Re: Re: Micro Technologies - accumulate

Hi Venkatesh,
I am glad that you raised this. Please find below the balance sheet and the P&L account of Micro Technologies. All the figures in this are in Crores Rs.

As per my understanding the balance sheet looks very strong. They have an equity base of Rs 10.97 crore which is 1.097 cr shares. Now the best part is Rs 192 cr as Reserves & Surplus amount. This shows the strength in the balance sheet. Further, they have total debt amount Rs 70 cr (Unsecured and Secured). In the previous year this was 9.37 cr and is increased to Rs 70 cr. With in this debt amount also the unsecured portion has a bigger contribution, in fact only unsecured has increased. This is not a good decision. But will not affect it adversely. The debt:equity ration is still in favour of the company. The D:E will be 70:203 which will be 0.34. The company is very conservative in using the funds. I like it very much.

Instead of looking standalone Debtors number I would prefer to look at Net current assets and current liabilities number and compare. The Net Current Assets of Rs 188.63 cr while the Current Liabilities are of Rs 15.69 cr. This gives us a difference of Rs 172.94 Cr. If it's divided in 1.097 cr shares then each share has Rs 157.64 cash available. This is extremely positive (I am using an adjective 'extreamly' because it's to be used to describe a very positive aspect of the balance sheet). This gives me the margin of safety and my investment gets protected in case the company gets into difficult time. This what is taught in the value investing principle. Remember if the company is growing and sales is increasing rapidly then there is a possible of debtors number increasing accordingly.

P&L Account. Last year the profitability (PAT*100/Revenue) was at 28.88% and this year it has increased to 30.54%. It means the company does not have any pressure on the bottom line. It's not because the company is innovative and is operating in the niche areas. The other income component is almost negligible which means that entire profit is from operations.

In last 5 years, which is a good indicator to suggest that it's not an overnight success, its revenue and profits did not dip a single time. They have shown healthy growth. The company has been paying consistent dividends at the rate of 20% during last 3 years and 10% during first two years.

One can cook up the numbers in a year or two but you would agree that this can't be done consistently for 5 years to deliver more than average results.

Please find a link to get recent Director's report of the company: http://www.cmlinks.com/lkp/profiles/LKPDirectorreport.asp?code=17761

I did not find anything significantly negative about this report. In fact, I liked the Threats part in the SWOT analysis and also performance overview section where they have listed various partnerships and associations established during the year.

Balance Sheet
Year8-Mar7-Mar6-Mar5-Mar4-Mar
Share Capital10.9710.5210.098.195.45
Reserves & Surplus192.1133.7102.950.4241.19
Total Shareholders Funds203.1144.311358.6146.64
Secured Loans9.649.375.332.052.42
Unsecured Loans60.5400.360.030.88
Total Debt70.189.375.692.083.3
Total Liabilities273.3153.6118.760.6949.94
Gross Block158.565.2748.129.6319.77
Less: Accum. Depreciation24.210.236.834.413.35
Net Block134.355.0441.295.2216.42
Capital Work in Progress19.8516.915.5212.562.8
Investments0.5401.122.218.25
Inventories38.0419.6811.197.785.46
Sundry Debtors69.138.182910.276.79
Cash and Bank Balance11.123.921.131.550.01
Loans and Advances28.189.415.675.022.98
Current Liabilities15.693.042.121.982.03
Provisions12.16.444.11.930.94
Net Current Assets118.681.6960.7720.7112.27
Miscellaneous Expenses not w/o00000.2
Total Assets273.3153.6118.760.6949.94
Contingent Liabilities00000



P&L
Year8-Mar7-Mar6-Mar5-Mar4-Mar
Sales Turnover172106.858.5626.7320.74
Other Income0.490.140.070.110
Stock Adjustments00000
Total Income172.5106.958.6326.8420.74
Raw Materials00000
Excise Duty00000
Power & Fuel Cost0.260.290.140.040.01
Other Manufacturing Expenses86.7358.6433.9916.1215.26
Employee Cost2.481.730.940.030.01
Selling and Administration Expenses7.923.41.811.170.38
Miscellaneous Expenses0.061.240.010.380.22
Less: Preoperative Expenditure Capitalised00000
Profit before Interest, Depreciation & Tax75.0241.6221.749.14.86
Interest & Financial Charges1.620.740.510.380.32
Profit before Depreciation & Tax73.440.8821.238.724.54
Depreciation147.522.421.060.88
Profit Before Tax59.433.3618.817.663.66
Tax6.872.521.180.740.15
Profit After Tax52.5330.8417.636.923.51
Adjustment below Net Profit00000.6
P & L Balance brought forward56.3330.8816.9410.957.44
Appropriations5.575.393.690.930.6
P & L Bal. carried down103.356.3330.8816.9410.95
Equity Dividend2.192.12.020.820.54
Preference Dividend00000
Corporate Dividend Tax0.380.290.280.110.06
Equity Dividend (%)2020201010
Earning Per Share (Rs.)47.5429.0417.28.326.33
Book Value185.1137.111271.5685.58
Extraordinary Items-0.010000


Trust this clarifies.

Cheers,
Niteen S Dharmawat
Mobile: +91-9850571857
http://dharmawat.blogspot.com/

IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.



On Tue, Sep 23, 2008 at 10:15 PM, Venkateswaran wrote:

Dear Mr Niteen,


I have also been following Micro tech for some time now and more after you earlier mail on this.

When I got the Annual report for this year, I was very excited to read and understand how the management looks at these uncertain scenarios. But when I read through the Annual Report of the company, honestly I was not impressed with the way it has been presented. Very poor language and the AR looked more like a college student write-up, with unnecessary adjectives and unwanted words.


Second thing I noticed is the high level of debtors. For sales of 190 crores, more than 70 odd crores remains as outstanding.


What is your opinion on the quality of management and debtors turnover ratio?


with kind regards
Venkatesh



On Tue, Sep 9, 2008 at 6:37 PM, Niteen S Dharmawat wrote:

Hi,
You would recall that Micro Tech was reco at 220 level in Oct 07 and it reached 375+ afterwards and corrected to 200 levels sometime in Feb/March08 to provide another
excellent opportunity to enter in the stock. The stock has again retraced to 300 levels in April'08 and appreciated by almost 50% within no time.

The stock is now again trading near 220 levels. It's offering another excellent opportunity to enter into the stock at this levels.

Just to further update you on the stock from the last communication, the company has given excellent results during last quarter and year. In June Qtr the revenue of the company has increased by 67.37% to Rs 57 cr and PAT increased by 65.46% to reach Rs 17.44 cr. The profitability (PAT/Revenue) is excellent at 30.59%. YoY (March'08) the revenue increased by 60.79 % to reach Rs 171.02 Cr and profit by 64.66% to reach Rs 52.84 Cr (again profitability is healthy at 30.89%).

The company is operating in niche area and has been able to successfully create a strong positioning and a reliable brand name in the market. It has launched another product yesterday, please read details by using the link below

Micro Tech launches micro mobile controller system:
http://www.myiris.com/newsCentre/newsPopup.php?fileR=20080909152742203&dir=2008/09/09&secID=livenews

Please do not commit 100% of the investible funds but stagger your investments with 15-20% at different intervals.

Cheers,
Niteen S Dharmawat
Mobile: 9850571857

IMPORTANT DISCLAIMER: Investment in equity shares has its own risks.
Sincere efforts have been made to present the right investment
perspective. The information contained herein is based on analysis and
up on sources that we consider reliable. I, however, do not vouch for
the accuracy or the completeness thereof. This material is for
personal information and I am not responsible for any loss incurred
based upon it & take no responsibility whatsoever for any financial
profits or loss which may arise from the recommendations above.



On 10/7/07, Niteen S Dharmawat wrote:

> Hi,
> Micro Technologies looks good to me and can be accumulated from a long
> term perspective. The company is currently quoting at Rs 220 levels
> and will be a good buy on every dip.
>
> Please read the comments below and the attached file and share your opinion.
>
> Reasons for investment:
> - Excellent profitability
> - Good, experienced management
> -Good track record - No dip in revenue or profits during last five years
> - Very strong balance sheet. 10.52 Cr share capital and reserve of 133.74 cr.
> - Negligible debt (just 9 cr on Total Shareholders Funds i.e. Share
> Capital & Reserves of Rs 144 cr)
> - Dividend paying company
> - Good book value Rs 137
> - Decent PE just close to 7 (singe digit) and double digit growth
> - Bennet and Coleman acquired 2,50,000 equity shares of Rs 10/- each
> at a price of Rs 250.40 per share on preferential allotment basis.
> - Allotted 900000 warrants with option for conversion into 9,00,000
> equity shares of Rs 10/- each a price of Rs 250.40 per share to
> promoter group.
> - Goldman Sachs has acquired 2,59,047 shares in last couple of months.
>
>
> Please find the detail report attached with this mail. I have not made
> my comments on all the points since most of them are self explanatory.
>
> Cheers,
> Niteen S Dharmawat
> Mobile: 9850571857
>
>
> IMPORTANT DISCLAIMER: Investment in equity shares has its own risks.
> Sincere efforts have been made to present the right investment
> perspective. The information contained herein is based on analysis and
> up on sources that we consider reliable. I, however, do not vouch for
> the accuracy or the completeness thereof. This material is for
> personal information and I am not responsible for any loss incurred
> based upon it & take no responsibility whatsoever for any financial
> profits or loss which may arise from the recommendations above.

Reliance Industries - Update

Reliance Industries is one my favorites. Some of you would recall that I have been recommending this stock from Rs 520 onwards when the feud between two warring brothers were on the street and media was opening fresh can of warms on a daily basis by flashing new breaking stories released by 'good sources' of warring brothers. The entire market during that time was in upswing while RIL stock was butchered to the extend that it became an untouchable stock. Later they reached a settlement and problem got resolved leading to unlocking huge value which I was talking about in my mails. The RIL stockholders were the biggest beneficiaries. They got shares in four companies free of cost. Today RIL is at 2100+ levels and the free stocks (RComm, RNRL, Reliance Energy etc) are doing equally good. This is a return of almost 6 times from the original recommendation.

Now what should we do with the stock with yesterday's 'big' announcement by Mukesh Ambani. One of the conclusions that we can draw is that the company is in a great shape to go to the new levels which means un-parallel growth and solid wealth creation for the shareholders. If you are holding the stock from 520 levels onward (and various other levels when it was re-recommended) then please continue to hold it. This single stock may help you plan your retirement, I am talking about real long term investment!!!

But if you want to buy more then is it the right time to enter in the stock? Should we really want to time the market or intrinsic value offered by the company is more important? The value offered by the company is, as I said earlier, going in the trajectory of un-parallel growth which will be realized over a period of 2-3 years. But the value offered by the market is something under question. So would advice immense caution while making any fresh exposure in the market. Let opportunities go but we should not loss our investment - should be the philosophy of the investment. I am of the opinion that market may come down to 9000 levels due to various reasons, discussed in earlier posting, over a period of next 6 months and that will be an amazing opportunity for investment. However, one can start investing from a level below 12000 thru' a stagger investment mechanism. If you have any questions, then please do write to me or post your comments on blog itself.


IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.

Crude price increase - Uncle Sam is very smart

I had been thinking about this subject for sometime now. However, I was not sure so never voiced my thoughts on this over email/blog. But when I discussed this with some of the friends and shared my logic with them then some of them agreed and some wondered if it's really a case. But everyone was unanimous and encouraged me to post it for comments from others.

In my view/guess(?) crude price movement from $45 to $145 was a conspiracy of Americans and OPEC. Both of them were hand in glove on this subject. Why?

As I explained in my earlier posts (subject: Rupee-Dollar equation) that crude and dollar have a very strong relationship. This very relationship leads us to believe that crude prices were increased by OPEC to save American dollar and thus economy.

When real estate crash and subsequent sub-prime crises hit the American economy, which led to lowest ever consumer confidence, demand slowdown, job losses, and a complete gloomy future, then the American government decided to print more dollars and give it to its citizen to spend. The idea was to artificially increase the demand and keep the confidence level of industry, public and investment community up. They completely believed (policy makers and Fed) that if this had not been done by them then it would have certainly led to an evident economy depression similar to 1929.

Now, what's wrong if they have printed more dollars and decided to give those new dollars to their citizens? This is suicidal.... Because if you are printing more bills and distributing it free of cost then you are depreciating the value of that currency. It's like everyone will be paid without productively contributing anything to the economy.

This act of printing so much currency by any government is certain to depreciate the value of its currency. And the dollar started depreciating against all the major currencies world-wide including INR. Dollar hit a bottom of Rs 37-38 from a high of close to Rs 46-47 with in a span of 18 months.

It could have touched Rs 32, as many were predicting but it did not lost that long.

When dollar was in huge supply because of extra printing by American government then it was made sure that there is an equal or more demand for the dollar worldwide. Americans have the advantage because US dollar is the most dominant currency in world trade. They took advantage of this.... They made it sure that price of crude, value-wise amongst the top listed product worldwide, is increased multi fold. This led to a worldwide rush to catch dollar so that they can buy crude. So on the one hand an extra supply of dollar was created and on the other it was ensured that extra dollar is consumed in the world economy without any problems.

But now the next question, why would OPEC join hands with Americans because it's OPEC which controls majority of oil production world-wide?

OPEC will have to succumb to Americans. Because if Americans were printing the currency which would have depreciated its value and ultimately led to the downfall of the dominance of American currency then OPEC members would have incurred huge losses themselves. Over a period of time, OPEC has accumulated huge dollar reserve. If the currency had been devalued and lost the charm then what they would have done with that pile of reserves? They had to be hand-in-glove with Americans and increase the price of crude so as to keep value of American dollars up and running.

Who is at loss? OPEC members: made windfall profits because they were selling the same crude now at 2-3 times the earlier price. Americans: Everyone got green notes to be spent at the expense of rest of the world which was paying price so that American economy continue to buzz.

Please share your comments to me on this article directly on the blog or over email: niteen.dharmawat@gmail.com

Cheers,
Niteen S Dharmawat
Mobile: +91-9850571857

RE: Re: Rupee-dollar equation

This chain of email messages on 'Rupee Dollar equation' was started when I first wrote on 27th July 2007. During this time all the so called 'experts' were predicting the death of dollar and I had a completely contradictory opinion. I had published my logic, please see first mail starting from bottom, on why dollar will appreciate and also predicted increase in inflation (in the post script -p.s. part of that mail).

Within few months, dollar took a complete 'U' turn and started appreciating against all the currencies. This is what I expected, however, many were were caught napping, especially exporters, who had started hedging dollar at Rs 38-39 levels in anticipation of it reaching Rs 32 levels and had to book notional losses. Also world-wide there was a steep rise in the prices of all the commodities which led to high inflation. The Indian government got so worried that it (RBI) was forced to increase the interest rates several times during this period.

Please read this entire chain of mails starting from bottom to understand how currencies and economy behave in a global world.

I always welcome communication which helps improving our knowledge and understanding about stocks, economy, international markets & trade. You may upload your opinion or alternatively send me an email.

Cheers,
Niteen S Dharmawat
Mobile: 9850571857

On Tue, Sep 16, 2008 at 4:59 PM, Niteen S Dharmawat wrote:
Rupee has even crossed the final target of Rs 47 just in a day from earlier 46. You would recall that the first predication on Rupee was made by me on 27 July 2007 when Rupee was struggling at around Rs 38. That time there were many pundits who were predicting the death of dollar and forecasting rupee to see a level of 35 or worst 32. But nothing of that sort happened which surprised many, including exporters who were in a rush to hedge dollar at any cost which proved to be extremely costly (if someone has hedged dollar at 38 in anticipation to come at 35-32 then the person has eroded the profits by more than 23%).

Now my next target is Rs 50. Dollar will remain between 45-48 levels during next 6-9 months before it hits a different direction.

Many are asking me, when American economy is passing thru' turbulent times then whey is $ getting appreciated? The simple answer is read my first mail below to understand why dollar will appreciate. The US economy is bleeding but still that has not changed the ground reality. The world trade is still carried out in USD and not in Euro/Gold or anything else. When you want to buy crude then you would need more dollars because crude prices have gone up 2-3 folds. Dollar will have to appreciate if everyone is demanding it. Had there been no problems with US economy, with a similar steep rise in crude prices, dollar would have touched Rs 60. So the pace at which it should have appreciated has come down because of problem with US economy.

Now if in the changing scenario where crude comes down to say 50 bbl from present 93 bbl then dollar will depreciate again? My question is, will that really happen? It has a very dim possibility because oil exporting nations, OPAC, will never allow that to happen. They will reduce the production but sale crude at lower prices.

I trust you have enjoyed the prediction. You may post your comments to me.

Cheers,
Niteen S Dharmawat
Mobile: 9850571857

IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.


- Hide quoted text -
On Mon, Sep 15, 2008 at 5:06 PM, Niteen S Dharmawat wrote:

Rupee has today convincingly crossed our next target of Rs 46 and is now heading for 47 levels.

Cheers,
Niteen S Dharmawat
Mobile: 9850571857


IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.

On Tue, Sep 2, 2008 at 10:26 AM, Niteen S Dharmawat wrote:

Double whammy means difficult times ahead for them if crude price does not come down. Since they are paying more than double then what they were paying a year ahead because of rise in the crude prices. Now this extra burden because the dollar is appreciated and is currently trading near 44.20 and is expected to cross 45.

Extremely bad for the government exchequer as fiscal deficit will be soaring up. No government will dare to rise prices of petroleum products in an election year. This will lead to inflationary pressure in long term. Controlling the prices will continue to be an arduous task if crude does not dance below 80 on a constant basis.

Cheers,
Niteen S Dharmawat


On Mon, Sep 1, 2008 at 8:19 PM, Nishit wrote:

And what about the importers especially crude oil imports?





On Mon, Sep 1, 2008 at 12:29 PM, Niteen S Dharmawat wrote:

Today Rupee has crossed 44 mark decisively and is now trading at 44.21. It's heading for our next target of 45. This will bring cheers on exporters' face.

Cheers,
Niteen S Dharmawat
Mobile: 9850571857

IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.

On Wed, May 28, 2008 at 5:13 PM, Niteen S Dharmawat wrote:

I am of the opinion that Rupee will depreciate further and may touch 45 or even more in coming months...

Cheers,
Niteen S Dharmawat
Mobile: 9850571857

IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.

On 5/16/08, Niteen S Dharmawat wrote:
I don't know how may of you would be able to recall this message now where I predicted about appreciation of Dollar vis-a-vis Rupee and raise of inflation. Sending it again for your info.... and comments.

Cheers,
Niteen S Dharmawat
Mobile: 9850571857


IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.

"Niteen S Dharmawat"
07/20/2007 04:21 PM
To ndharmawat@india.com
Subject: Rupee-dollar equation

Hi,

One more thing, I have a contrarian opinion on slide of Rupee. Everyone is now talking of the slide in rupee and they are predicting that it would take rupee to as low as 35. But I feel that rupee will not sustain any levels below 40, if it goes to that levels, then it will bounce back to 40+ or may be above very strongly. Why?

To answer why we will have to answer first thing that why rupee appreciated at all? It got appreciated because: we had more dollar flow compared to rupee. Which led to the pressure on dollar and it got depreciated. We earn dollar whenever we have made any export in dollars, investments by FIIs/FDIs and vice-a-versa incase import is made/an exit by FIIs. If economy is booming and we have had export surplus (more export compared to imports) then it puts pressure on dollar, because we get more dollars. We understand from the law of demand and supply that whatever is more in the market gets depreciated (reduced in value). That's what preciously happened with dollar.

Now what different has happened which has made me conclude that dollar will not depreciate (or rupee will not appreciate) any further? Something major has changed which will change the balance of payment towards dollar. This will raise our import bill by at least 35% compared to April'07 while the rupee has not depreciated that much. The major factor that constitute our import bill is crude oil which is now trading at $75.97 per bbl compared to $55 per bbl few months ago. This is a change of more than 35% and would seriously dent import bill (or exit of dollar). The impact will not be visible to us immediately, it will take a month or two to show some signs and that would be the time when rupee will be depreciated again.

These are my two-pence-worth and I tried to keep that as simple as I can. You may like to share your views.

Cheers,
Niteen S Dharmawat
Mobile: 9850571857

p.s.: Rise in crude price is not good for other industry and could further have impact on several things including inflation. But that's little complex to understand. Till that time we should not worry too much about the nothing and keep our investment in quality stocks. Also dollar is depreciated because of it's own good reasons in their home economy. While presenting the analogy, I have kept it to our shores and compared it with rupee only because that will make more sense to us.