SAAG RR Infra - E&P Services bet

Saag RR Infra Ltd (SRRI) is a Public Limited Company listed on the Bombay Stock Exchange (BSE Scrip Code : 531374). The paid up capital of the company is Rs.10.5 crores.

SRRI was established in 1995 with the primary objective of property development. It later evolved into a versatile infrastructure company. A few years ago it was taken over by Saag Consolidated (M) Bhd (Saag), a key player in the oil and gas sector in Malaysia and the Asia-Pacific , with a view to using the local company as their vehicle to tap the enormous potential India has to offer in the Oil & Gas - Exploration &Production (E&P) Services sector, specifically in pipe-laying and well services technology. Saag targetted SRRI as the latter was already executing various construction projects for the Oil PSU's in India , and hence was already engaged with & had a relationship with the target clients, though in a different capacity.

After a few years of effort, the company made it's first breakthrough in the Oil & Gas E&P Services sector in India with a prestigious order of Rs 288 Cr from ONGC for charter hire of two offshore modular workover rigs, for a tenure of three years

Some months later it was successful in getting a second order from ONGC, but this was subsequently cancelled as the proposed sub-contractor to SRRI did not meet the required parameters.

Salient points about SRRI :
· The Infrastructure division has the capability and expertise of executing projects in the construction , water & sewarage domains. Current order book is about 60 Cr for this division.
· The E&P Services division of SRRI has bagged a 288 Cr order from ONGC , and is bidding for further projects in the Oil & Gas E&P space.
· The company had earlier planned to raise capital for expansion/working capital via a preferential issue, but the same has been shelved due to market conditions, The company will raise debt instead.
· The ONGC order will be executed over 3 years timeframe spanning 4 financial years, starting from Feb/March 2009. Approximate execution would be along the lines of 20 Cr, 96 Cr, 96 Cr & 76 Cr over the 4 financial years starting FY0809.
· Assuming a 15-20% NPM on the ONGC order, and (a) not assuming profitability from the construction division and (b) not considering further E&P Services orders , the company could still achive the following EPS for the next few years on current equity of Rs 10.5 Cr :-
200809 - Rs 3 - Rs 5
200910 - Rs 14.5 - Rs 19
201011 - Rs 14.5 - Rs 19
201112 - Rs 11.5 - Rs 14.5

Recommendation :
Assuming the company can deliver on this prestigious break-through order it will open up huge avenues for further business in the E&P sector. Given that the E&P industry will likely recover in a couple of years as global economies come out of recession and oil prices firm up again, and with enough visibility of earnings in the interim, we can consider an investment in Saag RR Infra at CMP of Rs 20.95 (closing price as on 12th Nov, 2008) and all declines, for multi-bagger returns over a 3-5 years holding period.

Author : Bosco Menezes

Recommendation Date : 12.11.2008

Disclaimer/Disclosure : At the time of writing this article the author has a position in the stock covered by this report. The author or any of his dependent family members may make purchases or sales of the securities mentioned in the report while the report is in circulation. Readers/recipients of this report are strongly advised to do their strict due diligence, and should be aware that the value of investments can go down as well as up. The author shall not be liable for any direct or indirect losses arising from the use of the contents of this report, and readers are therefore cautioned to use the information contained herein at their own risk. In fact, readers would do well to seek the advice of a qualified independent advisor. The author certifies that all of the views expressed in this report accurately reflect his personal views about the subject company at the time of writing this report. Feedback / brickbats may be hurled at the author at boscom@gmail.com .

Camson Biotechnologies Ltd - One for Phillip A. Fisher

When Phillip A. Fisher , one of the pioneers of modern investment theory, wrote his masterpiece "Common Stocks, Uncommon Profits", the very 1st point he listed in his checklist of things to look for in a company before making a purchasing decision was :

" Does the company have products & services with a sufficient market potential to make possible a sizable increase in sales for at least several years ?"

Well, if there ever was a company that so perfectly fitted the above postulate, it is Camson Biotechnologies Ltd (BSE Code : 590076).

Since pictures speak more than a thousand words, I will save myself a few thousand by entreating the reader to watch the following presentation which will explain what Camson Biotechnologies & the sector it operates in is all about : http://www.youtube.com/watch?v=qDFxhrv5KJI

To tie-up a few salient points :

• Camson is fully integrated agri-biotech company producing bio-pesticides, bio-fertilizers, hybrid seeds & zero-residue fruits. It currently has 22 Bio Pesticides, 7 Bio Fertilisers and 17 Hybrid Seeds in it's product range.
• With the world increasingly becoming sensitive to chemical-free food, and exports increasingly needing to be zero-residue, demand for bio-fertilizers & bio-pesticides is zooming yearly. The world over, countries are moving towards banning agro-chemicals due to the increasing realisation of the longer term costs on the health of their populations.
• Bio-pesticides & hybrid seeds make up around 80% of the current turnover of the company. The company sells it's products at lower than the equivalent prices for the chemical-based products, and with the "chemical-free, zero-residue" advantages. This makes it a win-win for the farmer / contract farmer. Company has all the necessary certifications of it's products.
• Extensive details regarding the company, it’s products, it's vision etc can be accessed on it’s website : http://www.camsonbiotechnologies.com/
• Was ranked 34th fastest growing technology company in India in 2007 in the 'Technology Fast50 India 2007' programme conducted by Delloitte Touche Tohmatsu, Asia Pacific : http://www.camsonbiotechnologies.com/awards_certificates.html
• Management belongs to a family of agricultural technologists with decades of experience in agriculture.
• Promoters, Associates & group companies holding (including warrants outstanding) is around 55-60% though in the classification only 19.9% is currently shown as promoter holding.
• Company has grown 450% plus in last 2 years, scaling up from around 8-9 Cr in FY06 to 41 Cr in FY08. The company is targeting a 100% growth in topline in FY09, and a similar jump in FY10 too, which would need some further capital infusion, as the sector is capital-intensive.
• The company has built the base to continue this scorching pace of growth for the next several years.
• Among it's clients are HLL, Rajshree Sugar, Russel Tea, various state co-operatives etc.
• As far as seasonality of the business is concerned, some fruits , vegetables & crops are seasonal, while others are not, so overall seasonality factor is not very large.
• No Government controls for it's products.
• It has an impressive list of non-promoter shareholders ; Vivek Mundra is the latest entrant, having picked up a 1% stake recently.

Risks :

• Any adverse weather conditions affecting farming will impact the company in that particular quarter.
• Equity dilution - the author is informed that the fully diluted equity stands at 16 Cr . The Industry is working-capital intensive so maintaining the current rate of growth (company is growing 100% yearly) will require further cash infusions resulting in equity dilution – however incremental earnings will be at a far faster pace than any incremental equity dilution hereon.
• HR & other challenges typical to smaller companies growing at scorching rates

Recommendation : The stock quotes at Rs 74.10 as on 11th July, 2008. The author recommends buying the stock around it's March 2008 low of Rs 55 or below, strictly for a 3-5 year hold.

Author : Bosco Menezes

Recommendation Date : 14.07.2008

Disclaimer/Disclosure : At the time of writing this article the author has a position in the stock covered by this report. The author or any of his dependent family members may make purchases or sales of the securities mentioned in the report while the report is in circulation. Readers/recipients of this report are strongly advised to do their strict due diligence, and should be aware that the value of investments can go down as well as up. The author shall not be liable for any direct or indirect losses arising from the use of the contents of this report, and readers are therefore cautioned to use the information contained herein at their own risk. In fact, readers would do well to seek the advice of a qualified independent advisor. The author certifies that all of the views expressed in this report accurately reflect his personal views about the subject company at the time of writing this report. Feedback / brickbats may be hurled at the author at boscom@gmail.com .

Capital Preservation - Priority No. 1

My advice to investors is to approach the current year (FY09) with a bit of caution & keeping capital preservation in mind.

• Inflation is on the rise & the Govt/RBI may take several decisions which might impact corporate performance one way of the other. Both frind & foe (Left & BJP) are going on the offensive on this & a knee- jerk reaction from the Govt is not ruled out.
• The FM has conspicuously lowered his growth projection to 'around 8%' and made it clear that he is willing to sacrifice growth to keep inflation in control.
• Expected reduction in interest rates will certainly be on hold for longer than anticipated, and there is a chance that it might even be reversed, even as the lag effect of previous rate hikes might start reflecting in bottomlines.
• Impact of Pay Commission recommendations on Central & State Govt finances, and also on that of PSU's indirectly, needs to be looked at closely. So also, the write-off of loans announced in the last budget.
• The Global situation is still volatile, and could continue to impact our market in the short to medium term.
• Forex Derivative-swap losses are coming out of wraps & even corporates with good standing seem to be affected. It has now become mandatory to disclose such losses & provide for them immediately, else auditors have been asked to highlight the non-provision in the notes to accounts. As many company's will not be declaring unaudited Q4 results & directly declaring audited full-year & Q4 results by June 30th, suspicions on this account could linger till then .
• Monsoon is due in a couple of months, let's see if the trend of good monsoons for several years now is maintained.
• Post monsoon, if inflation is under control, elections will be on the horizon, at which point of time market players may keep positions light.
• Down the line the impact of FCCB's coming up for conversion or repayment, where the market price is at a steep discount, will also have to be seen.

Despite all the above, one also has to keep in mind that bear markets are basically manna from heaven for the long term investor. So continue to look out for & add stocks which you feel are going abegging at much below fair value, and which you expect will give excellent returns if held for 2-3 years or more, state of the markets notwithstanding.

I would also recommend that this period of lull can be utilised well by investors to read the investment classics & try to learn from them and rectify mistakes going forward (it is never too late), so that one can be a better and more disciplined investor going forward.

- ZeeNut

Zen Technologies - Risk-free Buy

If Rakesh Jhunjhunwalla were to tell you that he had done his due diligence on a company, was buying the stock & that you could enter at the same price as him, would you do so ?

Well, most investors would, I guess. I surely would, given his excellent success rate & his eye for spotting multi-baggers in their infancy.

Not many of us are fortunate to have such conversations with RJ, but we can do the next best thing – read the announcements & notices that appear on the stock exchanges. And every once in a while, we may find RJ telling us a thing or two via this medium.

For example, on Friday, 18th Jan 2008, Zen Technologies (Bse Code : 590032) announced that it was making a preferential issue of shares and warrants to Rakesh & Rekha Jhunjhunwalla @ Rs 135/-. Aha, get the gist ?

Anyway, so what did RJ see in this company ? If one reads the following reports (a bit dated) one will get a very good idea about this company :
http://kanavcapital.com/reports/ZenTechnologies.pdf

http://money.cnn.com/magazines/business2/business2_archive/2007/08/01/100138821/

Company Performance

While the company has not grown as envisaged over the last 1-2 years, it appears that the company is finally on the move, and this author expects the company to do sales of 30 Cr this year, 50 Cr next year (FY09) & better still in FY10. So one is looking at an EPS of Rs 10-12 this year and Rs 18-20 in FY09. Therefore current rates appear reasonable with good potential for upside.

Investment Recommendation
At the current rate of Rs 135, the same price as RJ is paying (and with the understanding that he has done a due diligence on our behalf), the company appears to be a risk free buy, even more so on declines.

Author: Bosco Menezes

Recommendation Date : 23.01.2008

Disclaimer/Disclosure :
At the time of writing this article the author has a position in the stock covered by this report. The author or any of his dependent family members may make purchases or sales of the securities mentioned in the report while the report is in circulation.
Readers/recipients of this report are strongly advised to do their strict due diligence, and should be aware that the value of investments can go down as well as up. The author shall not be liable for any direct or indirect losses arising from the use of the contents of this report, and readers are therefore cautioned to use the information contained herein at their own risk. In fact, readers would do well to seek the advice of a qualified independent advisor.The author certifies that all of the views expressed in this report accurately reflect his personal views about the subject company.
Feedback / brickbats may be hurled at the author at boscom@gmail.com .