Monday, February 28, 2011

Photo Output Market stats and trends

Above is a presentation from Photokina 2010.

Less than half a dozen manufacturers gasping their last breath. Minilabs installation globally are still waning as per slide 11, not sure if this is even better than no-growth industry. This does mean that no manufacturing competitor will enter this business and those who do remain standing will be profitable in growth phase to follow. Kiosks are on the rise. 250 Billion photos stored in digital media and rapidly rising which provides the shape to ascending histograms on Slide 7. If you notice the rise on Page 4, its gentler but the primary cause for Page 7. Its similar to mp3 format --> iPod

A new Industry consortium has been formed to promote photo printing

Founding companies of the Innovation in Photo Imaging consortium are: Eastman Kodak Co., Fujifilm North America, Hewlett-Packard, IPI – Independent Photo Imagers Inc., Noritsu America Corp., PMA – The Worldwide Community of Imaging Associations; Unibind/Peleman Industries and Xerox Corp..

PMAI trends in printing

In a flattish market, real winners were minilab consumables and kiosks. Online channel deemed dandy has slipped. Well, even if prints were ordered online, they would end up in a minilab or printer of some sort.

Last year's report.

What we make out is - in absolute terms, number of manufacturers, minilab installations globally are on decline. But the traffic / output per minilab is increasing. It is no longer feasible to survive by manufacturing minilab and owning a retail store that does only this business. Therefore only big format stores with minilab based printing as a side business can hope to survive.

Tuesday, February 22, 2011

Puneet Resins - Part 2

After a bit more legwork and probe on rubber industry my erstwhile belief that hot companies are privately held or concealed inside families gained more strength. While the tyre based rubber industry is dominated by less than 10 players, non-tyre rubber industry is fragmented amongst 100s of unorganised players.

Some people are satisfied with their lives and the majority unsatisfied all their lives, promoters are people hence they too fall in those categories. Its somewhat myopic really on their part to hide their fortune, penny wise pound foolish one could say, to not participate in shareholder friendly activity since doing so in short run would result in dividend outgo, hiring a few PR personnel, paying income taxes, sharing a small part of their growing fortune, something they ethically ought to do (since they were the ones who came with a begging bowl to capital market as opposed to partnering with like minded entrepreneurs) but over long run would help them build giant  organisations, given that they also possess business acumen to back it up.

After a little more probing I discovered that Rishiroop Group are actually rolling in dough. Swimming in the proverbial ocean of dollar bills like uncle Scrooge. They have the most extensive distribution network in non-tyre industry.

Half a dozen group companies are listed on

The one company you want to own in group and can't own is Rishichem. Their principals are crème de la crème of the world for Rishiroop's distrubution channel of non-tyre based rubber products.  Dow Corning, Dupont, ExxonMobil, you name it..

Anyhow, I feel that ( reserve the right to be wrong ) there may be a change of heart on their part and more business may be done through listed entities like Puneet Resins Ltd. and Rishiroop Rubber Ltd. Their son Aditya Kapoor, who completed his education in Europe and the US has joined business and has been recently appointed as an MD for Puneet Resins. I am not lame and gullible enough to fall for the fact that merely studying in a western country teaches you good corporate governance principles or makes you a better person. His father, Arvind Kapoor too completed B.Tech from IIT and M.Tech from the US, has run the business, all the while listed companies were in losses (at least for retail investors and IT department !) while the children completed education from the most exotic schools in Switzerland !

Lets keep them on radar.

Gujarat Reclaim and Rubber Products Ltd and Balakrishna Industries Ltd look excellent, solid, mighty in rubber for long term players. 

Friday, February 18, 2011

Elastomer Industry and Puneet Resins

Elastomers can be of various types. Thermal, High Performance etc. They can be commodity or specialised which are distinguished by exceptional chemical, mechanical and thermal properties. Dupont, Bayer, Zeon and Polyone are respected names with significant market share in West. PolyOne has annual revenues of 2 Billion $. PolyOne ranks as North America’s largest compounder with a market share estimated at 10-11 percent. Its distribution unit also ranks among North America’s largest.

Excel Polymers was a spin off from PolyOne in 2004 as a non core business. It has very specialised business and Lion One Chemical which bought it from Polyone has made 4X profits on its sale of Excel Polymers to HEXPOL in December 2010. Excel Polymers recorded annual revenues of 350 million $ in latest fiscal.

Excel Polymers isn't as commodity a business as it appears, i.e. collection of rubber from trees and selling it. Even though it makes intermediate products and not consumer brands, Elastomers require R&D. They make B2B segment rubber products for medical, transportation, space, consumer,  performance additives industry and do command brand name. Similar to making a flavour of ice cream and taste addiction, there is lot of R&D required and IP is valuable for many years.

Products of elastomer industries are not an array of items. They are solutions to the challenges some or the other industry experienced. As new products are built which require new chemical, mechanical or thermal property, elastomer manufacturers have to concoct a new recipe for the solution.

A very long list of PhD chemists working with Excel Polymers affirms the super specialized nature of Elastomer industry. NP margins of Puneet's principals are upwards of 10% meaning not bottom of the food chain commodity.

But then one could say, sage of Omaha prefers Johnson and Johnson whose brands are inside our minds to Dupont or 3M, majority of whose brands are in minds of just B2B populace. True, former is without a doubt better, since it does not have to innovate decade after decade. But its only truly better for an investor if its available at reasonable price relative to underlying value and growth rate.

In 1990s the industry experienced consolidation and now seems set to sail for above average growth rates of existing leaders. I am still learning more about this industry.

This should give a brief overview of Excel Polymers

Puneet Resins

It has only a handful of its own specialised polymers like Vulconoil and Vinoprene. Bigger companies have dozens of specialised compounds. It has earned most of its revenue from trading activities of products from its principals. They are expanding production line as per BSE announcement in Jan 2011 to cater to increasing demand. The company has yet to prove itself as a learning, lean and continuously improving organisation to achieve scale and respect in this industry.

Positives are :

 Low equity base
 No equity dilution
 No debt
 Promoter increasing stake from open market
 Dividend declared in 2010
 Chance of increasing offerings from Excel through Puneet


Less liquid market for stock
Link to underlying industry cycles such as auto
Culture of scientific research and innovation has to be maintained to lead
Mainly into trading as yet

Wednesday, February 16, 2011

Influence, Casino and Trading

 Words fall short in praise for the work by Robert Cialdini who is a Professor of Psychology. Detailed effort and experience of several years shared generously. I have
 repelled all books dealing with subject of self help, motivation, persuasion etc. We tend to think that we already know all there is to know, secondly getting a self help book partly means
you have fallen flat on the floor and are in "need" of help. I fortunately never felt I was. Books like "how to win friends and influence people" are completely absurd for someone who is not in business of chasing monthly targets. This is the first book or article in its genre I skimmed through.

I am not so much inspired by the idea of making sick people better as in becoming a Doctor, not that it is not noble profession in itself, we do need dedicated doctors. But I'm more inspired with the thought of making already great people into supermen. Not that I am a superman myself :).

This books is not a product of someone going into a room and delivering 300 pages in 6 months, it has taken heaps of research and work.

How this book can help you is - in providing lovely stories, safe guarding you from marketing tactics, compliance tools like reciprocity, commitment and consistency, social proof, authority etc. that may be used on you every single day.

Some examples I'd like to recount.

- You can ask someone for a bigger favour, after its rejection, once you accept rejection, retreat and request for  a smaller favour, it has a higher chance of success than asking smaller favour alone. All the while, all you were stalking for was a smaller favour.

- Toy stores increase the sales of toys in Jan - March, by first advertising for a few toys they intentionally don't stock during Xmas. They are aware that parents have promised children for a particular set of toys that were massively advertised before Xmas. During Xmas parents ended up buying some other toys. They would resort to re-stocking them and advertise their availability in Jan-Feb, post Xmas. It wasn't after all a co incidence that the author met several parents annually post Xmas in toy store.

- A small fish has symbiotic relationship with much bigger fish, whose parasites are cleaned up by this smaller fish. This happens through a certain dance that this fish does which makes bigger fish immobile. This trick has been learnt by a carnivorous fish which is able to replay click, whirr tape and take a bite out of bigger fish and scoot before it comes to senses. Humans have many such tapes that are replayed by shrewed marketers.

- Humans associate expensive with good merchandise.  Interesting story is covered where all failed attempts to sell cheap stones through persuasion, threat, increased margin, placing in high visibility area were overcome accidentally by increasing price to 2X.

 I personally know from a mechanic, that in 90s there wasn't a single BMW car that would do 300,000 Kms without engine work, same is not so for Toyota's. Yet BMW manages to sell at premium.

 Another example I realized post reading this book was the Pizza Hut has tried compliance on me a zillion times whenever I call up for a pizza. It starts with "Deal of the day is 2 Pizza, a drink and cake for 25$, how does that sound", reply, "No, just one pizza", "How about one garlic bread for 2$ extra". I never have become a patsy in this  retreat and reciprocation compliance fortunately.

- Some of the most dangerous tools are gradual brainwashing and changing self image about yourself. Examples of volunteer appearing in your home to paste a 3" sticker of "I love Delhi clean and safe" and then a completely unrelated volunteer (just for you) asking you to to put 3 Foot square board in your front yard "DRIVE CAREFULLY" is because your self image has been changed in your mind as "good citizen".

American prisoners of war were treated very differently in China than they were in Korea. Chinese goal was to start small and build. They started with "American society is not perfect. In Communist country nobody has to worry about employment." It gets interesting. Prisoners are required to enlist  10 points about shortcoming of American society and capitalism. Later than are supposed to elaborate each point with an essay. Next, they have voluntary debates on capitalism and communism, with a prize at the end. Similar to P&G contests of I Like Gillette because...
Only those prisoners letters were allowed to reach back home who had a little praise for communism. The news readers in China would claim that American prisoners have written in favour of communism without any coercion. In short they would be called collaborators with China and Chinese were able to spread their propaganda inside American homes that Communism is not so bad  through their own kin.



I went to Casino recently with an objective of understanding about this business firsthand and not losing more than 10$, I was more than successful by having lost only 4$. Something strange happened towards the end. It was a huge casino with losers and dullards all around. I could not imagine how 70 year old gravely weak people are gambling whole day. Its the ambiance, dance, feeling of celebration they intend to maintain until all of your wallet is empty. I took a round of whole casino, and if they worked as it was shown in Oceans Eleven then I must have been labeled as someone to watch out for. Just when we were about to leave a lady stood next to us on a slot machine, just within 2 minutes as if she knew what she was doing - she earned 10s of 2$ coins. Everyone else was seated and she did not even bother to take a seat. It was as if it was programmed for her to win. Pretty silly if you ask me, the whole casino thing is just designed to take money from you to pay salaries and rent for an expensive building.



I have turned into a short term trader for 10% of my portfolio. Rules of trading are in contrast to investing so it needs active oversight if not minute by minute check and one has to book losses. As I cannot update blog so frequently one has to know when to buy and sell. Puneet Resins offers both trading and investing opportunity. It is one stock that has both strong tailwinds for short term and can be a multibagger over 2-3 years. It has management bandwidth and has MOU with Excel Polymers. Excel Polymers in turn has been recently acquired by Swedish giant Hexpol, a leader in polymers with over 1 billion $ in revenues. One has to watch this commodity industry. Its a  nice hedge for Relaxo Footwear Ltd and the likes & those animals who love the long-short game.