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Sunday, December 16, 2012

Your questions on BEML, Micro technologies and Future Ventures!

Valued readers have sent in these queries on BEML, Micro technologies and Future Ventures:

Question: It will be amazing if you can share your thoughts on BEML. The CMP is too low right now.

Answer: BEML Ltd is a PSU MiniRatna category-I Firm, and operates in three main divisions - Mining and Construction, Defence and Rail and Metro. The firm has a stable topline and bottomline numbers from past five years, and in recent three quarters in running in red due to Mining slowdown and ban. Firm was also embroiled in recent Great Indian scam season - BEML's flavor being Tantra trucks. Both topline and bottomline of BEML is affected because of these issues. 

However, these are temporary(!) issues as scams are forgotten quickly in India and mining industry will pick up slowly as some Bellary mines are cleared by courts to operate and have slowly started getting back in gear. 

Because of these issues BEML has lost about 75% of its stock value, from a recent high of 1260 in late 2010, to about 290 now. BEML has even traded as high as 1850 in crazy heydays of 2007. Currently it is trading at 2008 lows and trading at steep discount to its Book Value of 521. 


Technically, There is double bottom formation in charts at 270 odd price, and hence breaking lows of 270 is difficult for BEML. Next set of resistance is at 335, 415, 445, 600 and 700 levels. 

So one can start dipping in slowly and accumulate at any good news in Mining sector, such as progressive lifting of mining ban by courts.

Question: What is your view on Micro technologies and Future Ventures.

Answer: Micro technologies is a unique firm with innovative set of products, such as Security Solutions for Vehicles, Offices, Homes and Cyber security products.
Topline growth has been good from 171 crores in 2008 to 455 crores in 2012. Bottomline has been languishing from past 3-4 quarters, but order pipeline seems promising.

Technically, Firm is bottoming out on charts at near 40 odd levels and next resistance is at 50, 58, 83 and 90. Can be accumulated at this levels.

Future Ventures is a PE (Private Equity) kind of business from Kishore Biyani stable. It had 14+ ventures and  several subsidiaries and joint ventures under its umbrella.

However, with the further restructuring of the group, all fashion/clothing brands would be regrouped under Future Fashion and move away from Future Ventures. The shareholders would get some shares for Future Fashion in bargain.

Technically, the chart is breaking out, so looks like the market is expecting this restructuring to be beneficial. However I would think that Future Fashion would be the most exciting company out of the three businesses of Future group.

Like any other PE business, the business cycle would be longer for Future Ventures and risk reward would be higher. Some of these holding type companies provide very good dividends and return in long run indeed. If you see the balance sheet, 1500 crores are equity capital and is similar to market cap. So you are buying something at cost price, close to its Book Value! Should be good for a long term 1-3 years kind of horizon, due to nature of PE business.

Thanks for reading this and pls keep sending in your comments and questions.

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