to give time to the family. Slogging in a job which takes away 10-16 hours a day.
What can he/she do ?
1) Continue to crib about the job he/she has started to hate.  ( even people business / self-employed can hate their work.)
2) Remain irritated and frustrated. Watch News Channels on TV and debate about Modi to Indrayani.
3) Keep thinking and dreaming about the great business idea he/she has !! ( never looking at whether it is feasible or not. Every other friend dreams of opening a hotel / restaurant or a startup. )
An interesting solution which is very tough to take !!
Taking a case where only one of the Spouse will quit. 
1) Sell the House for 4 cr.   ( Log Kya kahenge ? Ghar Bech Diya – Loot Gaya ye to.  )
There is not much expense in selling a Flat. ( Stamp Duty et all mainly paid by the buyer )
2) Search a flat in Andheri to Kandivli or even Navi Mumbai / Thane. ( most offices / jobs/ biz are anyways shifting there.)
It will cost you around 2 crores to buy a 2 bhk which will be much bigger then the one in Khar-Town.
3) Invest the money in Fixed Deposits and some in Equity MF. Start the new business.
If you put 1.5 cr in Fixed Deposits should get around 80k-100k in Interest Income. ( This is equivalent to your Current Take Home )
The 50 lakhs in Equity MF can help in creating some Retirement Fund in next 20-30 years. ( would not be anywhere close to what you need but something is better than nothing in equities )
Now you need not worry about the Monthly Income !!
Neither do you need to worry about your Job.
You can start a Business with your earlier Savings and hope to not lose it all. Even if you do your monthly expenses are taken care of. You can even think of a "Sabbatical".
4) Go back to the same Job.
You might start loving your job or find a job which you love even if pay is lesser
But Will you Do This or even Think about it ?
Another solution which is more tougher/crazier according to people.
1) Sell the House for 4 cr.
2) Keep 3 crores in Fixed Deposit. 1 cr in Equity Mfs etc.
Interest Income would be 175k-200k.
1 cr in Equity MFs will help in retirement income.
3) Take a rented house of 3 bhk. Should cost you max 1 lakhs per month. ( taking this on a higher side as lot of biases about renting.)
Can pay the rent as well as your Monthly Expenses with the interest income.
Now you need not worry about the Monthly Income !!
Neither do you need to worry about your Job.
You can start a Business with your earlier Savings and hope to not lose it all. Even if you do your monthly expenses are taken care of. Also it can be a "sabbatical" or an attempt to try what you like.
4) Go back to the same job
You might start loving the job or find a job which you love even if pay is lesser.
But its tough to do Any of It and doubt anyone will do it or even think about it !!
Hopefully in above solution you will spend more time with yourself and your Family.
In any case the hunt is to strike a Balance where your X square Feet
But !!
You are actually looking at buying another Flat as you read in the newspapers that Real Estate Prices are falling and you can get a good deal. You will find a new job at 15-25% hike so you can pay the EMI for the second flat and when your Son/Daughter starts earning he can continue the EMI or you finish the loan and let the son/daughter get married and stay in this Flat or take a bigger flat in the future or give it in inheritance.

You were a Slave of Your House and do you want your Next Generation too ?

Try calculating the no of Hours you actually spent awake in your house in a week. Its 25% approx of your time.
See how much of your income/networth is going into the house.
Amazing returns given by real estate in last decade or two has never allowed us to think financially. I hope returns continue in the next decade and we need not think and life goes on.
But personally I think Real Estate will not be able to do that over the next decade.
The myth that real estate will always beat inflation is going to start hurting a lot of people.
COMMENTS/SOLUTION  FROM READERS 
Adding some interesting comments and solutions from readers. Will keep posting this.
1) By Mr Chetan Shah
Hi Nooresh,
Your investment advice is partly in the realm of philosophy. I say this because we refuse to believe that philosophy (mostly not our own but others') is the underpinning of all our choices. Urban people are almost frightened of the word philosophy and spirituality in day to day life.
Let me ask you a question. Why do you stop at two options - selling the downtown home and moving uptown or renting? Why do you not provide a third option - move the hell out of Greater Mumbai.
My third option is exactly that. I ask everyone - is Mumbai gaining more from you, or are you gaining more from Mumbai?
You (age 40 onwards) can only gain more from Mumbai if you are an entrepreneur, or a highly successful executive who cannot have such career in another location. Families with spouses of this age earning between Rs.12-24 lakh (USD 20-40 thousand a year), working and commuting 12-14 hours a day with low probability of furthering income are just like 'kolhu ke bail', beasts of burden. I suspect there are lots of beasts of burden even at higher income levels.
Their option 3 is to move out to a smaller town, with lesser real estate prices, better space, better availability of social infrastructure such as gardens, affordable eateries, better drives around town, more parking space, lesser work/commute per day, better family time, neighbours and friends available for relaxed chat even on a working day and fresher fruit and vegetables. The precondition is that they should try to find a job or a mom and pop business to run that will provide lesser topline, but reasonable bottom-line to maintain or improve lifestyle.
Their kids can of course go to Mumbai for PG studies and stay in a hostel. But they have no benefit from hanging on to Mumbai like commuters hanging almost outside its local trains. Why not lead a dignified and healthy life in Surat, Nasik, Ludhiana, or Coimbatore?
Regards,
Chetan Shah
PS: I am a born Mumbaikar who can see more wrongs with the city than rights, several times thinly escaping physical violence while discussing this issue with devout Mumbai fans! Left Mumbai in 2007 at a mture age.
2) Sebastian

HI Nooreshji,
Good work at weekend,
Its to read and think about people still living hard, with lots of assets as gold and land in Kerala or may be in some other Indian states too :)
Should say that...
"A thought about tomorrow is good, But nobody still not living Today"
By thinking and lots of tensions of future.
Well done,
Sebastian