Stay with Sesa Goa…even Accumulate it on Declines….Very Ambitious Plans ahead

50 Million Tonnes sales in three Years Time…that’s Sesa Goa’s ambition…It’s doing just under 20 Million right now…More on this later

When Sesa Goa notched a record Profit of Rs 633 crs in Q1 of FY 09,I was excited and expected the Company to cross Rs 3000 crs PAT in FY 09….However as the Global Financial Crisis erupted and China stopped importing ,there was a steep decline in iron ore prices from high FOB levels of US $ 140/T to US $ 50 to 60/T….Sesa Goa managed to report just under Rs 2000 crs as PAT for FY 09 and thus posting an EPS of Rs 25..It’s reserves were just over Rs 4500 at March 31,2009 and with Equity at Rs 78.7 crs (FV Rs 1) the Book Value nudged Rs 60…..So when it declined to Rs 60 it was a screaming Buy   

Last Year in July 2008,I had blogged strongly for Sesa Goa to buy it at Rs 3300 Cum 1:1 Bonus and Cum 10:1 Split…That’s an adjusted price of Rs 165…It opened strong at Rs 175 ex bonus and ex split in August 2008….but then dropped sharply to even fall to Rs 60…I recommended adding to it…Even if one did not,the purchase is back in the money now

After crossing Rs 200 earlier this week,after it announced that it had bought out Dempo Goa’s Goan Mining Operations in an all cash deal of Rs 1750  crs,it has corrected to Rs 194 today as I blog

The Future continues to look pretty interesting…I heard the recent conference call with Sesa Goa’s CEO,Mukherjee and the CFO,Sushil Gupta

I’ll spare you all the technical details of Ore grades and reserves and resources……What caught my ear was Mr Mukherjee ambitiously talking about 50 million tonnes in three years !…They did just under 20 million for FY 09 (15.1 M in Sesa Goa and 4.4M in Dempo) and earned a net aggregate of near Rs 2300 crs,depsite low iron ore prices…50 Million Tonnes should then fetch them over Rs 5000 crs…and much more if the prices of iron ore rise again and the rupee continues a downward bias against the US Dollar….you could view volatility in iron ore prices and the US $ currency as risk factors… .I dont see Prices below US $ 40/T……Without any further equity dilution than the small preferential allotment to promoters at Rs 172,the EPS will cross Rs 60….so in three years the Share Price is an easy double from current levels of Rs 200…this would be gains of 26% CAGR for three years…Reserves will cross Rs 12000 crs to give a book value near Rs 150…The Company has no financial leverage and I don’t expect it to in the near future as internal acrruals are more than adequate and infact are creating great surplus…it had nearly a Billion Dollars in cash at March 31,2009…nearly 40% of it  has been applied to buy out Dempo Goa…More acquisitions should follow read more

Where are we on this Zig Zag ?

Came across this very interesting Zig Zag Chart……I say there’s some more pain…so we should be moving towards panic on the downside….mark… the recovery will not be as pronounced….in that  a Sensex of 21000 that was touched in the first month in 2008 is now not even visible on the horizon on any recovery from despondency  

Reiterating the previous Blog….look for scavenger prices….lifeless prices….thats the point of Maximum Financial Opportunity….The Market as a whole yet has to fall towards such prices…though some scrips have had  such a pronounced fall that the lows they fell to could be viewed as scavenger prices….Sesa Goa dropped like a closed parachute inside days from ex bonus ex split levels of Rs 175 to lows of  Rs 99/100 four trading days ago as FIIs who held 23% of the equity began exiting to repatriate urgent liquidity to their sinking mothers back in USA …It’s bounced back to Rs 126 showing that India has some matured value Buyers who will not miss scavenger prices even if the overall sentiment is bleak and weak

So prepare your Stock Selection Lists and assess what should be the Scavenger Price range for each selection……this would be your entry point…this would vary from person to person based on risk profile and valuation assumptions…For Example IFCI is looking like a Vulture Pick to some at Rs 38/39….My Scavenger Price Range is Rs 25 to Rs 29….buying at distress price and not stress price will give maximum gains…and believe me distress time is coming up ahead