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Thursday, December 6, 2012

What to do with PVR and Kingfisher and your questions on Harrisons Malayalam and Usher Agro!

Valued readers have sent these questions in past 2-3 days. Pls see the questions and our responses:

Question: It would be great if you could kindly share your views on PVR, it has risen sharply post Cinemax Deal. almost 44% up in 3-4 days.

Question continued...
PVR will now command a great presence in movie screening business & producers will have to strike deals with PVR promoters to ensure good collections , Also TV Analysts have started giving BUY calls saying the combined EPS is calculated to be around 25-30 Rs in 1 year taking price to above 400-500 per share.

I am holding PVR shares at 188 Rs , looking forward to increase my holdings.

Though it may reach 400-500 in a year it possible that it may come down in short term because the current rise has been very very steep(44% in 4 Days) & only on speculations of future earnings ? or is it possible that it will continue rising like wockhardt upto 400-500 levels ??

What do you think about movement of this scrip in short term ??

Answer: I would be careful in investing in PVR at these levels. I briefly looked at chart yesterday and there appears to be a triple top kind of structure on EoD.

If it breaks 335-340 on high volumes, you can again take a long and keep a trailing stoploss.

Question: Can you write something about Kingfisher Airways.

Answer: I looked at revenues for KingFisher in Sept quarter. Its just about 200 crores with 600 crores loss! And maybe next quarter may get worse with almost total shutdown.

At this point, its just like a lottery ticket with some investors hoping to come on-board. Not recommended.
Hope this helps.

Question: Can you please do analysis of Harrisons Malyalam ? What you think of this company in long term.

Answer: Harrisons has a diversified business lineup of Tea, Rubber, Cocoa, Spices, Engg Services and Exports. Firm is part of RPG group. Firm is also currently involved in a land dispute with State Govt.

Revenues are steady on an annual basis in last five years, but EPS is flattish. Last three quarter EPS is in negative territory. High Book Value of Rs 172, and entire firm is available at an paltry market cap of just about 120 crores!

Imagine owning a 150 year old, largest agri-business in South India at just about 120 crores.

This is the fate of many diversified old-time businesses currently, one can name so many of them, with huge land tracts, huge Book Value, but share price is languishing in tight low range. Market is giving astronomical valuations to theme based new "hep" businesses, but good old firms are laggards currently.

Probably market is waiting for some value unlocking process, before participants can re-look at such deep value scrips and start bidding up the price. Also high retail shareholding at 43% is also a dampener in price rise.

The land dispute needs to resolve and quarterly EPS needs to improve and come back to black before any chance of steep price increase in this scrip. Only for very patient investors.

Question: I would like to know your view on Usher Agro. What could be the strategy for coming 2-3 month as if look at fundamentals, it is looking great but it had been flat from 3-4 months.

Answer:  Usher Agro is a agri-processing firm dealing in wheat, rice and pulses. Looks a strong firm with growing topline and bottomline. Revenues have grown manifold in past 5 years from Rs 141 crores to Rs 811 crores. On a quarterly basis as well, growth is evident.

Firm is available close to Book Value of Rs 71. Firm has paid regular dividends.

Low promoter shareholding of 29.67% is a possible issue here. Debt of Rs 441 crore exists on balance sheet, which is a case with all agri-processing firms for their working capital needs.

Overall, a good firm fundamentally speaking.

Technically speaking, it is out of its Bear market and price may fly once crosses 71. Next set of resistances are at 78. Once 78 is crosses, 105 is possible as well.

Hope this helps. Thanks for reading this post and keep writing in to us.


  1. Hi Naren ,

    Thanks again for sharing your views on PVR.

  2. can u please share your views on tv 18 and sun tv?

  3. But Naren if u see KFA is going up with huge volumes and delivery is also on a higher side and also their is news about foreign airline investment
    Wat do u have to say about it

  4. Hi Sandesh,

    Pls have a look at fundamental state of Kingfisher Airlines:

    "SBI has an exposure of Rs. 1,500 crore to the Bangalore-based airline, which has not been serviced since January this year.

    Launched in May 2005, the airline has not reported a single penny in profit and has bank debt over Rs. 7,000 crore and unpaid interest thereon since January, apart from over Rs. 1,000 crore in vendor and tax arrears.

    It also has accumulated losses of nearly Rs. 10,000 crore, apart from the salary dues of the past seven months.

    The Centre for Asia Pacific Aviation has said a fully funded turnaround for Kingfisher would cost at least $1 billion."

    That's why i said, KF is just like a lottery ticket now. Which investor would sink $1 Billion of their money in KF, when KF's owner is not even interested in paying the salaries on time.

    Which set of new employees will join KF now? One of their family member even committed suicide.

    Why should a new investor commit suicide with their investment capital, that's the question now. Hope this helps.

  5. Hi Naren Bhai ,

    I invested in REI Agro at around 9 Rs in July.. But its moving very very slow...

    It does not participate in matter how much market goes up it sticks to 50 paise up down...

    Promoter is constantly buying and delivery is always every day "70%" and around for this stock ... but still it trades in plus minus 1 rupee range daily not moving up at all...

    What do you think would be the time frame for this stock to move to 20 levels ?? it is getting frustrating day by day... and i fear if market falls due to FIIs booking profit it would again go down below 10 levels...

    I read your posts on REI but requesting you to Please share your views again on Rei ..if positive , it may instill some confidence & faith in me to hold for more time..

    thanks ,

  6. Recently in a public interview of REI

    CNBC Do you expect the trading to contribute more to your total revenues which will not give you the same kind of margins as your branded products will? Is that a strategy of the company?

    A: The strategy of the company is basically that trading should be an additional contribution to the business. We continue to focus on our manufacturing business which gives us an EBITDA of about 21 percent. Trading should give us additional. So there is not a defocus on the manufacturing side. Trading will give us additional margin which will be lower than the manufacturing margin.

    They are trading in their own stock , so is it possible that they will purposely keep the price low for longest possible duration to enable this side profit??


  7. Hi Tarun,

    I responded here:

    The trading mentioned here is not stock trading, but commodity trading. Lot of commodity processing firms would hedge their underlying commodity to protect themselves. Some would get burnt like KS Oils.

    But since they have the knowledge of working closely with commodity, they would add some extra margins to bottomline. Thats what the CEO is mentioning here.
    Hope this helps.


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