Many value investors look at 52 week lows for ideas. I, too, have started taking a look at such a list appearing in economic times everyday - except I don't go and look at these companies if I don't know about them already
If I have already identified a company as having sustainable advantages and decent business model, then, when such a stock appears on 52 week lows I am definitely interested.
Recently Mr. Market was kind enough to throw two such bones.
1) Manugraph: Good ROCE. From what I have read and from the website, the company seems to have a dominant market position in newspaper printing machines _worldwide_. Recently acquired a company in the US for very good price. The newspaper industry in the developing world is a growing industry.
Available at PE of less than 10 for current market price of 140.
2) MacMillan India:
The company site is investor friendly. They break out segment revenues. Take a look at investor presentation.
MPS is a pure play BPO/KPO and is the most interesting business hiding inside the traditional publising business. Offshoring of publishing business is set to grow in next few years.
At price of 280, the business is available at PE of around 12.
These are decent value plays and probably worth a good look. However, what makes their purchase difficult is I am too spoilt for choice. In the current market, some other more interesting plays are available with around same PEs, similar ROIC and much better growth. Examples: Kirloskar Oil Engines and Sintex.
More on these later.
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7 comments:
macmillan india has good roce and low capital requirements. however they have not been able to fix the publishing business for some time and also the growth in their outsouricing business has yet to happen inspite of all the investments
regards
rohit
Hi Ravi,
This is not about your post, somrthing else.
I dont access to gmail .. am not sure if you had send me an email but I thought I would tell you that I have moved t Mumbai (as you wished) :D
Hopefully I will be able top login to gmail and would send out my number !
Saurabh,
That's some movement ;)
All the best.
Send me an email with your phone no. and I will call you.
Rohit,
You are right in saying that outsourcing business has not made much progress for MacMillan.
Interestingly, this Q's numbers show that it is publishing business (profit 7.1 Cr compared to 4.8 Cr last FY same Q) which has helped them more rather than outsourcing business (6.9 Cr compared to 9.9 Cr last FY)
So, maybe publishing is turning around.
Of course, Magic formula strategy does not get down to such level of fundamental analysis.
I just check that this is
Good company (High ROIC)
Cheap (High Earnings Yield)
That is magic formula in a nutshell. I have added my small wrinkles to magic formula viz. I want an understandable business and make sure that above numbers are not distorted by one-offs. If there is potential for some growth, that's nice to have too - of course, without paying up for it.
Once you gather a bunch of such creatures (typically 25-30) in a Portfolio you just let it be. The chances are that more good luck will come your way compared to bad luck - at least, that's what magic formula claims. Let's see.
Once again, thanks for your comment.
Hi Ravi,
Mate, I can see where your data skills come to use. You are a numbers guy .. just like me. Strangely, you follow the same template as I do, have a rather similar layout with no frills and love numbers. (eeks, it's scary)
On Macmillan, I loved the NCAV (Rs. 75.50 per share) which was a neat 26% of CMP.
http://scrip-tures.blogspot.com/2007/05/macmillan-india.html
The results were to be announced around this time.
Warm Rgds
Shankar
PS: Whats your email id? Can u pls email me at shankarnath@gmail.com
Hi Ravi,
I too have looked at manugraph, but newspaper being a diminishing industry in developed countries and some of the developing countries, and with the rupee appreciating there are headwinds for the company. The Market rarely gives a company in a diminishing market a good multiple ex:SRF. Pls can you tell me your thoughts on it.
regards
Ranjit
Ranjit,
A dominating position in a shrinking business could be good investment as the industry consolidates and standardizes around the remaining vendor.
Besides, the newspapers is very much a growing (granted, slow growing) business in the developing world. For example, see
http://www.followthemedia.com/fittoprint/wancirc05062007.htm
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