Looooooooong Full House Saturday Equity Mumbai Workshop Sept 14 2019

It was a looooooooong,should have held it over two days,  Full House Equity Workshop in Mumbai on Saturday,September 14,2019 with a whole spectrum of smart participants that made for really invigorating interaction ~they came from Mumbai,Gurgaon & Pune ~ from young upwardly mobile grads & post grads from top ranked Management Institutes in India,UK (London) & USA(Harvard) to ‘ well tuned in’ professionals from the IT ,Consultancy,Broking,Corporate & Banking Sectors to veteran high networth investors . We commenced at 9.30 am & concluded well beyond 7.30 pm ~ 🙂 should have arranged dinner too

Thank you Guys !

Here are a few candid clicks from the Workshop :

The Coverage was expansive & the Interaction from Participants very intelligent & which opened out many threads that we examined with anecdotal support . When analysing a company ,they asked what is “Non Negotiable” &  “How to have Foresight as on Hindsight we are always right”

Really a lot was covered ,some of which is below  :

  • Macros through :
  1. Examining the Equity Table’s four legs of Valuation,Liquidity,Momentum & Sentiment & the Impact of FPI Flows ~ when Valuation,which should be the strongest leg,sometimes takes a back seat as Liquidity or even a lack of it drives the momentum & sentiment
  2.  Not getting Seduced by any Bounce at  Friday closing Sensex 37385 & Nifty 11076 Levels as Caution is strongly indicated by domestic & overseas economy & geo-political headwinds
  3. Negative Interest Rates Era vs the Magic of Compounding in such meltdowns
  4. Sensex & Earnings & Market Cap & low GDP growth Dynamics on Levels & Valuations ~ Past,Present & Forward & why downside risk remains wide open while the upside appears capped for now ~ we referred to 1991/92 abnormally high Sensex PE pre Harshad Mehta Scam exposure & the High PE in 2000 with Ketan Parekh was in action & where the markets were clearing running ahead of fundamentals by huge margins~ we referred to the Sensex PE of just 6 in the late 1980s when VP Singh was the PM 1988~ we covered Mkt Cap/GDP Highs pre Lehman collapse in 2007/8 & the levels now
  5. Fx Reserves  & Exchange Rate Risk &  the Risk of increasing Sovereign Debt as planned by Government ~ How our Rupee has always had a South trajectory,except when it soared from Rs 49 to the US $ to Rs 39 to the US $ creating havoc especially in the Diamond Sector
  6. Why Inversely co-related Gold & US $ are moving up together instead
  7. Turm-Oil & Impact on Fiscal Deficit & Rupee  like last happened in 2007/8( On Saturday at the workshop we were not yet clued in to the Drone Attack on the Oil Refinery in Saudi Arabia that saw Oil Prices dangerously soar 20% in spot) ~ India is hugely dependent on Oil Imports
  8. Interest & Inflation rates
  9. Trump ~ Not sure if he’s a macro or micro factor !
  • Micros through many companies  & sector dynamics covering :
  1. Checklist on how to Smartly & Effectively & thus Quickly Read a voluminous Annual Report
  2. Our Five Steps for Evaluating a Company for Investment
  3. Impact on the Financial Statements in Scenarios like Buy Back,Rights Issues,Fictitious Sales,RBI issuing a divergence on Provisioning for NPAs,non linear jump in Sales Realisations,5 G Spectrum Fees,Permanent Diminution in Investments,Monetising Assets & Depreciation of the Rupee
  4. Quick Brief on Absolute & Relative Valuation & how to prepare a quick Valuation Grid from the Annual Report, Market Price Trends & Shareholding
  5. Why Liquidity more than Profitability is the ‘Circle of Life’  for a Company as viewed through the lens of the Cash Flow Statement dervived from the Balance Sheet & Profit & Loss Ac & that distinguishes operating,financing & investing flows
  6. Corporate Governance Issues on inadequate Disclosure or Non Disclosure, Incorrect & questionable Accounting Treatment & Lack of Transparency &  irresponsible (deliberate?)  Management utterances  that give a leg to Insider Trading & huge Profits through  Derivatives Play
  7. Courage & Conviction Promoter or Institutional recent Buying in Vodafone,Yes Bank,I B Real Estate & Tata Motors & seeing more wealth destruction since in these   
  8. Basis for Disclaimer of Opinion by the Auditor of Reliance Infrastructure & what holds out some hope
  9. Intangibles,Investments & Impairments
  10. Reliance Industries’s Enterprise Value,Revenue Segments Potential,Spin offs of the Jio Telecom Infra into two trusts, Aramco’s 20% stake being negotiated in the Refining,Petroleum Retailing & Petrochemicals Business that should lead to further demerger & reviving & scaling the Gas Exploration Operations
  11. How Defaults & Corporate Governance Issues decimated into or near oblivion Eros,Cox & Kings,ManPasand,Tree House Education,Satyam,Jet Airways,Kingfisher & Talwalkars & is there any hope of operational & share price recovery with Asset values holding out some hope in a few ~ How Clearly the Statutory Auditors & Credit Rating Agencies were negligent or intentionally turned a blind eye in many cases
  12. Huge Potential Outlay of the ‘Nal sey Jal’ Scheme of the Government & the new Jal Shakti Ministry focus that should benefit many companies if the implementation & execution is as noteworthy as the intent
  13. How IndAs 115 continues to affect Bombay Dyeing
  14. How Exchanges continue to accept outright untrue or tepid clarifications from Companies
  15. Reference to Investment Gurus & Living Legends Warren Buffett & Peter Lynch Approaches & Success
  16.  Coverage of a few sectors like Defence, Hydrocarbons,Broking,Telecom,Real Estate,NBFCs,Banks & Automobiles & Disruption that’s in play in many
  17. Consolidation & Capitalisation of PSU Banks & the controversial Acquisition of Laxmi Vilas Bank by I B Housing Finance pending RBI approval
  18. Common Investor Mistakes

The next Equity Workshop is scheduled  pre-Diwali for Saturday ,October 19,2019 & will be announced soon on www.jsalphaa.com & social media

Touched by some warm & constructive feedback from participants :

  • thanks for a lovely interactive session…”
  • “enjoyed your session yday”
  • “it was great to meet again & reskill to be better prepared for opportunities which would arise”
  • “Thanks for being the Enabler,the last few days have been very encouraging”
  • “Cover the Scenarios Exercise more with Investor focus than just on Accounting Impact & take in a few Annual Reports before Lunch”  

😆 & I swear I did not pay for these ones !

  • ” You are very good at what you do,comes naturally to you,with a vastness of the subject to cover you did justice to cover the best you could with your insights and experience of all the treasures of knowledge,you are an encyclopedia of the subject with case studies,which is the best way of teaching, sharing & learning according to me,the various industries that you know of,the processes & the products,the promoters & the pitfalls,the auditors & the audited,you can understand in the readings the stated & the unstated,intention & intended,you truly personify_the integration of intellect with instinct_”   
  • “Whoever missed this one, missed learning a radical way to look at balance sheets. Very practically in a few minutes you can strip away the padding and bullshit that promoters hide their sins behind. If the stock market’s motto or rather rider has always been caveat emptor or buyer beware, Gaurav’s lessons in Analysis would ensure that a “fool and his money are not soon parted” for when emotions like fear and greed coupled with ignorance seize us even the wisest are prone to behave like fools. Especially the wisest!”
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    Union Budget 2014 ~ Will Sensex continue to Humour as Jaitley does not!

    Have a look at our first impression posted  after our FM ‘s Union Budget Address and during market hours

    Union Budget 2014 ~ Will Sensex continue to Humour as Jaitley does not!

    Think he missed a great opportunity to provide us with the ‘Naya Soch’ of the new NDA Government

    His Speech stated quite a few challenges and objectives like tackling Black Monies,raising Tax to GDP ratio,lowering Inflation and Fiscal Deficit % but stopped short of spelling out the specifics of solving these

    Having just 45 days after NDA was elected he has opted for the easier option of simply following the UPA budget process and numbers too that the UPA FM Mr Chidambaram laid out in his Interim Budget in February 2014….whether it be Disinvestment or Tax Receipts or Fiscal Deficit Control Targets…made right noises but was tokenism in a few areas like social expenditure…thankfully nothing really adverse or anti poor though direct tax incentives are not really cause for any celebration

    Sensex had quite a roller coaster ride today as to be expected….opening stable & pre budget speech at 25514 in the morning then sliding before noon over 300 points to 25117 from yesterday closing of 25445 during the budget speech before strongly racing away by over 700 points to 25920 …over 400 points previous day closing post budget speech only to reverse all the gains and close at 25373,down 72 points  from previous day closing

    Will the Sensex continue to Humor us in the near term despite not an iota of Humor in the FM’s Speech !? …sense is that any correction will be a hiccup on the onward march towards 30000 on the back of increased FII Net Infows & Big Corporate Infra spending  

    I see some clear big winners in the Infrastructure Space across the Board from Shipping to Power to SEZs to Real Estate to Highway Road Construction Companies and Pipeline Companies

     

     

    Mahindra Hoilidays lists above Issue Price of Rs 300 on NSE today….stays and closes above too….but will it continue to stay above ? I continue to say ‘No’

    Mahindra Holidays and Resorts India Ltd (MHRIL) was listed on NSE today….It was issued at Rs 300 and the Issue was comfortably oversubscribed

    A freak trade saw a High of Rs 374.50 and a low was registered of Rs 311.35…but it closed at Rs 313,towards the Day’s Low

    12.74 Million shares were traded and the average price was Rs 325.21 creating a turnover of Rs 414.42 crs

    I yet hold a view that this price of Rs 300+ will not hold…my reasons have been spelled out when I reviewed in great detail the IPO on this blog on June 22,2009

    So it was with some amusement that I viewed Tarun Kataria of HSBC,the IPO’s Underwriter, spelling out on UTVi this morning,his four reasons why MHRIL has done well on listing and is quoting at Rs 325 ,8% to 9% higher than IPO Price of Rs 300 levels…He was justifying the HSBC philosophy of Leaving something on the table for the Investors

    Tarun,this margin has already reduced on the first day itself to below 5% if you take closing price of Rs 313 and I fear that we shall soon get MHRIL below issue Price of Rs 300…..in a sense the price will fall off the table !

    Let’s take Tarun’s four reasons why he views MHRIL as a success…His view is in Black while my view on his view is in Red if I disagree and in Green if I tend to Agree

  • MHRIL epitomises Emerging Markets….It’s just a ‘feel good’ perception
  • MHRIL practices financial discipline and good corporate governance….I tend to agree
  • Embedded in MHRIL are the Value Systems of the Mahindra Group….I tend to agree
  • Pricing of MHRIL IPO at Rs 300 was to leave something on the table for the Investors.There was good interest at even top end bookbuilding range of  Rs 325I strongly disagree…even Rs 300 is high…you’ve priced it at 30 times earnings multiples…even with a high Promoter holding of 83 % it will be difficult to hold the Share Price above Rs 300
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    Should you invest in the IPO of Mahindra Holidays & Resorts India Ltd in the Price Band of Rs 275-Rs 325 ?I don’t think you’re missing any Boat here

    13 Years after Mahindra Holidays & Resorts India Ltd (MHRIL) set up,it is coming tomorrow to the Public to raise Equity Funds.It’s in the Business of Vacation Ownership and is a leader in this Field having a market share of over 70%.

    Members are empowered with a right to stay at any of the Company’s resorts,subject to prior reservation, for a period of One to Seven Days during designated months and for a Period of 10,25 or 33 Years depending on which Plan they have joined.For this Right they have paid an average of Rupees Rs 2.5 lakh with options to spread the Payment over as long as even 5 Years…Recognition of Income is a portion of this Fee in the year of Joining,with the rest apportioned over the plan Period

    In these 12 years,the progress has been slow and steady with momentum seen in only the last few years

    As of March 31,2009,it has a cumulative of  92825 Members…..Currently It has 27 resorts,some owned,some on long lease and five on short (under Two year Lease) with 1261 Apartment and cottages across them

    Financial Performance….In FY 09 It earned Rs 80 crs on an equity of Rs 77 crs giving an EPS of just over Rs 10…It’s networth was just under Rs 196 crs giving a Book Value of @ Rs 25

    So do I like the Company ?………Yes

    So do I like the IPO ?……..No

    So would I rather be a Member of MHRIL than a Shareholder ?……….Neither

    Why is that ?……Well,both issues should be evaluated seperately

    Let’s take the prospect of being a Shareholder first

    The Pedigree is good and the Prospects are fair…..but the IPO Pricing is expensive…At Rs 275-Rs 325 MHRIL is asking us to pay 30 earnings multiples and 13 Book Multiples on recent performance…That’s HIgh…They are justified in doing this only if they see strong and quicker quantum growth ahead in earnings…I don’t.Their Growth will be constrained by the Apartments and cottages thay have available for right of use…The Object for this Issue reveals that Rs 211 crs are to be spend for Five Properties…to expand at Asthamudi in Kerala and Coorg in Karnataka,to renovate an acquired property in Ooty in Tamil Nadu and to build two new properties in Tungi,near Lonavla in Maharashtra and in Theog,near Simla in Himachal Pradesh…Over Rs 150 crs are for the last two new projects…Rs 111 crs are planned for FY 10 and Rs 93 crs for FY 11,rest later…there are no definitive agreements for the capex spend as of yet…each room would cost an average of @ Rs 50 lakhs and capacity is being projected close to 1600 apartments and cottages within a few years read more