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Saturday, November 24, 2012

Curious case of Money Matters Financials Services Ltd!

A valued reader asked this question on Money Matters Financials Services Ltd:


Question: There is this one counter that I'm very bullish on and bought at 97 levels...now it is at 130 odd....had made a peak of 787 in 2010...into financial sector...main business is lending business...it has ZERO NPA.....book value at 232...networth of co is 824 cr...

Ya forgot to mention the stock is Money Matters Financial services....

Also with rate cuts from may be Jan...it would get benefited, I believe...

Naren, can you kindly do some technical as well as fundamental analysis of the same and throw more light as to whether it can be a good long term investment.

(Naren, also note....there was a CBI raid in 2010...n it has crashed to 44...but then I learnt, that it has got a clean chit...news not confirmed about clean chit though)

Answer: 
Money Matters Financial Services came into being when it bought over Dover Securities in 2007, which was a small company listed on BSE. The combined entity was named Money Matters Financial Services Ltd. The company is into investment banking and major activities are loan syndication, debt placement, financial restructuring and debt settlement.

Here is an interesting case study about doing business in India! Lot of companies doing similar business are struggling, but not Money Matters. It raised a stupendous amount of Rs 445 crore through QIP to expand its business. Marquee global investors such as Morgan Stanley, Wellington, Fidelity and GMO were involved in this issue. Other established companies in this field are struggling to raise smaller amounts.  

The company’s clientele include big names such as Adani Group, Tata Group, Reliance ADA Group, Aditya Birla Group etc. It also was involved with DB Realty for Rs200 crore loan, which was sanctioned from LIC Housing Finance. It is this association with DB that got company's promoter Rajesh Sharma arrested by CBI for taking bribe to sanction big loans to corporates.

Now this situation is clear for anyone who knows the reality of doing business in India. Rich politicians need someone to front-end and recycle their wealth into the system. That’s how small time companies get large loans at huge valuations, get big connections and grow astronomically, whereas other companies in same field will struggle.

This is a dilemma for retail investor. Should he look at morals of a firm or just look at profit making opportunity and take a bet on these tainted names. Case in point is recent investment by guru Rakesh Jhunjhunwala into tainted DB Realty, which sky rocketed the scrip price when his investments was known to others through media. I can’t resolve this situation for you, as this is a personal dilemma for you to ponder.

I can only look at financials and charts. Business is growing astronomically for Money Matters as revenues for year ending 2012 is 571 crores, which might double looking at runrate of 293 crores revenues in Sept,12 quarter alone. EPS might also double from 11.5 to over 20 in 2013. Book Value is 232 and firm can reach its Book Value, looking at current performance. Promoter ownership is improving QoQ and is at 64.9% and retail ownership is very low at just 3.75%. Low retail ownership typically lead to a mad scramble to buy shares and huge price spikes. Dividend is very low at 10%, looking at current performance.



Looking at charts, 97 is a very good price that you have entered. Current price is at 132 and nearby support levels are at 125, 104, 78 and 71 respectively. Nearby resistance levels are at 142 which is a strong resistance, once crossed with heavy volumes, no stopping the price rise. Hope this helps.

Pls send your queries at stockfundoo@rediffmail.com. Thanks for reading this post.

References: For doing the research on this firm, i looked at below articles by DNAIndia and MoneyLife:
1. http://www.moneylife.in/article/money-matters-financial-raided-by-central-bureau-of-investigation/11505.html

2. http://www.dnaindia.com/money/report_who-s-money-matters-well-morgan-stanley-wellington-fidelity-gmo-invested-in-its-qip_1471712

6 comments:

  1. Dear Naren,

    That was so prompt and so kind of you !!
    As always you have brought in a lot of clarity
    Really appreciate your helpful nature a lot...

    Thanks a lot Naren :-)

    Naren, there's another such co but more so into debt market, bonds etc. called A K Capital which I believe has good potential...
    Everything about it looked impressive to me unless of course I m overlooking something.

    Thanks again Naren

    Regards

    ReplyDelete
  2. Ganesh, Thanks for your comments. AK Capital is indeed a good firm, will write a post on this in sometime.

    ReplyDelete
  3. Hi Naren ,

    Thank you very much for your great insights.

    You belong to that rare group of helpful people who go on imparting valuable knowledge to the general public without asking anything in return.

    I suggest you to atleast put up a donation system , not saying that you require donations but just that if people benefit from your worthy inputs it could be a way for them to say thanks in return..

    I am seeking advice over 2 stocks
    1.Allahabad bank 2.Alembic Pharma

    Albbnk - It has suffered on NPAs & net profit has plunged 52% yoy.
    Alembic - i couldnt find any problems fundamentally but now that drug pricing policy has been accepted i fear it may go down more & moreover it could cut its projected profit margin in coming year.

    I am holding Albbnk at 134 & Alembic at 60 , am a long term investor so invested over a year horizon.

    Can they overcome the challenges faced currently over a period of one year ?

    Requesting you to kindly provide your valued inputs on these.

    Thanks in advance.

    ReplyDelete
  4. Dear Ramkrishna,

    Alembic's promoters may be a problem, have a close look.

    ReplyDelete
  5. Hi Naren, What is your view on Heritage Foods? The stock run up from as low as 135/- in June to 560/- few days ago, almost a 4.2 fold increase in few months.

    What is the fundamental call? May not be worth to buy now, want to know what is further upside?

    ReplyDelete
  6. Hi Naren, like you said Money Matters faced some stiff resistance at 142 levels.....and after having crossed it, it has made fresh 52 week high now of 168 ! :)

    I added more, hence my avg price now is about 112....

    One question, now that it has been moved to Trade to trade segment (no intraday, only delivery based buy sell)....also its circuit limit has been revised to 5 %...by sebi along with thangamyi jewellery and L&T Finance....to prevent too much fluctuation in price rice.....since then the stock was silent for sometime and then hit 5 % circuits....4 last week....and now at 164 levels....

    It seems it has paid a very high advance tax for the current quarter....

    so keeping all these developments in mind and the charts....any fresh view Naren ? Or a just hold, as rate cut cycle is just round the corner....?

    What is a realistic target and time frame for the stock ? Of course target for a stock like this not possible to arrive at...but an educated assessment would be very helpful

    Thanks a lot

    ReplyDelete

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