Sicagen's core business is trading of building materials such as steel tubes, MS/GI pipes, boiler tubes, seamless tubes, rectangular/square hollow sections, TMT steel rebars, PVC pipes, electrical cables, steel fittings and cement. Sicagen is the authorized distributor for Tata Steel, Jindal Pipes, SAIL, Finolex Cables, Supreme Industries, Maharashtra Seamless and ACC Cements.
Sicagen is also the leading dealer of commercial vehicles for Tata Motors in Tamil Nadu state. It operates showrooms and and workshops at Chennai and Trichy covering 11 districts in Tamil Nadu.
The above two mentioned businesses are the core businesses and contribute more than 90% to the company's revenue and that's why the company disposed off other businesses such as:
(a) Goodwill Governor Services
(b) Goodwill Engineering Works
(c) Speciality Chemicals
It also sold of 10 wind mills in Oct'08 as the operating and maintenance cost was high, on account of wind mills being decade old.
This was some boring stuff related to the company, as is mostly the case with companies involved into dealership and trading business. Let's come to the more interesting facts about the company :
1. I feel that the company can be a true value play with its current MCAP at 66 cr. The company has about 13 Cr in cash and about 318 Cr as Net current assets. Most of the net current assets are in the form of Advances.
2. I usually don't take into account the value of fixed assets while valuing the company as when the business is liquidated, the amount received for plant and machinery and other fixed assets (except land) is far below the book value. However, the company has valued freehold land at Rs 5.8 crore in its books. Now, if the land was acquired way back , then it can alone be much more worth.
3. For those who are still interested in knowing the book value of fixed assets, the figure for the same is 26 Cr, inclusive of the value of the land mentioned above. So already a 5-6 bagger in making comparing just the book value and the current MCAP.
But, the real issue with such kind of value investment, where the possibility of growth is limited, is, that the market may take many-many years before actually realizing the liquidation value of the business, or it may also happen that it may never value it on the same lines, thus making the investment boring and not a multibagger as is envisaged before making an investment.
Sicagen is also the leading dealer of commercial vehicles for Tata Motors in Tamil Nadu state. It operates showrooms and and workshops at Chennai and Trichy covering 11 districts in Tamil Nadu.
The above two mentioned businesses are the core businesses and contribute more than 90% to the company's revenue and that's why the company disposed off other businesses such as:
(a) Goodwill Governor Services
(b) Goodwill Engineering Works
(c) Speciality Chemicals
It also sold of 10 wind mills in Oct'08 as the operating and maintenance cost was high, on account of wind mills being decade old.
This was some boring stuff related to the company, as is mostly the case with companies involved into dealership and trading business. Let's come to the more interesting facts about the company :
1. I feel that the company can be a true value play with its current MCAP at 66 cr. The company has about 13 Cr in cash and about 318 Cr as Net current assets. Most of the net current assets are in the form of Advances.
2. I usually don't take into account the value of fixed assets while valuing the company as when the business is liquidated, the amount received for plant and machinery and other fixed assets (except land) is far below the book value. However, the company has valued freehold land at Rs 5.8 crore in its books. Now, if the land was acquired way back , then it can alone be much more worth.
3. For those who are still interested in knowing the book value of fixed assets, the figure for the same is 26 Cr, inclusive of the value of the land mentioned above. So already a 5-6 bagger in making comparing just the book value and the current MCAP.
But, the real issue with such kind of value investment, where the possibility of growth is limited, is, that the market may take many-many years before actually realizing the liquidation value of the business, or it may also happen that it may never value it on the same lines, thus making the investment boring and not a multibagger as is envisaged before making an investment.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the Lead Associate on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
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