Low risk high return stock idea | Zenith Fibres Ltd

Posted on October 12, 2012 by vinitbolinjkar

Yet another low risk high return investment idea from our beloved Kukkuji is Zenith Fibres Ltd. Zenith Fibres is not only doing well, but its ultra-low cost expansion along with its compelling valuations and 12 year dividend track paying record make it a compelling buy.

In this video interview Kukkuji explains his rationale for being bullish on the stock. For the benefit of our viewers the rationale is enumerated below the video.

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What makes Zenith Fibres Ltd a screaming BUY?

Zenith Fibres Ltd (ZFL) has undertaken a very opportunistic expansion in its propylene business by buying out a manufacturing plant from the crisis ridden Europe at a throw away price of Rs 2 crore. On this paltry investment of Rs 2 crore ZFL is expected to achieve a turnover of Rs 50 crore on an annual basis. The capacity is expected to kick start anytime soon.
Even without the expansion ZFL had achieved a ~100% yoy growth in net profit for the Q1FY13. The EPS for Q1FY13 works out to Rs 3 and with the added capacity it expects to achieve an EPS of 13-14 per share for the full year FY13. At the CMP of 36 this works out to a PE of a little less than 3 – clearly indicating that the stock is going extremely cheap.
The Book value of the stock is around Rs 46 and hence the stock is available at a significant discount to book signifying low downside risk.
ZFL has a dividend paying track record of more than 12 years. Last year ie in FY12 the dividend was upped from 15% to 20%. Considering the rosy prospects and cash balance of RS 14-15 crores and the stock having a market cap of merely Rs 18 crores, there is every chance of the ZFL management increasing dividend payout in the future.
Further the stock has a very high ROCE >25% coupled with a very high replacement cost.

This heady concoction of strong fundamentals, attractive performance parameters, compelling valuations and strong dividend policy clearly makes this stock an undervalued low risk high gain investment pick.

More information on Zenith Fibre can be obtained from its website.

Disclosure: Kukkuji holds all the stocks mentioned in the video interview.

A brief video introduction of Kukkuji.

Kukkuji has done several video interviews with Winning Trades | Low risk trading strategies for the Indian markets in the recent past.

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Disclaimer: The views expressed in this article are entirely my own and do not reflect the views of my employer. This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither http://winningtrades1.com or myself accepts any liability arising out of the above information/articles.

	Vinit Bolinjkar Head of Research, Ventura Securities Ltd

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http://winningtrades1.com

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Four Principles of Stock Selection: Video interview of Kukkuji

Posted on October 9, 2012 by vinitbolinjkar

Kukkuji in his previous interview had spoken about some low risk high yielding investment ideas on small capitalization stocks). In today’s interview he provides updates on the same recommendations ( viz: Balaji Amines, Hind Rectifiers and NESCO).

In addition he outlines his Four Principles of Stock Selection which are a must see for investors as there is a lot of learning to be derived from this video. A brief write up on the contents of the interview is included for the benefit of those who have difficulty with viewing videos.

In the interview he recommend’s booking partial profit in Balaji Amines and converting those profits into Hind Rectifiers and NESCO. Hind Rectifiers is expected to be a big beneficiary of the Railway modernization plans. Nesco which has been consolidating for a long time is his favourite pick and recommends to hold onto the stock.

His Four Principles of Stock picking are as follows

Strong fundamentals are the most important
Stock should have a good dividend paying track record and if the dividend yield is attractive it is an added bonus.
The ROCE of the stock should be greater than 20-25% and he finds that when markets turn these stocks have a high propensity of providing unusually high returns.
Replacement cost is another important criteria. If the replacement cost is high then this along with good dividend yield and book value which is at a discount to market price is a lethal combinations.

As per his opinion the stock that meets the Four Principle of Stock Selection criteria is PTC (India) Financial Services Ltd. At CMP of Rs 16 the stock is an attractive low risk high return investment opportunity. The attractive criteria for the stock are as follows

No NPAs
FY12 EPS of Rs 2.75 per share
Q1FY13 disbursals are around Rs 458 crores which is exceptional considering that during the entire FY12 the disbursals were ~ Rs 658 crore. Full year FY13 , PTC Financials expects to do about RS 1600 crore of disbursals.
It has current commitment for Rs 7,700 crore of disbursals
The NIM is also very strong at ~9%.
Maiden dividend possibility is an added attraction.

Disclosure: Kukkuji holds all the stocks mentioned in the video interview.

Brief Profile of Kukkuji

Kukkuji is a veteran investor who has built up an enviable portfolio investing in low capitalization stocks. He runs a internet group by the name of Investment Super growth which has close to 10,000 subscribers. Currently he is retired and spends most of his time travelling and researching on Indian stocks.

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