Market outlook and stock tip:-Microsec Financial Services Ltd ( Saturday, July 7, 2012)
Scripscan:Microsec Financial Services Ltd
Story:The Microsec group is promoted by Mr B.L.Mittal and Mr Ravi Kant Sharma.The Microsec group operates through the MFSL, and its subsidiaries, Microsec Capital, Microsec Resources, Microsec Technologies, Microsec Insurance Brokers, Microsec Commerze, and PRP Technologies.Incorporated as Satyam Fiscal Services on 6 June 1989, the name was changed to Microsec Financial Services (MFSL) from 21 October 2005.Microsec is a non-banking financial company (NBFC) registered with the Reserve Bank of India.It has its presence mostly in West Bengal and the North East and plans to become a pan-India financial house going forward.Microsec mainly operates in the financing and investment business. The company offers loans against shares wherein it gives 60% of the market value of shares as a loan to the client. This provides the company with a 40% cushion in the case of a default. The company also operates in the areas of investment banking, brokerage and wealth management activities through its various subsidiaries.While there are many players in this segment, the company is unique in the sense that it mainly focuses on small and medium enterprises sector ( SME). The company's core strength lies in advisory services. The company approaches a corporate client by providing them advisory services.It also helps clients raise funds through syndication and equity.On the retail side the company offers brokerage services and Club Kautilya - a research based distribution channel, which provides financial planning services through personal resource planning (PRP) software. The company plans to open 200 branches of Club Kautilya in the next few years.The key point to note down would be the fact that no non-performing assets were generated by the company during FY07-11.This is mainly due to company’s exposure to margin funding business with adequate risk coverage and management’s ability to recover debts effectively.Company had come out with IPO @ 118 and scrip had gone upto 140/ after listing.On equity of 31.81 crores, it has reported Eps of Rs4.8 for fy11-12 on a consolidated basis. In last few quarters promoters have increased their stake through creeping acquisition route from 54.79% to 61%. Promoter may enhance their stake further considering the throwaway prices.Also Vallabh Bhansali holds nearly 6% stake in the company. However, it is held in 7-8 different names and holding in each name comes befow 1%, so names not coming in more than 1% disclosure.The next trigger can be a buyback which can come any day at around 60-70 bucks.Total quantity may be 3 million shares.Microsec also pays a dividend of 1 re per share and is still cum dividend till 24th of july.That itself gives a cool yield of around 3.5%.At 28rs there's hardly much downsides but it can well surprise on the upside front.This nbfc's are hard to be valued on PE multiples or even on price to book.There's so much of potential,intangible properties that one may well skip those.Microsec also is debt free and operates with best profit margin in the industry.It has lot of investments,intrinsic Value of Holdings which could be 120 per share, market value around 80-85 Rs per share.So the whole business is available for free of cost.Microsec ended fy11-12 with consolidated sales of 52crs and a PAT of 15crs.Broking revenue constituted around 41% of the total revenue, followed by 45% each by the financing and investment and 8% by investment banking businesses. Wealth management contributed 6% of the total revenue.At present prices its at a 75% discount to its IPO price which only provides an opportunity for investors to make an entrance.A definite 50% gain is on cards provided one got a holding period of 2-3 quarters.At 90crs marketcap with so much to talk about and back it up,A pure no brainer or a logic driven buy.
Todays update:In a matter of less than 4 months, the company has hit the 50% return target of 42rs and looks good for even more.Enjoy the ride members.
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