Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Zylog Systems – Worth a second look

with 114 comments

At 230 Crores market cap the company deserves attention. Most of the past growth has been purchased by acquisitions, which is more often than not a more damaging and dangerous outcome for investors making an offer.

If one waits and analyzes in threadbare detail, outcome would be indecisiveness.

I believe it is worthy of a small investment on following premise.

Company can fire 35% of employees thus reduce wage bill significantly and all fixed costs can be shaved fast which can provide a base of 100-200 Crores+ FCF per annum
300 odd crores will be received at a minimum out of outstanding 900 crores from debtors reducing debt by half
Debtors amount outstanding albiet high, is around 30% of turnover (800 crores / 2200 Crores). Infosy FY 12 had 20-25% outstanding on 31000 Crores.

Although a low end IT company with 10% PAT margin, product revenues account for 37% of revenues, this stream can continue to grow and is more stable.

Top 10 customers account for 30% of revenues

This is trusting the published books of accounts. At a minimum they appear to have 3500 employee if not 5000 as per AR 12.

Disclosure: Started buying this evolving story @ 71

Written by amitdipsite

November 20, 2012 at 8:23 am

Posted in Uncategorized

114 Responses

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  1. Hi Amit.. Thanks for your views, advice and very importantly Disclosure on Zylog Systems.. Hopefully it will evolve and touch its previous highs..

    yogesh

    November 20, 2012 at 9:27 am

  2. Hi amit,

    How u will compare it with Glodyne..
    just out of interest i am asking..
    rgds

    Zain.

    zain

    November 20, 2012 at 10:30 am

  3. Could you elaborate on its fall from 300+ to current 66 in 1 year ,

    Deepak Kumar Prasad

    November 20, 2012 at 12:02 pm

  4. Thanks for the link and views.

    Zain,

    Glodyne is a rapidly obsolete steel mill with some employees. and Zylog has no depreciating steel machinery, only employees. Check %age of employee cost to sales. Hence business is not comparable.

    Fall from 300+ to 66 Rs is well documented in all newspapers linking to pledge, over enthusiastic acquisitions… I can't provide more value.

    Regards

    Amit Arora

    November 20, 2012 at 7:56 pm

  5. Very much similar to Onmobile if I am not wrong if we check the fall from top for both companies. Onmobile still not out of woods.
    No point of trying to catch falling knife.

    Achin Jain

    November 20, 2012 at 9:17 pm

  6. 1) Please let me clarify, situation is not very similar to Onmobile. In case of On mobile SCAM was proven ! and with Zylog it is NOT proven as of this date.

    2) Onmobile B/S is far stronger than Zylog B/S

    3) Onmobile Employee Cost/Sales is 30% whereas Zylog Employee Cost / Sales is 70% (470 crores /615 crores as per September 12 Quarter Consolidated)

    4) Onmobile has 100+ Indian competitors, Zylog may have 20

    Amit Arora

    November 20, 2012 at 9:27 pm

  7. N number of block deals today before 09:30 am

    Company : Zylog Systems ( 532883 )
    Deal Date Client Name Deal
    Type Quantity Price
    20/11/12 GAJANAN ENTERPRISES P 446081 66.89
    20/11/12 VORA FINANCIAL SERVICES PRIVATE LIMITED S 453691 68.27
    20/11/12 VORA FINANCIAL SERVICES PRIVATE LIMITED P 456645 69.07
    20/11/12 SRIPRIYA S S 174134 66.18
    20/11/12 JM FINANCIAL PRODUCTS PRIVATE LIMITED S 482869 70.67
    20/11/12 BIRLA GLOBAL FINANCE COMPANY LIMITED S 300000 67.22
    20/11/12 GAJANAN ENTERPRISES S 434567 67.97
    20/11/12 ANUPAMA SHUKLA S 191000 69.01
    20/11/12 IFCI LTD. S 400000 66.12
    20/11/12 KARE RAMANARASIMHASETTY PRADEEP P 350000 67.66
    20/11/12 CROSSEAS CAPITAL SERVICES PRIVATE LIMITED S 688664 68.51
    20/11/12 CROSSEAS CAPITAL SERVICES PRIVATE LIMITED P 688884 68.56

    Deepak Kumar Prasad

    November 21, 2012 at 4:01 am

  8. HERITAGE FOODS is 500+ great call, keep it up Amit.

    regards
    tirumala rao

    rao

    November 21, 2012 at 4:11 am

  9. Thanks and great to know you made money.

    Regards

    Amit Arora

    November 21, 2012 at 5:08 am

  10. Retracement of 30-40% is quite possible from here. Reward/Risk ratio seems high at this mkt cap.

    Venkat

    November 21, 2012 at 5:25 am

  11. Googling out for any strong reason of Zylog going down further in capitalization doesn't seems exist right now. It looks a strong bargain hunt at this level.Disc: Accumulating a decent amt at current cmp. Thanks Amit for sharing this idea.

    http://www.dqindia.com/dataquest/analysis/3594/dq-top-rank-zylog-systems-upward-swing#comments

    Venkat

    November 21, 2012 at 6:22 am

  12. hi amit,
    there is some modus operandi going on in some stocks by a few cartels. have a look at the chart of kemrock industries. stock has fallen in a similar manner done hugeeee volumes at the lower end and is having a dead cat bounce. zylog too maybe the victim of such a cartel.

    Ankit Solanki

    November 21, 2012 at 7:51 pm

  13. Hi Amit.. Northgate technologies now greenfire agri commodities limited, one forgotten stock.. In year 2011 – 12 many things changed in company like scheme of amalgamation and merger, change in working etc resulted in little spark in terms of profit although not significant.. do you think that with all this changes and looking at risk reward in relation to current price is it a worth looking..

    yogesh

    November 22, 2012 at 11:54 am

  14. Hi have not has a look. They look like CHOR in my opinion. To have a new country you need a flag, currency, institutions but for opening a new company you need a PDF write, graphic designer a www domain name and lots of fools.

    Regards

    Amit Arora

    November 22, 2012 at 7:12 pm

  15. Hi Amit,

    What's your investment horizon for Zylog? Or it's a pure trading play?

    Thanks,
    Raj.

    Raj

    November 23, 2012 at 4:48 am

  16. Hi Amit,

    Which is better TV18 / NDTV ?

    Jatin

    November 23, 2012 at 5:49 am

  17. Thanks for your view.. Your point taken.. But still if you can have a look at it and comment on the same, will be great as your views will help us on how to study a company rather its financials while making any decision..

    yogesh

    November 23, 2012 at 8:22 am

  18. Dear Amit,
    Can this story be compared with opto circuits. OCL has been hammered by bears for reasons not attributed to current performance but on long term debt due to acquisition. Dose Opto circuits also deserve look in similar manner at CMP for accumulation.
    Kindly reply as i hold OCL since long

    Kishor Barhate

    November 25, 2012 at 4:15 am

  19. Hi Amit,

    can winsome jewellery be another thangamayil ? if you can look at it .

    Deepak Kumar Prasad

    November 25, 2012 at 2:11 pm

  20. Shale Gas
    ———-
    China Auctions, they claim more reserves than the US

    http://www.energytribune.com/64983/chinas-second-shale-gas-auction-fails-to-dazzle-amid-profitability-concerns

    Poland

    http://english.peopledaily.com.cn/90777/8029856.html

    Risks in China have not been discussed

    http://www.readability.com/articles/qyttbh4i

    Conflicting Views, Cornell University Professor says Shale is ABSURD

    http://www.newsinenglish.no/2012/11/22/statoil-shale-gas-projects-absurd/

    Oxford University Professor write a book on why WIND and SOLAR is idiotic and one needs to embrace SHALE

    http://www.newscientist.com/blogs/culturelab/2012/11/embracing-shale-gas-may-help-cut-emissions.html

    meanwhile we should profit as businessmen.

    Amit Arora

    November 25, 2012 at 8:49 pm

  21. Hi Amit,

    Do you reckon that Vikas WSP is a direct beneficiary of the SHALE gas and Fracking boom???

    Also want to know your views on this late Hue and Cry over the Media sector especially TV18. Do you think that this digitization is going to be a game changer for it.Also have been hearing some news like it can generate nearly 1000cr profit per annum down the line in few years.

    Sandeep

    November 25, 2012 at 11:46 pm

  22. A vast northern energy project frozen, billions of dollars in lost profit, legal disputes and investigations – the creeping shale gas revolution has left Gazprom, Russia`s state gas monopoly, reeling.

    Long used to being the big boy on the block, Gazprom has been confronted with a future where it may no longer be able to dictate long-term pricing contracts, shut supply valves on a whim and hold much of Europe in its grip because of its position as dominant player.

    For years, officials at Gazprom refused to discuss shale gas at length. Alexander Medvedev, deputy head of the monopoly, once famously called it a “bubble”. Alexey Miller, its CEO, said the alternative energy source would remain something of a luxurious side dish. “If you like foie gras, that doesn`t mean you no longer need a regular steak,” he told a gathering of European businessmen in Cannes in 2010.

    Now, with the US poised to overtake both Saudi Arabia and Russia to become the world`s largest oil producer by 2035 because of shale, it looks like Russian officials may be grudgingly accepting the new reality.

    Vladimir Putin, the powerful president who has made stretching the Kremlin`s grip over the country`s energy sector a governing priority, has taken the lead. “Politicians, experts and businessmen are talking about the shale revolution,” he said last month to mark the launch of Bovanenkovo, a new Arctic gas field. “We must take into account current developments and have a clear view of how the situation will develop not only in the next two to three years, but through the next decade.”

    He commanded a new energy strategy to be drawn up by the end of November.

    “When the whole boom started, Gazprom was in denial,” said Elena Herold, a Russia analyst at PFC Energy, a Washington-based energy consultancy. Putin`s statements marked a shift, she said. Russia realises it will have to react – though no one yet knows how.

    The US shale gas boom has already had major effects on Russia, though its responses have remained ad hoc. There is a widespread understanding that Gazprom`s decision to pull the plug on Shtokman, a huge Arctic gas field that it had long feted as Russia`s flagship foray into a new and difficult production region, was prompted by increasing US reliance on shale.

    Gazprom has also been forced to concede – on a case by case basis – that its prices to customers in Europe have been too high as the continent has taken in liquified natural gas once destined for the US, sold at spot prices well below those locked into Gazprom`s long-term contracts, where prices are indexed to oil. Russia supplies around a quarter of Europe`s gas.

    The European commission has also launched an anti-trust investigation into whether Gazprom has been imposing unfair prices on its European customers by linking its prices to oil, and whether it has been hindering the free flow of gas across the EU. Russia`s dependability as a gas supplier was called into question after it shut the valves to Ukraine, the country through which most of its gas reaches Europe, over pricing disputes largely seen as punishment of the ex-Soviet country`s turn westward. It was accused of using energy as a direct foreign policy tool. The cuts, in 2006 and 2009, came in the dead of winter, and countries across Europe froze.

    Ukraine said this week that it planned to sign production sharing agreements with Chevron, ExxonMobil and Shell by early December to develop its own shale gas. For now, the tide in Russia has yet to turn. State run media and Gazprom talk up the environmental dangers of fracking, an odd phenomenon in a country that usually keeps ecological concerns at the bottom of its agenda. Putin`s command that Gazprom wake up to shale gas will likely change things, analysts said. “No one in Russia`s energy industry can afford to ignore the president`s stark comments,” said Herold.

    Jatin

    November 27, 2012 at 5:20 am

  23. Dear Amit, have you look into Store one retail india recently? Please share your thoughts.

    http://www.platts.com/IM.Platts.Content%5Caboutplatts%5Cmediacenter%5Cpriceshale.pdf

    Pradeep Kumar

    November 27, 2012 at 12:00 pm

  24. Dear Pradeep,

    Thanks for the link, I have skipped Store One because they are just accounting profits, no business in reality.
    —————————————————-

    The two most mis-priced bets are Zylog (once books are proven clean) and Vikas (only 5-10% bet of portfolio), as per my understanding it is all sustainable. What if it sustains and infact keeps growing, at a minimum I believe it should sustain. Overall sentiment is against promoter background. Both stocks can be bet 20% of portfolio over next 1 year as one develops confidence on story. IMO both are multibaggers from current levels esp. Vikas WSP as not much needs proven for me other then hefty dividends for minority.

    Regards

    Amit Arora

    November 27, 2012 at 7:45 pm

  25. Nov. 27 (Bloomberg)– New York state will seek a 90-day extension of the Nov. 29 deadline to develop fracking rules, which would reopen a public-comment period, said Emily DeSantis, a spokeswoman for the Environmental Conservation Department

    The extension, if granted by the Office of Administrative Hearings, would allow Health Commissioner Nirav Shah time to analyze the issue with the help of an outside panel, whose members were chosen this month, DeSantis said in an e-mailed statement. The study, ordered in September by Governor Andrew Cuomo’s administration, caused New York to miss the deadline.

    The state has been studying hydraulic fracturing for more than four years and issued a moratorium in 2010 so regulators could conduct an environmental review and develop rules. By requesting the extension, the DEC avoids restarting the entire review process.

    Raj

    November 28, 2012 at 9:20 am

  26. Commissioner for the Environment Jan Wright has all but ruled out a moratorium on fracking.

    In releasing her interim report on fracking today, Dr Wright outlined four “golden rules” for fracking and indicated cautious approval for the practice.

    “Also known as hydraulic fracturing, the process uses water sand and chemicals to extract otherwise difficult to dislodge gas and oil from shale rock and sandstone.

    It is a focus of much protest and emotive claim and counterclaim and Dr Wright, in her briefing before her report was tabled in Parliament this afternoon, made it clear the evidence does not back up some of the more emotive claims.

    There is no evidence fracking is an earthquake risk, her report says, although it also advises it would be prudent not to use the practice on or near active faultlines until more is known.

    “I have not yet seen anything that is a big red flag, but I don’t know yet how thorough the monitoring is that has been done,” she told a media briefing.

    “The risks are low if everything is done with best practice.”

    Specific rules

    The next report will focus far more explicitly on what specific rules will be required to ensure best practice from firms using fracking.

    So far in New Zealand firms trialing the practice include Todd Energy, Solid Energy and L&M Energy.

    The report stresses four areas of regulation: as noted above, the first is to keep away from active faults.

    “The second thing is ‘well integrity’ – casing the well thoroughly, getting the cement right and strongly bonding the well to surrounding rock, making sure it is able to withstand ground movements, which as you know we have a lot of in New Zealand.”

    The third aspect is limiting any spills and leaks on the surface – “easy to do in theory but there is always human error”.

    The fourth is disposal of waste from the fracking process.

    These four will be the main thrust of the final report next year.

    Much of the publicity around fracking has been over-emotive, she says, and adds that her own previous comments have been misinterpreted by opponents of the practice.

    Qualified endorsement

    Her comments earlier this year on a qualified endorsement from the Royal Society on fracking should not be seen as an endorsement and neither is today’s report.

    “I did not give the big tick to fracking then and that is certainly not what I am doing here today.”

    But her interim conclusion is that fracking “can be managed provided best practice is actually being implemented and enforced through regulation”.

    A moratorium – as opponents in the Green Party and in the environmental movement have called for – is not needed, she says.

    “Calling for a moratorium is a very big step. I find it a little hard to see the need to undertake a moratorium on the industry at this point – to be fair you would have to look at conventional [mineral extraction] as well.”

    Raj

    November 28, 2012 at 9:22 am

  27. AHMEDABAD: Guar farmers and exporters are planning to hold a protest in Rajasthan, Punjab and Haryana demanding that the Forward Markets Commission (FMC) lift the ban on guar futures. In spot market, guar seed prices have fallen by 30% to Rs 8,000-Rs 8,400 a quintal in the past one month owing to poor export orders and a good production. However, a section of manufacturers and exporters feels the ban should remain to ensure stability in prices.

    “We will be staging a huge protest march in Jodhpur against the government`s inaction of re-listing guar and guar gum on the futures market. The protest will take place on December 23, which is the birth date of farmer`s leader and sixth prime minister of India Chaudhary Charan Singh,” said BD Agarwal, MD, Vikas WSPBSE -2.93 %. The company clocked a net turnover of Rs 1,025 crore with a net profit of Rs 155 crore this year. It processes 70,000 tonne guar gum a year. The nation`s commodity market regulator banned futures trading earlier this year as guar gum prices rallied to Rs 80,970 ($1,557) per quintal on March 27 in Mumbai from Rs 8,750 per quintal a year earlier. Currently, the FMC is holding talks with the commerce ministry. “Farmers are not getting a fair price,” said Agarwal, pointing out that guar seed prices are Rs 9,700 a quintal in Ganganagar, compared to Rs 8,400 a quintal in Jodhpur market. India is the major exporter of guar gum to the world with major export destinations being the US, China, Germany, Russia and Australia. The country exported 7.07 lakh tonne of guar gum worth Rs 16,523.83 crore during the year 2011-12.

    Raj

    November 28, 2012 at 9:24 am

  28. Hi Amit, The above content is copied from MC Board written by a boarder named SPEL. He posts lots of info on Vikas WSP board. If possible, please have a look and share your views. Thanks.

    Raj

    November 28, 2012 at 9:27 am

  29. New Zealand`s environmental watchdog is unlikely to call for a ban on fracking upon the release of her initial inquiry into the controversial oil and gas industry technique.

    Parliamentary Commissioner for the Environment Jan Wright will on Tuesday release her report on fracking, which involves injecting a mixture of water, sand and chemicals under high pressure into rock masses, from as little as several hundred metres underground, to help release oil and gas.

    The report follows an eight-month investigation instigated after it was revealed fracking was being undertaken without consent, and some operations had polluted the air, groundwater and soil.

    As Wright prepares to table her report in Parliament, the Star-Times has learnt that any suggestions to either ban fracking or allow it to be continued but with stricter guidelines and consent processes, would instead be included in a second, yet-to-be completed report.

    Wright`s investigation comes at a time when a growing number of overseas countries are banning fracking due to environmental disasters and reported links to an increase in seismic activity.

    Fracking has been carried out in New Zealand for more than 20 years, with numerous operations by energy companies without specific consent from local councils.

    Green Party energy spokesman Gareth Hughes said if Wright did not make a binding stand on fracking in her report, he would call on the Government to order a moratorium on fracking until the procedure was proven safe.

    “Until it can be proven we have got a robust regulatory regime to protect our environment, we shouldn`t be undertaking this massive expansion which is currently planned,” Hughes said.

    Hughes has provided the Star-Times with a dossier of alleged fracking incidents in New Zealand, including a lack of consent, dumping of fluids in public waterways, groundwater and soil contamination, air pollution and a failure by officials to scrutinise chemicals being used.

    Earlier this month, Todd Energy released the 178-page submission it had provided Wright`s investigation.

    In it, the energy company – which has a history of fracking in Taranaki – said New Zealand`s multibillion-dollar energy industry would be uneconomic if fracking was outlawed.

    Todd Energy chief executive Paul Moore argued the practice could be done safely.

    “We need to do it – but we also need to assure the public that we`re doing it well,” he said.

    “We believe the way to do this is to be totally transparent. All we want to do is honestly say to everyone that we are wanting to do the right thing, that we are fully committed to New Zealand and our environment.”

    Raj

    November 28, 2012 at 9:28 am

  30. Hi Amit,

    I am totally confused about Vikas WSP,

    Lot of possitive analysis and potential, and at the same time lot of negatives about the promotors!..

    An article appeared in moneylife points this. the link is not working, but i got a copy of the ame at moneycontrol board.

    Pls go through the link and give ur valuable comments

    http://mmb.moneycontrol.com/india/messageboardblog/message_thread/10268405/12072641

    with best regards

    Zain

    zain

    November 28, 2012 at 9:36 am

  31. Jatin..

    Have you done any investigation on this.. seems NDTV has got lot of hidden value in it..

    sandeep maddali

    November 28, 2012 at 2:38 pm

  32. Amit, why no Fii or MF is interested in Atul Auto which is debt-free growing more tha 30% yoy which strong management !!
    Reminds me of quote by prof bakshi-
    Zebras have the same problems as institutional portfolio managers like myself.
    First, both have quite specific, often difficult-to-obtain goals. For portfolio managers, above-average performance; for zebras, fresh grass.
    Second, both dislike risk. Portfolio managers can get fired; zebras can get eaten by lions.
    Third, both move in herds. They look alike, think alike and stick close together

    Jatin

    November 29, 2012 at 5:47 am

  33. Ha ha

    I have read that in an article on “A Zebra in Lion Country”
    http://www.amazon.com/Zebra-Lion-Country-Ralph-Wanger/dp/0684838818

    Has any institutional house even given a target of 800% ? or even 200% ?

    Wim Plast, Atul Auto, Cera, Thangamayil are all multibaggers and will again become once more !

    Enjoy

    Amit Arora

    November 29, 2012 at 5:53 am

  34. Buying Zylog, I know its free falling. Be Ready for 30 Rs levels too but I feel strongly about reversal.

    Amit Arora

    November 30, 2012 at 4:48 am

  35. Hi Amit,

    Can we plz look back to the stoy of Cravatex. I have started accumulating recently after its fall from 799. And plans to do so till whatever levels it falls. Whats your opinion.

    Thanks

    Naveen

    Nanna

    November 30, 2012 at 4:57 am

  36. Jatin

    November 30, 2012 at 5:10 am

  37. Dear Nanna,

    Cravatex has potential but right now its boring like Relaxo was from 2004-2009. May take few years to build business. I bought it all the way from 100 to 799 but not during its downturn. Company may be brilliant short term prospects could not not so alluring. It was 15% of portfolio six months back but now it has reduced to 5.5%. I did not buy or sell anything just that others outperformed.

    So, right now other stocks turn me on much much more than Cravatex. Including Muthoot Finance, Manappuram, Vikas WSP, Zylog etc.

    Regards

    Amit Arora

    November 30, 2012 at 8:31 am

  38. Shoemakers Vibram USA Inc. and Fila USA Inc. said Friday that they reached a settlement in a patent infringement lawsuit.

    http://www.businessweek.com/ap/2012-11-30/vibram-and-fila-settlement-patent-case

    Rahul Paliwal

    December 1, 2012 at 2:33 am

  39. hi Amit. What are your views on karuturi global and himalaya international? Both these scripts look very tempting!

    thanks and regards,
    Kapil

    MSKAPIL

    December 1, 2012 at 7:46 am

  40. Thanks Zain

    I doubt if Sucheta Dalal has done analysis of fracking industry. I don't worry about operator or murderor promoter or tax evading promoter.

    I only worry about fundamental strength of business and promoter's attitude towards minority – DIVIDEND.

    All the best

    Amit Arora

    December 1, 2012 at 7:16 pm

  41. Hi Amit,
    What do you think is the scalability of business of Corvi and it's going to effect Photoquip business figures?

    totalview

    December 2, 2012 at 8:56 am

  42. What does the article says? Can someone traslate please. Thanks.

    Raj

    December 3, 2012 at 4:07 am

  43. Hi Raj,

    Try this Hindi to English

    http://translate.google.com/

    Amit Arora

    December 3, 2012 at 7:44 am

  44. Thanks, got it.

    Raj

    December 3, 2012 at 8:10 am

  45. for Thangamayil Jewellery. hdfc sec is giving EPS of 70 for fy 14 so giving a p/e 10, when TBZ is trading at 25 p/e gives 700 in next 12-15 months
    http://www.hdfcsec.com/Research/ResearchDetails.aspx?report_id=2989528

    tirumala rao

    rao

    December 3, 2012 at 2:17 pm

  46. An entry at 70 and ready to see 30 levels? Do you think risk-reward ratio is favourable at this point?

    totalview

    December 5, 2012 at 3:36 pm

  47. This is where Photoquip promoters have fared poorly. We hardly know your their intentions.

    totalview

    December 5, 2012 at 3:40 pm

  48. Dear Amit,

    Whats your views on Shree Ganesh Jewellery House? available at 1.7 PE (on conso EPS of 75.97), conso book value of 258 and growing at a very good pace, paying dividend at 6 Rs. per share (yield 4.5% at cmp) awarded by Gem & Jewellery Export Promotion Council for Outstanding Export Performance and contribution in the Trade, during the year 2011-12, for the two categories:

    1. Studded Precious Metal Jewellery Exports by units from EPZ/EOU Complexes

    2. Plain Precious Metal Jewellery Exports by units from EOU/EPZ Complexes.

    Enjoy Money

    December 7, 2012 at 5:26 am

  49. Dear Amit,

    With lots of spending expected on power. The mining industry seems interesting. How about a clean player Eimco Elecon. Sitting on cash reserves, clean balance sheet, strong support from foreign promotor. Can u please look into this compnay.

    Thanks

    Naveen

    Nanna

    December 7, 2012 at 2:59 pm

  50. Amit..

    Even i am very much confused on this. Why so much distress valuations?? When whole sector and peers are booming.. anything fishy in their books/promoters/management. Knew that they are wholesale suppliers and not catering to retail group… But still i believe even a small trigger will lead to 100% price appreciation easily. desperately waiting for your comments on this. How would you read this.

    Also my question to you on comparing Thangamayil and PCJ. PCJ has got better brand recall,diverified and are concentrated in big cities which is coming with an IPO at 7 times FY13 PE. May be it is better placed than Thangamayil???

    Sandeep

    December 8, 2012 at 3:13 am

  51. My sense in case of SGJH is the management is not trust worthy and is not focused on its core business.

    Jatin

    December 8, 2012 at 5:17 am

  52. What if the SGJHL comes into retail Business? There is some news on SGJHL's joint venture with Rocks Creation Ltd of Dhaka having retail interest. check out this link.

    http://mmb.moneycontrol.com/india/messageboardblog/message_thread/14381583/16185430#m16185430

    The Management of Vikas is also tainted, we're still bullish on it because of Business growth visibility so why not SGHJL?

    Enjoy Money

    December 10, 2012 at 4:28 am

  53. We are bullish on Vikas because its product has no replacement. The whole industry is dependent its products and they are the leaders. So there is a strong MOAT. What MOAT you find in SGJH ?
    TMJL as Manish Dave quotes ” A Big fish in Small pond ” is best pick even at this very price, so why to consider SGJ ?

    Jatin

    December 10, 2012 at 9:08 am

  54. I second Jatin here, VIKAS has strong MOAT and any change in Management's behavior towards Minority shareholders like dividend policy etc will be warmly welcomed by the market. But i still believe PCJ is better placed than Thangamayil which is been available at similar valuation but more Brand recall.
    Any comments folks..

    Sandeep

    December 10, 2012 at 10:14 am

  55. Dear amit, some interesting news. is this degrade vikas prospect?

    HOUSTON – (Sept. 13, 2012) – Halliburton announced today the commercialization of its new PermStimSM fracturing service. The service uses PermStim™ fluid, which is based on a derivatized natural polymer rather than guar. The fluid does not contain insoluble residue, making it a more robust system that will result in improved well performance. A recent fracturing treatment involved the first use of the new fluid system in the Eagle Ford shale formation. Magnum Hunter Resources chose the fluid for its Moose Hunter 1H well in Lavaca County, Texas. The fracturing treatment was performed in a 6,050-foot horizontal section at 10,897 feet in vertical depth, with a bottomhole temperature of 280°F and a bottomhole pressure of 6,500 pounds per square inch (psi).

    The treatment was pumped down a 5-1/2-inch casing, using a hybrid fluid system that interspersed linear fluid stages with cross-linked fluid stages using PermStim fluid. Proppant concentration ramped from .25 pounds to 4 pounds per gallon. The 24-hour initial production was 1,686 bbl of oil and 801 Mcf of gas on a 16/64- inch choke, which exceeds the average 24-hour initial production for Magnum Hunter’s operated wells in the Eagle Ford shale area.

    H. C. “Kip” Ferguson III, executive vice president of exploration for Magnum Hunter Resources, said, “PermStim fluid worked very well and was easily integrated into our current fracturing design. A clean fluid makes sense as we plan for closer offsets and begin our development program for the Magnum Hunter Eagle Ford shale area.

    “The typical completion in the Eagle Ford shale play does not recover a significant amount of load water from frac stages; therefore, we need to optimize the fluids we use throughout our development area,” Ferguson added, “and we believe the use of clean fluids like the PermStim fluid system will result in maximum regained permeability and will reduce residue retained by the producing formation.”

    Laboratory tests show that PermStim fluid provides significantly higher regained permeability than derivatized and native guar-based fluids. In proppant pack flow measurements, the derivatized guar-based fluid exhibited 70 percent regained permeability and the native guar-based fluid only 40 percent, while the PermStim fluid exhibited 94 percent regained permeability.

    So far, the PermStim fluid system has been used successfully in more than 102 wells located primarily in the Denver-Julesburg, Williston and Green River basins at temperatures up to 300°F bottomhole static temperature. The PermStim fluid system provides important benefits: improved well cleanup, enhanced proppant pack permeability, controllable viscosity, excellent proppant transport, salt tolerance, and instant and delayed cross-linking systems.

    PermStim fluid is designed to provide equal or better health, safety and environmental (HSE) performance than any other conventional fracturing fluid system on the market. Even better HSE performance is available with CleanStim® fluid formulation composed of components sourced from the food industry.

    Pradeep Kumar

    December 10, 2012 at 2:04 pm

  56. Thanks for the link Pradeep.

    In my opinion, there can be many other competitor chemicals.

    Right now fracking is done in the US. China has more shale reserves and it can start soon in many other parts of the world. One would need 50 million acres of plantation. Guar along with others will need to fulfill this need.

    This year 10 million acres of land was planted with Guar. This is 2.5% of India's arable land. India's arable land area of 159.7 million hectares (394.6 million acres) is the second largest in the world, after the United States.

    Where will we get 50 million acres of land ?? Who is making more arable land ?? If Xantham gum or other competing plants must substitute then they must be grown on 10+ million acres. Hence Guar will stay for many more years

    Amit Arora

    December 11, 2012 at 9:21 am

  57. Oil == Commodity.

    Guar == Commodity.

    Assume both have many substitutes.

    Yet Oil exploration companies are 30-50 baggers in past 15 years.

    Amit Arora

    December 11, 2012 at 9:22 am

  58. Dear Amit,

    Can you suggest that CMP of Vikas WSP is a good level to invest from medium-term say one to two years?

    totalview

    December 11, 2012 at 11:01 am

  59. http://www.halliburton.com/public/pe/contents/Brochures/Web/H09347.pdf

    http://seekingalpha.com/article/865591-buy-halliburton-for-a-48-upside

    dear amit, Permstim is a direct substitute and looking at competitor data is a good idea to avoid inconsistency-avoidance bias if any.🙂
    Please have a look at their numbers also.
    http://www.halliburton.com/public/news/pubsdata/press_release/2012/Q2_Earnings_Release.pdf

    waiting your valuable comments.

    Pradeep Kumar

    December 11, 2012 at 7:59 pm

  60. I don't read much on behavioural finance so don't know what is inconsistency-avoidance bias.

    There are substitutes which I know for few months, not only from 33 Billion $ Halliburton but also from 90 Billion $ Schlumberger

    http://www.slb.com/services/completions/stimulation/sandstone/hiway_channel_fracturing.aspx

    There will be more substitutes of Guar in future but they will not be free either.

    Amit Arora

    December 12, 2012 at 7:48 am

  61. Two Good things happened in zylog recently
    1) Remaining Pledge shares were released from Fin Inst.
    2) Influx of Senior CA candidature in Director Board.

    Need to see how the mgmt will play cards with debt burden on BS.

    Venkat

    December 13, 2012 at 2:43 pm

  62. Hi Amit,

    I have a doubt. SEBI allows only 5% creeping acquisition per year naa? (Photoquip doing the same).

    So is it legal for Vikas WSP promotors to increase their stake form 12.99% to 24.89%. Almost 12% increase.

    Is it mandatory to go for open offer or create any other legal issues. Please clarify me.

    rgds

    Zain.

    zain

    December 14, 2012 at 9:34 am

  63. Hi Zain

    5% Creeping acquisition was applicable to promoters holding 15%-55%. Hence promoter with less than this stake is allowed to acquire more.

    http://www.sebi.gov.in/boardmeetings/takeovers.pdf

    SEBI further clarifies that 5% acquisition should be done only once for those holding over 55%

    http://www.business-standard.com/india/news/sebi-clarifiescreeping-acquisition/364257/

    All the best

    Amit Arora

    December 14, 2012 at 10:40 am

  64. It definitely looks interesting to me.

    If they want to become profitable its simple. Get rid of loss making projects, break even projects and employees. Keep half the employees and profitable projects. Lets see ! who has the last laugh with Vikas WSP and Zylog.

    Amit Arora

    December 14, 2012 at 10:43 am

  65. Jatin

    December 14, 2012 at 2:00 pm

  66. Few points seems obvious..

    1) Onsite modelling is a flop for Zylog(Canada) interms of profit margins. For ex: $50 million revenue generating a meager $0.4 Million NP fpr last Q.
    2) Brainhunter acq for $ 30 Million, 2 years back was a disaster. Just a $40 million revenue stream annualy with neg profit.
    3) Zylog(India) offshore model, is doing great, may be thats were little concentration is requirement currently.

    For Point 1- I guess Zylog needs to concentrate more on offshore model and need to re-think its pure onsite structure model where margins are quite low.They may think to exit those pockets where margins are too low, similiar like Infy exit'ed GE Businesses for low margins
    Point 2- Brainhunter should be made a offshore model, else this seems to be laggard and a disaster story.

    Venkat

    December 15, 2012 at 4:52 am

  67. my concerns, zylog india also into business like wifi which is capital intensive and e-goverance where profit is unpredictable, aging concerns and regulatory delays. But in the longrun, i hope they will do better.

    Pradeep Kumar

    December 15, 2012 at 12:44 pm

  68. Dear Amit,

    Would you like to have a third look at Zylog Systems?

    totalview

    December 15, 2012 at 5:15 pm

  69. Hi Amit..

    Still accumulating Omnitex??? any news to share with us. What would you suggest us on that at cmp ?? And Vikas wsp.. very confused of what to do… gained conviction on Business but promoters integrity is bad and i burnt a lot by investing in companies with bad promoters… Any suggestion.. may be worth taking risk with 2% of portfolio??

    sandeep maddali

    December 16, 2012 at 12:39 am

  70. Going through the latest Annual report of zylog's, you get a feel that it's def not a company that will go down in dark so soon, with net worth of 900 cr plus its does look like a temporary bad phase (As we assume here that no fraud in BS numbers,as cmpy payed 100 cr + in taxes last fiscal),Management looks responsive, employees seems ok with the company prospects as far as i interacted with few of them.
    let see if next few Q result's doesn't get degrade.

    Venkat

    December 16, 2012 at 6:45 am

  71. One of the persons who has expounded unequivocally and incontestably on RISK vs UNCERTAINTY is Mohnish Pabrai in Dhandho Investor.

    Is Uncertainty high with Zylog ?

    YES

    Can the management change ?

    YES possibly

    Can the bank refuse funds or roll over loans ?

    YES

    Will management reduce size of operations ?

    MAYBE

    Will management sell a few subsidiaries ?

    MAYBE

    Will management close a few subsidiaries ?

    MAYBE

    Will management make operations lean, if so how ?

    DON'T KNOW YET

    Can company go to ZERO ?

    NO

    As you can see Stock Market HATES uncertainty. BUT Uncertainty of what, uncertainty of outcomes. It can be possible that out of 5 possible outcomes, none of final consequence results in not only Bankruptcy but final value of say 700 crores.

    Also, India markets are pigeonholing Zylog into Allied Digital, Glodyne, Satyam. Recency effect !

    Good Luck

    Amit Arora

    December 16, 2012 at 6:57 am

  72. UNCERTAINTY is very High but RISK (in the eyes of beholder) is very low. Stock market cannot differentiate between RISK vs UNCERTAINTY.

    Amit Arora

    December 16, 2012 at 6:58 am

  73. Just love these quotes and fits perfectly here-

    Most investors, according to Mark Zeckhauser, whose training fits a world where states and probabilities are assumed to be known, have little idea how to deal with unknowable and treat as if risk is the same as uncertainty. When they encounter uncertainty, they equate it with risk, and tend to steer clear. This often produces buying opportunities for thoughtful investors who shun risk but seek uncertainty on favourable terms.
    Second, Zeckhauser states that historically, some types of unknowable situations – those that Taleb
    calls positive black swans – have been associated with very powerful investment returns and that there are systematic ways to think about such situations. And if these ways are followed, they can lead you to a path of extraordinary profitability.
    One way to think of unknowable situations is to recognise the asymmetric payoffs they offer. The
    opportunity to multiply your money 10 or 100 times as often as you virtually lose all of it is a very
    attractive opportunity.
    Also Zeckhauser says is that there are people who can get amazing deals – that they have this ability to source these transactions. They have certain skills that allow them to attract such transactions to them – maybe they’ve got capital, contacts, or something in them which a typical investor does not have. Zeckhauser advises that when the opportunity arises to make a “sidecar investment” alongside such people, you shouldn’t miss it.

    Jatin

    December 16, 2012 at 7:26 am

  74. Dear Amit, Wht about finolex cables? At current valuation and brand positioning in power cables segment, wht tells u their BS numbers for having long term position? please enlighten

    Pradeep Kumar

    December 16, 2012 at 9:30 am

  75. Hi Amit,
    You can add 3iiinfotech to the list of Allied Digital, Glodyne…….

    totalview

    December 16, 2012 at 9:48 am

  76. Thanks for the valuable guidance..

    One more doubt.
    SEBI increased open offer trigger from 15% to 25%.

    http://www.thehindubusinessline.com/markets/stock-markets/article2302790.ece

    Is it applicable to existing promoters also?..
    So Vikas WSP have to go for open offer if they want to increase their shareholding more than 25%.. Is my understanding correct?

    Or can they purchase from market (5% creeping way) after Mar 2013?

    rgds.

    zain

    December 17, 2012 at 6:14 am

  77. Its hard to believe that that people(retail investors) could dump a company just based on news of lenders liquidating pledged shares. I think it is just the recent Satyam scam fresh in investors minds which made them sell. I think this was a perfect example of 'Herd mentality' at play.
    Zylog officials say they have the financial strength to withstand the crisis. May be they are right may be not, but there is tremendous value in this company.

    Mokhtar

    December 17, 2012 at 12:42 pm

  78. Hi Amit,

    What do you think about Redington India as a company?

    Regards,
    Elton

    mystics

    December 17, 2012 at 7:13 pm

  79. Talent flow- most comparable product is Taleo which was acquired by Oracle for $1.9B

    http://www.bloomberg.com/news/2012-02-09/oracle-will-purchase-taleo-for-46-a-share-in-deal-valued-at-1-9-billion.html

    Jatin

    December 18, 2012 at 6:32 am

  80. Dear Zain,
    They will have to make an open offer to acquire another 26% of the capital of the Company once they cross 25%. That is why they have limited the acquisition to 24.98%.

    Those holding between 25% to 75%, can do creeping acquisition every FY limited to 5% of total capital of the Company.

    Enjoy Money

    December 19, 2012 at 5:31 am

  81. This is Hilarious.

    BSE has come out with a research report under investor protection fund. It says Photoquip is sole distributor of Manfrotto , Gitzo and Nissin in India. Alas they haven't done the research properly, as now none of the above are with Photoquip.

    Jatin

    December 19, 2012 at 2:07 pm

  82. Is this how BSE justifies spending 3 crores per report, 50 lacs per page of PDF with wonderful bunkum.

    http://www.bseindia.com/download/Research_Report/Report/526588/2012-13/PhotoQuip%20India%20Ltd%20Final.pdf

    Amit Arora

    December 20, 2012 at 6:38 am

  83. Hi Amit,
    Mouthwatering price, Zylog available @ Rs.61 and on LC. Should one accumulate more one who has entered around 70? Your valuable advice is needed.

    totalview

    December 20, 2012 at 10:04 am

  84. Jatin

    December 21, 2012 at 5:42 am

  85. Commendable initiative given the size of company.

    Amit Arora

    December 21, 2012 at 8:00 pm

  86. Idea is to not run out of money also. So maximum allocation should be 25% of portfolio @ 30 Rs. In my opinion if wants to buy 100 Shares. Buy the Last 50 Shares between 30-40 Rs.

    Amit Arora

    December 21, 2012 at 8:02 pm

  87. Jatin has posted the Jpg file in relation to iF awards

    http://exhibition.ifdesign.de/index_en

    Amit Arora

    December 21, 2012 at 8:20 pm

  88. Congrats Amit, You too survived !!! Its 22/12/2012

    Jatin

    December 22, 2012 at 8:42 am

  89. Dear Amit,

    \Your advise on Omnitex at CMP please.Can we start accumulating

    Kishor Barhate

    December 23, 2012 at 5:48 am

  90. As per my estimates each of the following five divisions of Zylog can itself be worth over 200 crores

    http://www.talentflow.com/
    http://www.fieldpower.com/
    http://www.bank-companion.com/
    http://www.silvanus360.com/
    http://www.clm-mechanix.com/

    Amit Arora

    December 24, 2012 at 1:17 am

  91. Hi Amit,

    Any Advice Indsil Hydro Power and Manganeseltd.

    Shashi

    December 24, 2012 at 1:47 pm

  92. We can add another 150 crores with below division
    http://brainhunter.ca/login.aspx

    It seems there is some liquidity issue, which may be reason why market seems to ignoring zylog at these mkt cap. But as per some employee's, business seems normal and we can see few job openings been posted in job portal( small hint on status)

    http://jobsearch.naukri.com/zylog-jobs
    http://freshersadda.com/9542/zylog-systems-recruits-freshers-jobs-ui-developer.html

    Venkat

    December 24, 2012 at 1:57 pm

  93. Amit, Zylog and Vikas WSP both around Rs 16 now. What's your view on both at these prices and after nine months?

    How about Tanla, a similar story?

    rajdori

    November 19, 2013 at 8:21 pm

  94. I had booked a loss long time back in Zylog @ 42 Rs and also wrote in comments. Holding in Vikas WSP, may recover.

    I don't buy B Grade stocks anymore.

    Cheers

    Amit Arora

    November 20, 2013 at 3:35 am

  95. But all small caps are B Grade only !!! Does it mean that you have stopped investing in small cap stocks?

    viewer

    November 22, 2013 at 3:14 pm

  96. Yes, but only time will prove whether I am right or wrong. I am holding on to several small cap stocks since last year. But no new investments. 0 bagger in Photoquip for past 2 years, 3 bagger in Atul Auto in past 18 months, zero bagger in Gulshan Polyols etc. No new investments, no focus on small caps now.

    12 PE Gillette Pakistan, 10 PE Unilever Nepal, few 10 PE stocks in Sri Lanka, 20 PE GSK Bangladesh, 14 PE Bata Bangladesh. Reckitt Bangladesh. These companies have what I call “unrealised potential” and what I prefer, 5-9% dividend yield, zero debt, no brainers.

    Hypothetical example, if Unilever Bangladesh opens marketing office in bangladesh in 2014 and has revenues of 10 Crores only in 2015 and net profits of 1 Crores. I will be happy to buy it at 300 PE Multiple i.e. 300 Crores market cap. Because I know that in 15 years time its market cap will be 6-10,000 Crores. This is not apparent right now in these companies to the naked eye.

    Amit Arora

    November 22, 2013 at 9:45 pm

  97. Hi Amit,

    Any updated coverage on this company?

    Saurabh Bachhawat

    December 10, 2014 at 11:52 am


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