Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Pakistan Vindicates

with 10 comments

I have had an uphill battle trying to convince others to invest in Bangladesh, Nepal, Kenya etc. for what appeared to me absolutely no-brainers, geo political risk and currency risk notwithstanding. I have found those opportunities better than any listed company in India. Friends aside, I have not even been able to convince my own family members. My enthusiasm and exuberance met with nonchalance and derision. That is putting it mildly. Until Pakistan story unfolded I felt like the only person who had some lose nut in his brain.

Over the past few months Pakistan Stock Exchanges have opened up to foreign investment, legally for any and every citizen/institution anywhere across the world. I tried early in 2012 to get an account opened to buy Unilever Pakistan, then available at 5000 Rs, similar valuations and attractiveness as Nepal Bangladesh companies are trading today, but it was not allowed for foreign nationals to  invest. It finally got delisted at 15,000 Rs recently.

http://tribune.com.pk/story/527447/going-private-for-delisting-unilever-pakistan-faces-a-higher-price/

 Come 2013 and portals of heavenly abode for value investors, sorry, legal investment hurdles for foreign investors are cleared with foreign repatriation. Pakistan, deemed to be an even less economically stable country than Nepal or Bangladesh, serves as a good example. 18 Month spot charts of 3 out of 25 or so MNCs listed in Pakistan for the recent 18 month period ending 17th of November 2013, i.e. today, are pasted below.

Abbot Labs – 4 bagger in 18 months

WYETH6 bagger in 12 months, 10 bagger in 18 months


NESTLE Pakistan – Only tripled in 18 months. 
“only” is intentional


Some people had automatic explanation why Gillette/Colgate/Nestle in India can trade at 50-70 times annual earning but similar companies in other developing countries can only trade at 10-12 times. Today NESTLE Pakistan has been re-rated to 60 times earnings ! This had to happen as certainly as death and taxes. Sigh of relief. Peter Lynch never invested in multibaggers in Financial Industry right in his own backyard. A funny quote applies to all of us laser focused on BSE and NSE India trying to find value in Louis Vuitton like priced BSE Index, not once questioning whether we are in the wrong store. “The closer you are to the church, the farther from God”.

Even today, these countries mentioned are more attractive than India and that’s where I am investing. Buffett – “I skate to where the puck is going to be, not to where it has been. Thank God sufficient people with investment muscle think like me so as to be able to re-rate companies in seemingly unstable countries. Common sense prevailed over xenophobia. Thanks for the Pakistan precedent, I am hopefully on the right track.


Written by amitdipsite

November 16, 2013 at 9:58 pm

Posted in Uncategorized

10 Responses

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  1. In its golden period Sensex went up 7 times from 2003 to 2008. Pakistan index went up 15 times.

    Amit Arora

    November 18, 2013 at 9:19 am

  2. Superhouse Ltd is an export focussed company. If intending to buy a B) grade stock choose it over Relaxo. Likely to outperform latter. Disc: Not invested in either.

    Amit Arora

    November 19, 2013 at 5:53 am

  3. amitji,what is your view in arrow coated product? this micro cap do you think give good returns in next 5yr?

    Tamal Sarkar

    November 24, 2013 at 1:20 am

  4. Dear Tamal

    No idea on Arrow Coated products. Maybe it can form 1-2% of small portfolio, not more than this.

    Companies that I feel can give good returns are Glaxo Bangladesh (25 PE ratio), Bata Bangladesh (14 PE ratio), Reckitt Benckiser Bangladesh (30 PE ratio), Gillette Pakistan (13 PE ratio), Unilever Nepal and few more in Sri Lanka too. They are also small caps in those countries with 50-100 bagger potential over next 15-20 years.

    Don't go by just PE ratio, go by potential to earn and potential of no loss. Nestle India was 75 PE ratio in 1980s and 1990s, but one made great returns despite that, it was potential to expand and saturate the market, even now it has not been exhausted. Assuming Nestle India were to open office for the first time in India in 2015 and register sales of 100 Crores and profit of 5 crores in first year of operation, what PE ratio would you be comfortable to buy it at ?

    My answer is I would happily buy it at PE ratio of 500. So, even though PE ratio of 40/50/70 sometimes feels expensive it isn't if supported by growth and potential (needless to say dividends and very high ROE). PE Ratio of 500 would give Nestle India a market cap of 2500 Crores, that seems okay, given the potential ahead. Same way, if Nestle India were available to you for 50 PE ratio in it first year of operation of 20 PE in 10th year of operation, its still very very cheap. If you're getting Rolls Royce for the price of Toyota who should even spend time to analyse which one to buy, unfortunately that is my situation, I can't look at micro and mid caps in India given the opportunity cost.

    All the best

    Amit Arora

    November 24, 2013 at 2:07 am

  5. Amit Arora

    November 24, 2013 at 2:17 am

  6. Dear Amit,
    I am interested in Bajaj Corp , which cheap in FMCG Sector. Drop your advice , it is worth to buy at these levels.
    Thanking you
    Divakar

    Lordsiva

    November 25, 2013 at 8:08 am

  7. Dear Divakar,

    I also have some and bought last year around 120 levels

    see here

    http://multibaggersindia.blogspot.com/2012/05/investor-is-king.html

    Main risk with Bajaj Corp single product accounts for 90% of profits. Decent company. Primary attraction was lack of competition from MNCs, only Indians use hair oil, same as mostly Indians use Pressure Cookers. Dove has also introduced Hair Oil

    http://www.dove.in/en/Products/Hair-Care/default.aspx#Oil

    Still decent company and for next 2 years writeoffs on acquisition will reduce PAT

    Regards

    Amit Arora

    November 25, 2013 at 8:49 am

  8. Amit, could you let us know how to go about investing in Pakistan?

    Kumar

    December 2, 2013 at 10:37 am

  9. Honda Pakistan available at dividend yield of 6%…that too with PE of 8. Honda mobilio can boost the top line shortly…..
    sent mail to open account in pakistan; standard capital replied positively. let see….

    Karthikraja K

    August 8, 2014 at 5:40 pm

  10. I could not get SCRA account, if you can, please update here. Will
    Gift you as well.

    All the best, there are other opportunities in Pakistan as well. So do update if are able to get a working account.

    Amit Arora

    August 8, 2014 at 6:40 pm


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