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Market outlook and stock tip:-R S Software (India) Ltd
Sunday, June 17, 2012
Scripscan:R S Software (India) Ltd
Story:Founded by the US based entrepreneur Raj Jain, RS began with a clear vision of providing quality software services to international markets. The company researched and instituted global best practices in the areas of People Management and Process Architecture to build a world-class organization. With rigorous attention to world standards, the company acquired ISO 9001:2000, SEI CMM Level 4, P CMM level 3 and ISO 27001:2005 certifications.RS Software is a Kolkata based IT company focussing on electronics payment domain. They have their own products which they sell as solutions.Playing a pivotal role for the Payment Industry, RS has developed and maintained mission critical applications for leading Payment networks in North America, Japan and UK. RS Software’s offices are located in the US, Canada, UK and India, employing over 700 professionals to deliver high quality solutions for Payment networks, Processors, Acquires, Issuers, and other Payment Industry companies.Today RS Software is on course to be the leader in using its domain expertise to enhance the most powerful Payment Networks globally, and provide leading edge technology solutions to all stakeholders in the Payments industry. RS Software seems committed to its aggressive growth strategy.This company caters to the need of topline clientele which includes the likes of Visa, Visa EU, Visa CEMEA, Maclane, Pemco, Vignon etc.The cornerstone of RS Software’s value proposition is its understanding of the payment transaction’s entire life cycle, and a unique methodology customized for managing software applications for the electronic payment industry, in the areas of development, maintenance, migration and support. The experience of working in this industry over the past 18 years continuously enhances the knowledge pool that is managed by RS’ knowledge management system, with a goal to cross train in all areas of work. RS constantly refines the unique methodology to meet the dynamically changing requirements of its customers.RS Softwares is a niche player working on a patent pending solutions in the mobile payments area.They have developed a payments lab where prominent people from the payments domain have visited.In India the key driver for mobile can be if RBI promotes it and can benefit RS software.This fine business boasts of 40%+ ROE.Debt too has been retired in the past 5 years leaving balance sheet clean.Free cash flow of 15 crs was generated in FY11. This also has been increasing over last few years.Last fiscal the company rewarded its shareholders with a bonus issue which shows their confidence and conviction in the company.The promoters which used to own 19% in march 2008 has hiked the stake to around 30% as on date and plans further to enhance to 38%(post warrants conversion to equity).The marketcap of the company is only 95 crs.Balance sheet shows it carries cash of around 20rs per share.The dividend declared is Rs. 2 per share which implies a total of Rs. 3 in FY12 and dividend yield of around 4%.RS Software recently posted their Q4 and yearly results.Q4 sales were at 70.46, a growth of 39% over last year, NP at 9.6 cr - a growth of 38% and EPS at 9.01 - a growth of 43% over last year qtr.Yearly sales came at 264 cr from 199 cr last yr - a growth of 32.5%, NP at 28.86 cr from 22.33 cr - a growth of 29.24% and EPS at 25.71 from 19.91 - a growth of 29.13%.A debt free dividend paying company which has been a consistent performer over the last several years operating in a sunrising industry commanding a trailing PE of less than 3 is a massive bargain for the investors planning to own a pie of it.A mere trailing PE expansion of just 3 to a multiple of 6(5 odd to 6) would help it to achieve my assigned target.Its an unnoticed gem which whenever gets attention would move on to a different orbit.One can safely buy it for solid returns in the coming months and years.
Todays update:In a matter of less than 3 months, the company has hit the 105% return target of 150rs and looks good for even more.Enjoy the ride members.
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