Saturday, November 7, 2015

Organic Trend has no End - Trilogy New Zealand

I wrote a few weeks back a brief note on a couple of organic food companies here http://multibaggersindia.blogspot.com/2015/09/organic-food-long-term-trend.html 

It is usually quite hard to spot a new trend and then work on finding stocks (listed) that fit the criteria. There are a number of reasons for it, the greediest, smartest, shrewdest poker players in town (private equity) would not let such a listed company be public. A few examples of up coming trends are use of Graphene as the silicon of 21st century, Battery storage technology for solar grids, Robotics (humanoids or systems with AI). 

We do get lucky once in a while by spotting companies that are not on the map, or those that have changed their business model.

If you recall from some of my previous posts, products that help women look pretty, or allow humans a longer life, or deceptively even a perception of being healthy (eg: perception of healthy Patanjali Food stuff, even though it may contain three times the pesticide content of Maggi) are perpetual models (nice book on business models http://tinyurl.com/pe7lu2m) to be exploited by capitalists. I hate exploitation or taking advantage of others based on psychological tricks or diplomacy (Nice book on how not to get duped by other marketers from Cialdini http://tinyurl.com/ol4xpql). 

Nevertheless, I am not blind to the fact what is going on in the Advertisement industry and social media or the world around me. Organic *everything* is on an upward trend or at-least I am a sucker for it by paying 2.5x the non-organic food.

I just happened to stumble on an announcement recently from a company based in New Zealand that it will beat organic growth target of 57% growth (excluding acquisitions).

Source: https://www.nzx.com/companies/TIL/announcements/270582

I had been searching all over for organic food companies like a musk deer, the company that I should have bought was right near my back(yard) literally. 






















 The story gets better as the company went in for a bolt-on acquisition funded entirely by debt of another strong company that imports Gucci, LVMH, Aramani and other perfume brands in New Zealand. But excluding the growth of acquired company the organic growth is 57% in revenues. 


I checked and found that I am indeed late to the party with stock up 300% or so recently.















The company had been struggling to create a cosmetic brand called ECOYA

http://www.ecoya.com/

The company has a second brand now Trilogy

http://www.trilogyproducts.com/

Some fortunate events transpired in the life of this company, Kate Middleton and few Supermodels in Europe provided free publicity to Trilogy, the recently introduced product "ORGANIC Rose Hip Oil". Certainly a formula that is good for supermodels and the Royalty is also good for the gentry and lower classes.And you certainly cannot pay princess to be a brand ambassador for your product. 

Reference: http://www.dailymail.co.uk/femail/article-2986045/Is-rosehip-oil-secret-Duchess-Cambridge-s-pregnancy-glow-Royal-said-fan-natural-oil-keeps-wrinkles-bay-s-sold-out.html

http://www.express.co.uk/life-style/style/562964/Kate-Middleton-pregnant-wrinkles-rosehip-oil-Carole-Middleton

https://www.google.co.nz/search?q=kate+middleton+rosehip

http://www.trilogyproducts.com/trilogy-talk/royal-seal-of-approval/



http://www.usmagazine.com/celebrity-beauty/news/kate-middleton-pregnancy-safe-beauty-products-shop-201553

Organic products such as Trilogy beauty products are also "pregnancy safe", and boy you gotta see the salivating margins on these products for infants and pregnant women.

It gets better, did I say, even better ! 

The company has signed up with most respected Organic chain in the US. It has introduced product in the US in every store of Whole Foods Mart the Organic Supermart. Currently the revenues in Australia account for 50% of sales, NZ 25% and US only 5%, ROW 20%. US revenues are now growing 100%+

I know the question comes to mind about valuations, extremely inexpensive at 14 times earnings 1 year forward. 1 time sales. In rest of the globe, in developed countries FMCG companies are trading at 3-10 times revenues and 30-80 times earnings, and they are not growing this fast. The company has broken out of 20% growth trajectory and now in 30-40% orbit, this year 60% actually.

I avoid developed markets for investment, too many eyeballs, too much capital chasing at too laggardly growing companies. This is only the one out of two companies I like in New Zealand for investment. Last time in 2013 I liked a company in Australia, CAPILANO Honey and read in their annual report "We are quite satisfied with 10-12% growth", hence gave a pass.

I wrote about this company as "The only company I like in Australia" two years back http://multibaggersindia.blogspot.com/2013/09/roe.html 

Capilano went up nearly 10 times, 1000%, even now at in-expensive 18 times earnings.
















How much up a stock has gone up on the past has nothing to do with how much it will go in future. I bought Symphony in 2010 at 25 Rs when it had already gone up 10 times from 2.5 Rs. It went up another 100 times from that point.

Not letting go of this opportunity which I think will grow well above 15%, and approved by the Royalty!


Link to Annual Reports: http://trilogyproducts.com/investors/


Saturday, October 24, 2015

Independence, Reality, Age and Limits to Growth

I had written a blog post five years back (in 2010) on how your family can own 70% of Indian listed and unlisted companies here http://multibaggersindia.blogspot.com/2010/12/how-your-family-can-own-70-of-india.html

In the previous article in 2010 I touched on how you could set up a foundation, where nobody could touch the capital, convince your next five generations to continue to compound money on value investing principles and accumulate over 70% of the financial wealth of India.

I though it was time to raise the bar :-) , being a big fan of DIY, methinks, why depend on your family office / foundation, rather why not do it yourself, and why limit to India, why not the entire planet.

Independence

When I started getting greedy for money, it was with the objective of, in Munger speak "not being an empty sack, so that I could stand upright..." and can spend the time of the day the way I like.

Now that I think about it, the financial independence objective was a very narrow definition, I would still be a slave of my mental habits, still be confined in the same body, time-space, same century, same planet, prisoner to the food demands of the body every single day, the list goes on... So, true independence must be more than financial independence.

You can read how people with 100 million, and 1 billion and 10 Billion spend their time and get the kick

https://www.reddit.com/r/AskReddit/comments/2s9u0s/what_do_insanely_wealthy_people_buy_that_ordinary/cnnmca8


Frankly, none of the antics of billionaires as described in the article appeal to me. Nevertheless, by accumulating a suffocating amount of wealth, the energy represented by financial wealth can be channeled into project to change the complete landscape of the planet, re-instating mission statements of schools, colleges, and corporate world. You can very well do that if you control 70% of wealth on the planet.


Reality

Reality is stranger than the strangest fiction novel you can ever imagine, it is beyond imagination, reality allows imagination faculty to imagine. 

The examples that I may quote from may be from India or China, but they apply to all lands, Egypt, Greece, Lemuria, Atlantis etc

Before you dismiss what I am about to write on human age as utter non-sense, fortunately I can provide some tangible proofs to the completely hyper rational logical mind. 

English unfortunately is a very un-mathematical language, where names and words do not really have a mathematical origin. Sanskrit is one of the oldest languages and besides having strong rules, the words have a root meaning, those meanings have not changed for 5000 years+. Tamil is as old or more older than Sanskrit but I know little about Tamil.

Examples from Reality

I remember wondering as a kid constantly mesmerized with thoughts of how big the universe is and whether it has an edge or boundary, how old is it.I am sure you felt the same. Later we lost some of that wonder to scrape through Monday tests, half yearly and annual exams in the school, pathetic.

If you ask the brightest Nobel Laureate on this planet or students from IIT or MIT, or luminaries from NASA, "Who / When was it discovered that the Universe is expanding?"

The answer is likely to be "Edwin Hubble in 1929".

https://cosmology.carnegiescience.edu/timeline/1929

The correct answer should be "I don't know, too hard to tell". But for the sake of being announced of sound mind and judgment and not being abandoned by your family and friends, you would not answer that.

Just see how that assertion of discovery of universe is expanding in 1929 is wrong:

More than 99% people living in India would have heard of the word Brahmanda as described in their Vedic texts over 5000 years back. Brahmanda means universe in sanskrit, no kidding. It comprises of two words:

Brah = Stretch or Expand
Anda = Shape of an Egg

Similar statement was quoted 1400 years ago:
[Quran 51.4] And the heaven, We built it with craftsmanship and We are still expanding.

What I have actually found is that earth is going through cycles, the intellectual, emotional and spiritual watermark of this 21st century civilization is way below the levels reached in the previous civilizations right here on this planet in numerous countries. It may well surpass in future, but as yet it hasn't. Greeks called them Bronze, Iron, Silver, Golden age and Indians called them Kali, Dwapar, Treta and Satya Yuga.

There are two other words worth pointing which prove that Ancient Indians (remember high water mark as has not yet been breached, not even close) knew very well than earth is round and has speed.

"Earth" in Hindi language even today in 2015 is described as: Jagat Bhugol (these are 5000 years+ old words). I am myself familiar.

Bhu = Earth
Gol = Round
Gat = Speed ( a courier cmpany on BSE is listed GATI, meaning speed 
http://money.rediff.com/companies/Gati-Ltd/16590029?srchword=Gati+Ltd.&snssrc=sugg

Vedas are full of checksums (that IT people must be familiar with). They were orally transmitted until man during descending cycle became intellectually weak to unable to memorize all the tomes, hence a part of them were written down (a whole lot was withdrawn from being written, that is lost knowledge).

Another example is from Hanuman Chalisa, which a lot of women from India are familiar with as a prayer chant, in one of the mantras is embedded the distance of Earth to the Sun : "Yug sahastra yojan per Bhanu. Leelyo taahi madhur phal janu. "

1 Yug = 12000 years 
1 Sahastra = 1000 
1 Yojan = 8 Miles 
Yug x Sahastra x Yojan = par Bhanu 12000 x 1000 x 8 miles = 96000000 miles 
1 mile = 1.6kms 
96000000 miles = 96000000 x 1.6kms = 1536000000 kms to Sun.
Bhanu = Sun
Leelyo = Play
Tahi = You
Madhur = Sweet
Phal = Fruit

A true scripture is multi-dimensional. It is valid for an idiot, a businessman, and a spiritual aspirant with many knot points, not easily understood.

Moving on, I may have convinced you, or perhaps not, the that fact Universe is Expanding was merely re-discovered.

Star Antares is the 15th brightest object in sky. In ancient India it was known by the name ‘Jesta’ meaning the biggest, largest and the eldest. Jesta is the star that is 40,000 times larger than our Sun.

'Viman Shastra' a several thousand year old treatise on air travel, mentions construction of flying vehicles for inter-stellar travel but the formulas are un-decipherable and many smart minds across the globe are trying to reverse engineer. 


Time dilation is touched on in the Indian puranas, there is mention of a meeting that King has to go to with beings on another planet, after he comes back in 30 minutes of other planet from that meeting, 700 years have elapsed on earth and his Kingdom is dust. 


The Value of PI is mentioned in the Vedas up to 28 decimal places


A Sloka in the 10th book of Rig Veda appears to be written for praising Lord Indra

The technical translation of that Sloka gives the value of pi up to 28 digits accurately. It is not until the invention of the computers that the western mathematicians could get this value up to 16 digits accurately. Here is a test for those who think that a computer can do any calculation. Use the fastest computer available to you and write a program to calculate the value of pi up to 28 digits accurately. You will know how difficult it is.

Vedic Numerical Code In Sanskrit, the following Vedic Numerical code was used in many slokas

"Kaadi nava Taadi nava Paadi panchaka Yadyashtaka Kshah sunyam"

कादि नव टादि नव पादि पञ्चक यद्यश्टक क्ष शुन्यम् 

Means...
>Kaadi Nava Starting from ka, the sequence of 9 letters represent 1,2,..9.
>Similarly Taadi Nava , starting from ta
>Paadi panchaka (1-5), starting from pa
>Yadyashtaka (1-8) starting from ya
>And ksha represents 0

In detail
ka(क)-1, kha(ख)-2, ga(ग)-3, gha(घ)-4,gna(ङ)-5, cha(च)-6, cha(छ)-7, ja(ज)-8,jha(झ)-9

ta(ट)-1, tha(ठ)-2, da(ड)-3, dha(ढ)-4,~na(ण)-5, Ta(त)-6, Tha(थ)-7, Da(द)-8,Dha(ध)-9

pa(प)-1, pha(फ)-2, ba(ब)-3, bha(भ)-4,ma(म)-5

ya(य)-1, ra(र)-2, la(ल)-3, va(व)-4, Sa(श)-5, sha(ष)-6, sa (स)-7, ha(ह)-8

kshah (क्ष)-0.

Based on this code there are many slokas in mathematics
e.g., For PI value, a sloka is as folows..

गोपीभाग्य मधुव्रातः श्रुंगशोदधि संधिगः |
खलजीवितखाताव गलहाला रसंधरः ||

gopeebhaagya maDhuvraathaH shruMgashodhaDhi saMDhigaH
khalajeevithakhaathaava galahaalaa rasaMDharaH

ga-3, pa-1, bha-4, ya -1, ma-5, Dhu-9, ra-2, tha-6, shru-5, ga-3, sho-5, dha-8, Dhi -9, sa-7, Dha- 9, ga-3, kha-2, la-3, jee-8, vi-4, tha-6, kha-2, tha-6, va-4, ga-3, la-3, ha-8, la-3, ra-2, sa-7, Dha-9, ra-2

3.1415926535897932384626433832792...

The above sloka has actually 3 meanings
1. In favor of Lord Shiva
2. In favor of Lord Krishna
3. The value of PI upto 28 decimals.

https://www.facebook.com/EasySamskrutha/posts/703916786405256:0


Age

Compounding and time is very fascinating combination. The longer you can compound, the less capital you need. For example if you were to compound 1 Million USD for 100 years @ 20% CAGR (DIY or Foundation or Family) you would accumulate 82 Trillion USD ( more than GDP of the world in 2015)

If you have only 10,000$ to start with you can accumulate all Global Assets in 126 Years.

If you are born in the most un-favourable circumstances but know about compounding. You can save 1$ a day for 30 years to accumulate your first 10,000$ and reach the goal of accumulating all Global Assets in 156 years.

How old can a man live ?

I used to think 70 to 100 years. But like I said, reality is stranger than fiction. I have not met any person myself as yet, but have done sufficient research to know that man can live for several 100s of years.


A particular saint from India around 15,000 BC, that was in highest age (Golden in Greek, Satya in India) devised internal medicine and external cleansing processes to conquer age and termed it Kaya-Kalpa (Body Immortality) Yoga. Sage Agasta's goal was obviously not to compound money :) but make spiritual progress within this life and prolong life. Some of the people who mastered those techniques lived for over 12,000 years. I know you might be tempted to lock me up in a lunatic asylum.

https://en.wikipedia.org/wiki/Agastya


Meanwhile I know of two documented examples, one from India and another from China of people who have lived for over 250 years, both using some breathing exercises or meditation.

https://en.wikipedia.org/wiki/Li_Ching-Yuen

https://en.wikipedia.org/wiki/Devraha_Baba

So, my friend, I have proven to you how you could take over the planet financially. Think long term! Buffett might need to launch a research on Agastya's work if he wants to be the oldest person in the world.

Known Universe

The known universe as widely accepted is also pretty big. Don't get carried away with the thought that 83 Trillion USD is a lot of money. It is, but still on an insignificant speck of invisible dust particle in the big picture.

Have a look:

Tuesday, October 20, 2015

Arbitrage Opportunity India - Amal Ltd & Atul Ltd merger

I am not blind to the fact that multi-fold growth per annum is possible in micro caps. I wrote about few opportunities earlier like Millennium Beer, a 2-3 Million USD company at the time (which merged with United Breweries, a 4 Billion USD market cap company) which wiped out the possibility of multibagger gain. (http://multibaggersindia.blogspot.com/2010/11/arbitrage-opportunity-millennium-beer.html)

Similar fate has struck another company that I had an eye on, for over three years, ever since it was with BIFR. Amal Ltd, a 4 Million USD market cap company.

http://www.amal.co.in


http://www.bseindia.com/stock-share-price/amal-ltd/amal/506597/

The board has decided to merge it with the parent company (Atul Ltd), nearly 800 Million USD market cap, but there is likely to be an arbitrage opportunity closer to the time of announcement of swap ratio.

Real money is in spin offs, not reverse mergers.


Friday, October 16, 2015

Microcaps, Money, Retirement, Aim of Life

Microcaps

I have stopped investing in conventional microcaps and nano caps (1 Million USD to 10 Million USD range) and feel the need to at least bet 7-10% of the funds on an idea. As the future of companies are hard to forecast in that nano cap range, the bet size has to be small as a percentage of portfolio.

 Nevertheless I am investing in similar companies in 30-50 Million USD market cap range in other countries. Nairobi Securities Exchange (KENYA) currently has only 66 companies listed, going by the news 50 more micro caps should list in the next two years, juices have started secreting in a capitalist's jaws.

http://www.businessdailyafrica.com/Corporate-News/Top-100-finalists-target-NSE-listing-to-boost-capital-/-/539550/2905394/-/13j9o1dz/-/index.html


More Money

I completely understand you dude, I started my work career with 100 USD per month salary in 1999, and yet wanted to be the richest person in the world. Absence of material wealth is a curse, as is absence of health. There is a grave risk that if you spend a very very strong force behind achievement of material ambitions, you may achieve them, but your life will be mostly hollow with only suffocating material wealth around you. I have in the past been a victim of such ambitions. 

If ten years down the line you realize, that you have been living your life like a complete idiot, the meaning of life is not just material wealth maximization, but you have strong consistency and confirmation bias and huge commitments to continue in that direction of material wealth maximization, all the purposeful and meaningful work in life would have taken a back seat.

It was extremely sad to hear the widely regarded, ethical and respected billionaire, Mr Ratan Tata's speech in Pune telling students to enjoy life, take it easy, and that we have less than 2500 weekends to live.

https://www.linkedin.com/pulse/20141207092319-127684331-superb-speech-by-mr-ratan-tata-given-yesterday-at-symbiosis-pune

"Don’t just have career or academic goals. Set goals to give you a balanced, successful life. Balanced means ensuring your health, relationships, mental peace are all in good order. There is no point of getting a promotion on the day of your breakup. There is no fun in driving a car if your back hurts. Shopping is not enjoyable if your mind is full of tensions. Don't take life seriously. Life is not meant to be taken seriously, as we are really temporary here. We are like a prepaid card with limited validity. If we are lucky, we may last another 50 years. And 50 years is just 2,500 weekends. Do we really need to get so worked up? …It's OK, Bunk few classes, score low in couple of papers, take leave from work, fall in love, fight a little with ur spouse... It's ok... We are people, not programmed devices..! "Don't be serious, enjoy Life as it comes"


It is sad because Mr. Rata Tata singularly dedicated his life (without marriage) by creating a 80 Billion USD conglomerate, while he is advising youngsters to take it easy. People would generally do what you do, and not what you say.

Retirement


I have a very simple view on retirement, don't retire, constantly, unceasingly work. Any body selling you idea of retirement by the beach on a yacht is selling you false claims. Retirement could be from a profession or field of activity, but should not be from work.


Aim of Life



Well it comes down to square one, or to put it simply, the first and the second commandment of Jesus Christ. When you have invested all your energy in understanding and experiencing those two commandments, it may take months, years, decades or longer, you would be close to finding happiness. There is a scientific, provable, experiential basis of those commandments, there are not mere emotional good intentioned words like a father says to a son.

While it may be hard to agree for majority that the purpose of life is to seek God, but nearly everybody will agree that purpose of life is to seek happiness (and avoid pain). So, seeking lasting happiness cannot be in conflict with current desires.

Emotionalism and Intellectualism do not provide great satisfaction, only experience does. And once experienced, the whole world may disagree with you, you will be firm with your statement.

The amazing part is that consciousness is the static, unchanging, constant background, on which the life of all matter and organic life forms is un-folding. That constant background is the witness of all scenery inside it, the scenery of space-time.

Buddha said something to the same effect as Mr. Ratan Tata, after personal experience. Follow the path of moderation, not the way I did.

The aim of life is to evolve until the cosmic consciousness has been realized and personally experienced. That is not a binary state. When you do play well, you are aware that your game is improving. There are a rung of ladders that you will know you have climbed and now can see a further distance. As a wise man said, "Long before you find God, if you live right, you will find how amazing and joyous life can be". But don't buy any theory, personally experiment and experience.

Try this intoxicated narcotic equivalent without its financial cost or health impact http://www.amazon.in/Wine-Mystics-Rubaiyat-Omar-Khayyam/dp/0876122268/

If you do not find the heady pearls of intoxication, then blame not the ocean but your diving skills.

Wednesday, September 16, 2015

Organic Food - Long term trend

What we call Organic Food was called Food by your grandparents. It is a trend that will continue to show up now, in my opinion.

A couple of exemplary companies at the moment on my radar that I may miss being on the sidelines due to the Infosys nature of stock (high growth but equally high PE multiple).

First is in the United States. Where Food Comes From Inc. It provides Organic Certification, Labelling, Third Party Verification http://wherefoodcomesfrom.com/

WFCF is still a small cap at 65 Million USD market cap. The company will be engaged in McDonalds tracking and verification program and has lions share of market.

On the face of it quite dear, 6 times revenues and 100 times earnings.

Second is an Australian company, just noticed today, makes organic baby food (Just as no patient bets low on brain surgeon, no parent bets low on infant food).

The company is wiping out its competition with revenue growth of 150% in the previous year and net profit growth of 450%. The company came with an IPO last year and is 7 times up since. A rare IPO stock that was not overpriced. Needs more research. Bellamy is nearing 800 million MCAP, 5 times revenues and 85 times earnings. If the growth continues at even 1/3rd of the current years' pace (always hard to look ahead), then the stock looks quite cheap. Company has positioned itself for growth in Hong Kong and China.


http://bellamysorganic.com.au/

What is evidently clear is the potential of the sector.


Click to Enlarge




Friday, September 4, 2015

Tart Chart

In a bear market, stocks may seem like mouthful of hot molasses, too sticky to spit out, too hot to swallow.

While claims of creating material wealth are true in equity markets, emotional impact on full time dedicated investors is not well studied and reported. It pays to be a bull as markets are mostly up rather than down over long term.

To be informed is to be empowered.

You should know, if you are not already aware that equity indices may or may not move for 11 years (eg: Sensex) or 16 years( eg: Dow Jones) or even 25 years (eg: Nikkei) except for 1% of stocks (that we may or may not own). Person who has not read history is like a child, doomed to repeat mistakes (of throwing in the towel, or himself from the window :-))

Some of the charts below will provide perspective on bear markets.

I just tweeted that a typical, low intensity bear market (3 on Richter scale) typically lasts 6-18 months. Not sure which part was horrendous for my friend Padmashankar, comparison with Hitler's gas chamber or duration of bear markets. I assumed duration, if 18 months is long and painful, then one is likely to end up in lunatic asylum if one is trapped in a 10 year bear market, hence this post.




Lets pay homage to the mother of all, Dow Jones in 1930s, several years long, down 86% from 375 to 50, the great bear market (read suicides)






Note the 18 Year consolidation (read pain) from 1906 - 1924 and 16 Year consolidation (read suffering) from 1966 - 1982





25 Year Bear market since 1989 and counting in Japan......


Closer to home, Sensex experienced negative returns over the 11 year period 1992-2003


Poem I wrote for Bear Market

I am a simple bumpkin with no minions
but dream big of billions not just millions

I carry a dream in my heart 
while working on a stock market chart

To quit my day job
no responsibility to mob

but this bear market
is upsetting my bread-basket

Many say, the market is no art
a monkey can throw dart

But those who wither the storm
shall rise to be re-born

We live in the noons of tomorrow
not stirred with bear market sorrow

Its just the beginning the journey to billion
Of my greedy addiction and accumulation

This stock market chart shall not thwart
my formidable army will tear the fort of bear apart



Tuesday, August 25, 2015

NSE Kenya - 50 bagger

Having seen a large number of research reports, focusing on next 20-25% only, but on equities that went up several fold, are in stark contrast to how a long term investor should think and a great dis-service to long term investors.

 
I read a statement recently, "Best investing articles are the ones that have nothing to do with investment". I see this all the time, with investing newsletters venturing into  philosophy.

The problem I find with this statement is that the person in context has defined himself / herself narrowly as an investor. I have not. As a man shall not live by bread alone but by every word of ....., no investor shall live with stocks or financial analysis alone. It is too drab to focus on single domain without variety. 

So, I do not like philosophizing on equities but come to the point. The point being making money with multi-fold growing ideas. Hence the title of this post.

While I may be wrong in duration it may take for NSE Kenya to be 50 times, perhaps it could be a mere 20 bagger over next 12 years. Every serious long term investor should go through annual reports of NSE Kenya and find out if he/she holds the company that is better than this? I unequivocally found the answer to be No, in every situation, not excluding BRK. That also depends if you consider 18-20% to be sufficient year in and year out. 

https://www.nse.co.ke/inverstor-relations/financial-reports-and-results.html


Someone needing USD there is some semblance of currency depreciation to keep them away from Kenya or Nigeria, but for INR earners, that does not seem to be the case.



In the previous three years, the company grew top line by 25-35%. 2015 was a hard year for Kenya with tourist cancellations, scaremongering by CNN on security, horticultural crop failure, so, in the six months ended 30th of June 2015, the company grew topline by just 15% and bottomline by 40% (that is a bad year). A great company constantly throws up two choices "Very good and excellent, and a bad company constantly offers you other two choices gruesome and horrible", speaketh Buffett. This result sets the company at valuation of ~10.5 times earnings (as opposed to 12 that I said in previous post today http://multibaggersindia.blogspot.com/2015/08/why-india-is-still-expensive-sensex.html). Again, for my the benefit of my institutional brethren, its TTM not FY18 earnings.

Link to half yearly results: 30-June-2015

NSE Kenya is a lot similar to CRISIL, but only better in every respect, in terms of cash flows and market share. Dividend payout needs improvement. A lot of investors from India are familiar with CRISIL one of the biggest credit rating agencies of India, and if you see its 10 year chart, it has gone up 200 times. Crisil is growing at humble 15% but PE ratio is 65.

http://www.moneycontrol.com/india/stockpricequote/miscellaneous/crisil/CRI

CRISIL price went up 200 times for those who dared to invest with fog on the windscreen. Very High quality companies will not be available at 10 times earnings, nay even 30 times earnings. That has been the case in my experience with India, Pakistan and Bangladesh; I would wager that will be case with Kenya and Nigeria as well.

I will be least surprised if the dividend per share after 10-15 years on NSE Kenya is far bigger than 2015 current market price of the script. If you find one such company, and you do not pounce on it, you are making a big mistake.

Lastly, NSE Kenya has no reason to be listed, merely a Capital Market Authority mandate to share wealth. That is exactly what you need to be looking, companies that are listed due to a freak accident and are not in need of capital.

Its time for you to get rich, think 10 years forward!




Monday, August 24, 2015

Why India is still expensive Sensex @ 25,000 ( just 20% down from peak )

Munger uses opportunity cost as a very frequently used tool.

Munger opines that if you have the opportunity to purchase an investment that is better than 98% of all businesses, then you can use it as a filter to automatically eliminate the other 98%.

Ultimately in the long run, investing world is full of toads that do not transform to princes.

I wrote in 2013 about Unilever Nepal @ 10,000 NPR / share. The company is growing @ 20%, not less than it grows in any other emerging country.

http://multibaggersindia.blogspot.com/2013/09/multi-generational-investing-idea-3.html

Now, after two years of irrational bull market (not backed by productivity improvement) companies are over priced on every continent.


Unilever Nepal (where FII investment is not allowed) is also trading at reasonable valuations (22 PE from 12 PE two years back) on back of 20% growth, it looks quite affordable. 


The company has lions share of FMCG market in the country, pays out 100% of dividends, in fact, Royalty is also paid as dividends, hence a minority investor wins more. This years' dividend is whopping 990 Rs a share giving a 4% yield on closing market price of 26,000 Rs yesterday.

http://www.sharesansar.com/viewnews.php?id=28610

Year Revenues Net Profits Crores * # of Shares** Earning Per Share *   * In Nepal Rs
2002 6.75 920,700 73  ** Face Value 100 Nepal Rs (Hindustan Unilever owns 80%)
2003 Growth 25% 4.25 920,700 46.28 40 Rs Dividend
2004 9.31 920,700 101.38
2005 12.7 920,700 138.3
2006 18.91 920,700 205
2007 23.81 920,700 259 220+ Rs Dividend
2008 145 26.3 920,700 286 250+ Rs Dividend
2009 214 33.5 920,700 364 300+ Rs Dividend
2010 290 51 920,700 555 350+ Rs Dividend
2011 337 61 920,700 664 400+ Rs Dividend
2012 420 70.26 920,700 763 680 Rs Dividend
2013 472.47 83.13 920,700 903 760 Rs Dividend
2014 920,700 1000 860 Rs
Dividend
2015 920,700 1200 990 Rs Dividend

Not bad, the price has gone up 150% in two years + dividend yield is 4%, and company continues to look cheap..


THREE YEAR CHART OF UNILEVER NEPAL 6000 - 26000, STILL CHEAP AS CHIPS



While I appreciate you may not be able to buy Unilever Nepal, but any citizen of any country can still buy NSE Kenya (on they way to become my biggest single holding anywhere) which has 100% control over equity (futures, commodity, derivatives soon) markets in Kenya.

The company is expected to grow over 25%. INR / KES equation does not look that bad. You will be astounded to note the PE ratio, 12 times earnings. This is not an asinine FY25 scenario, its TTM earnings. I wrote about this opportunity here http://multibaggersindia.blogspot.com/2015/04/30-cagr-30-roe-debt-free-10-pe-monopoly.html . Serious enough people would act rather than analyse https://www.nse.co.ke/inverstor-relations/financial-reports-and-results.html



Having found near monopolies at 12 and 20 times earnings with same country demographic and growth characteristics as India, these companies will be drowning in cash, wouldn't you call that opportunity cost. These companies are proverbially as strong as the a Portfolio of Three Companies Munger keeps talking about. 

You have 15% growers like Blue Dart trading @ 80 times earnings, 3M at 100 times earnings, a 15% growing Asian Paints at 65 times earnings, and a troubled Zero growth Commodity Stock Exchange MCX (just because its monopoly) at 45 times earnings. If India is not expensive, then which countries' equities are expensive? I see, you are asking me to buy 3rd tier companies. I wrote to a number of people whom I advise to expect Zero returns in India in next two years. IMO India is still very expensive.