FLORENCE INVESTECH LIMITED
(BSE Code: 532518, CMP - 377/-)
Dear Friends,
Today I am going to talk on a less known Stock that is available at huge Discount to its Current Market Value of its Investments. It is a Investment Company by Nature of Operations. Yes I am talking about Florence Investech Limited(FIL) which is from Promoter Group of JK Group of Companies. Florence Investech Limited is having good stake in JK Group of Companies like JK Tyre & Industry, JK Lakshmi Cement, JK Paper and many more and regular Dividends from these Non Current Investments is the main Income of FIL. It is a Debt Free company and have no Short Term as well as Long Term Debt on its books. It was also engaged in Seed Sales business which was Demerged into a Separate Entity as JK Agri Genetics(Formaly known as Florence Alumina Limited) which completed in Financial Year 2011-12. So from Financial Year 2012-13 it is Purely a Investment Company which is working as CIC-NBFC(Core Investment Company-Non Banking Financial Company). Company has lower equity base of only 33,28,944 shares of face value Rs.10/- which is as under:
Promoters Holding : 74.99% (Including JK Tyres & BMF Investment Ltd)
Promoters Holding : 74.99% (Including JK Tyres & BMF Investment Ltd)
Bodies Corporate : 10.84% (Indian Only)
NRI Holding : 04.67%
Individual Holding : 07.06% (Holding Below Rs.1 Lac)
Individual Holding : 02.31% (Holding Above Rs.1 Lac)
Clearing Members : 00.13%
--------------
Total :100.00%
========
So you can have Idea that Promoters, Bodies Corporates and NRI holding major Stake in Company upto the extent of 90.63% and only 9.37% stocks are lying with Individual Persons. So that is why it has very very less daily volumes in BSE.
Now come to the main part of this post which is its Investments in Group Companies which is as under:
(All below table value in Lacs)
Name
of Script
|
No.of
Shares Holding
|
Acquisition Cost of Stake
|
CMP 09/06/16 in Rs./-
|
Market
Value of Holdings
|
Annual
Dividend Per Share
|
Annual
Dividend Income
|
|
JK Tyres & Ind.
|
32659100
|
3463.84
|
91.95
|
30030.04
|
2.50
|
816.48
|
|
JK Lakshmi Cement
|
13645040
|
982.67
|
352.95
|
48160.17
|
0.25
|
34.11
|
|
JK Paper
|
11833332
|
5151.36
|
53.15
|
6289.42
|
0.50
|
59.17
|
|
Bengal & Assam Co.
|
646811
|
645.59
|
550.70
|
3561.99
|
10.00
|
64.68
|
|
Dhampur Suger
|
74534
|
163.05
|
100.80
|
75.13
|
0.00
|
0.00
|
|
Umang Dairies
|
1194965
|
14.34
|
66.40
|
793.46
|
1.00
|
11.95
|
|
Udaipur Cements(#)
|
7511756
|
74.66
|
11.87
|
891.65
|
0.00
|
0.00
|
|
JK Agri Genetics
|
1500000
|
150.00
|
421.55
|
6323.25
|
3.00
|
45.00
|
|
TOTAL
|
10645.51
|
96125.10
|
1031.39
|
#Holding upto Dec,2015 3,54,86,242 shares of Udaipur Cement Works Ltd but in Oct-Dec,15(3rd Qtr) it had sold 2,79,74,486 shares of Udaipur Cement Works(Because in Udaipur Cement Promoter holding including Florence share was 88.64%, so as per RBI mandated Promoter holding restriction of 75% capping Promoters had to cut off there holding in Udaipur Cement Works and for this JK Lakshmi Cement, JK Paper and Florence had to sell some stake in Udaipur Cement to bring Promoters holding below 75%)
Note: This is also a reason of Sudden jump in Net Profit of Florence Tech for 3rd Qtr because of which It reported EPS for the F.Yr 2015-16, Rs.85.49 as against last year Rs.20.55. Company will report in the same range results like EPS will be in the range of 15-30 for next 1-2 year also because its income is dependent only on Dividend declared by Group Companies. So Jump in EPS is only due to sale of Stake in Udaipur Cement Work and Booked Long Term Profits, and one should keep in mind it is a process of Encashing Investments or selling Investment not a recurring income. This uncertain Jump in Profits will be there only when Florence will sell its Investment fully or partially by any reason and will book its long term profits.
besides the above Quoted Investments Company has also the following Investments in its books:
Equity shares(Unquoted):
1) Clini RX Research Pvt Ltd. 2625001 shares with cost of 262.50 Lac
2) JK Risk Managers & Insurance 1220000 shares with cost of 122.00 Lac
3) JK Pharmachem 2371903 (Under Liquidation)
4) Global Strategic Technologies 500000 shares with cost of 50.00 Lac
Preference shares(Unquoted):
1) CliniRX Research Pvt Ltd. 1500000 shares with cost of 150.00 lac (8% OCCRPS)
Mutual Funds:
1) Baroda Pioneer Liquid Fund 38348.53 units with cost of 602.35 lac
So Overall FIL have 10,645.51 Lac Quoted Investment in their Books with ZERO Debt besides Unquoted Investment of 1188.58 Lac. Its Book Value till Mar,2015 was Rs.365/- but in this Financial Year EPS is around 85/- and Dividend Declared is 15% i.e. Rs.1.50/- per share. So Book Value till Mar,2016 would be near about 445/-. So Stock is available at Deep Discount to its Book Value. and Now come to the Current Market Value of the Investment. The Current Market Value of Quoted Investments is 96125.10 Lac. So if we add only Acquisition Cost without any appreciation Total market value of FIL comes to 97313.68 Lac against Total Book Value of 11834.09 Lac. So per share Market Value of Investment comes to Rs.2,923/-.
From the above calculations/Facts it is clear that FIL Share, which has Rs.445/- per share book value and Rs.2923/- per share Market Value of Investment, is available at Rs.377/- only.
Now come to the Future Prospects of this Investment Company. FIL have its major Investments in:
1) JK Tytre & Industries (30.72%)
2) JK Lakshmi Cement (50.34%)
JK TYRE & Industry: Jk Tyre & Industry is a Midcap Company with Good Fundamentals. It has Rs,20.45 EPS TTM basis and trading at only P/E of 4.51 which is very cheap for a company which has grown in last 10 years on CAGR basis- Sales-12.75%, Net Profits-45.44% and maintain its ROE-13.43%. in last 3 years company shown a decent performance in Profitablity and Profits of JK Tyre jumped 196.71% on cagr basis. So JK Tyre is trading at very cheap valuation compare to peer companies. Promoters holding in JK Tyre is 52.34%(FIL Holds 14.45%) without any share pledged. Company pays regular Progressive Dividends to its shareholders from last many years. Last year Company has paid Rs.2.50/- per share dividend as against Rs.1.50/- previous year. Tyre Companies are expected to do very well in Future and many Brokerage houses also giving Buy Ratings on JK Tyre & Industry. So if JK Tyre will do very well in Future (which is almost certain) then Investment Value and Income (Through Dividend) of FIL will automatically increase.
JK Lakshmi Cement: JK Lakshmi Cement has came out with Good numbers in Mar, 2016 Quarter. Although JK Lakshmi Cement has not done very well last year in terms of Net Profits but it has increased its sales with little margin from last year. Company has very good Brand name and demand of its products in market. Cement Sector is in Huge demand and JK Lakshmi is expected to do very well in coming months and years. Promoters holding in Company is 45.94%(FIL Holds 11.70%) without any single share pledged. Company is continue giving Dividends to its holders and even in last year when company has not done so good, it has not avoided Dividend and paid Rs.0.25/- per share dividend as against Rs.2.00/- previous year. Although Dividend given last year was very little against previous years but it has not done well last year like previous years in terms of Net Profits. JK Lakshmi Cement is expected to very well in Future and also that is why many Brokerage houses maintains BUY Ratings on it as Emkay given target for JK Lakshmi Rs.655/- and Angel Broking given Target for Rs.744/-. So It is a very great Investment of Florence Investech Limited which is going to give Florence multiple returns in Long Term.
Florence has more than 81% of its Current Valued Investments in above 2 Group Companies and this is very fortunate that both of these companies are very good performing and these are expected to give even more good performance in years to come. Besides this both companies Florence has some investments in JK Paper(Which even today made a 52 week high in BSE), Bengal and Assam Co.(Which is also a Investment Group Company and holds very huge shares of many of Group Companies), Dhampur Sugar(Sugar Sector is running in a Golden Period as Prices of Sugar are flying in Sky and even it will rise more so Sugar Companies are going to rise more and more in coming years), Umang Dairies(This is doing very good), Udaipur Cement Works(It is group company which is also Cement Sector like JK Lakshmi Cement and it is my feeling that sooner or later it will be merged in JK Lakshmi Cement, It has very good Fundamentals), JK Agri Genetics(Company is engaged in Seeds and Agro Products. Monsoon is expected above average this year so JK Agri will do very well in near as well as in Long Term).
So from above whole discussion some below facts are cleared:
Market Cap of Company - 12528.00 Lac
CMP of Investments - 97313.68 Lac
Debt on Books - NIL
Promoters & Big Holdings - Above 90%
Cash Generation per year - 700-1500 Lac(Which will grow year by year)
All its investments are long term stories which are in very good line of growth and these will give multifold returns to its holders like Florence. So my views are that this Company Florence Investech Limited is trading at so cheap valuations because it is less known and less discussed company. It can easily deliver the investors very good return in next 2-3 years but this is the Stock which can be hold in Portfolio for next many years like 5-10 years also for more compounding benefits.
Market Cap of Company - 12528.00 Lac
CMP of Investments - 97313.68 Lac
Debt on Books - NIL
Promoters & Big Holdings - Above 90%
Cash Generation per year - 700-1500 Lac(Which will grow year by year)
All its investments are long term stories which are in very good line of growth and these will give multifold returns to its holders like Florence. So my views are that this Company Florence Investech Limited is trading at so cheap valuations because it is less known and less discussed company. It can easily deliver the investors very good return in next 2-3 years but this is the Stock which can be hold in Portfolio for next many years like 5-10 years also for more compounding benefits.
Note: The above is not a research report but information as available on public domain and it should not be treated as a research report.
Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”
Disclosure: While writing the above facts and information I have NO position in FLORENCE INVESTECH LIMITED in my portfolio. Readers should consult their financial advisory before any action.
http://www.moneycontrol.com/india/stockpricequote/chemicals/florenceinvestech/JKA02
