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Sunday, February 2, 2014

Selan Explorations Technology Ltd:-The company which made more money than Warren Buffett in the last 10 years

Paid members have enjoyed a 25% rise in Selan since its call a couple of months ago.Its time for blog readers to enjoy this amazing multibagger.

Stock Idea:-

Scripscan:Selan Explorations Technology Ltd
Traded in:Nse-bse
CMP:300
Target:450
Return percentage:50%
Duration:9-12 months
Long term Returns expected:30% CAGR for next 5 years.

Note:Trying to pen in most simple words.Please read it meticulously and understand why you need to buy the stock.

Story:Selan Exploration is into exploration & production of oil & gas.It currently operates 5 small fields in Cambay onshore-Lohar, Bakrol, Indrora, Ognaj and Karjisan.These oil fields were awarded to the company in 1995-2000 under a Production Sharing Contract (PSC) with 100% participating interest by the Government of India.Selan was subsequently awarded two more fields in Gujarat namely Ognaj Oilfield and Karjisan Gas field.In-place resource stands at 73 mmbbl(million barrels)& 7 mmbbl in Bakrol & Lohar respectively.Production level is currently at ~660 bpd(barrels per day).The company sells its crude output to Indian oil at a discount of 5% to Brent.Five points to qualify Selan exploration as a great medium to long term buy.

1)As of now, the company is producing oil from only 2 fields,Bakrol & Lohar.Management has also indicated that Indrora Oilfield contain far larger quantities of recoverable oil than Bakrol.Let us conservatively assume 100 Million Barrels of Oil Reserves under Selan.Selan's reserve would get valued at many a thousand crores.Selan recently has completed drilling of 2 wells, commercial production is expected to happen any day now.Further drilling is also going on.Company has a marketcap of only 500crs.It delivered a revenue of 97crs and PAT of 45crs respectively for the last fiscal 2012-13.

2)Previously, the technology recovery rate of exploration activities was ranging from 10-20% from the total potential reserves in Gujarat.But with the latest technology implementation of 3D contour mapping this recovery rate has gone up to as high as 50-60% for the similar fields.Contour mapping is just like a magnetic resonance imaging(MRI) scan of a human body.Stunning management quality and they are committed to make huge amount of shareholders wealth in the coming years.It buybacks(7 buybacks in the last 10 years),it allots warrants,it generates huge amount of cash,it has got a wonderful under leveraged balance sheet.Selan is one sure shot winner for the longer run.

3)Numbers has been flattish so far over the last few years as it was consolidating its resources and investing a lot in its proven fields.Over the next few quarters the company would actually be in a position to ramp up production massively and deliver an EPS of 60(2014-15).Value it as per the sector and the valuation would be in 4 digits.Even if at the present juncture we see the valuation of selan;EV/reserves of less than 1,marketcap to sales of around 5 with high double digit return ratios,its the cheapest oil exploration company in the bourses.

4)Selan's production cost is $11 per barrel, which is reasonably low.Company pays $5 per barrel as Royalty to the government.The stock has delivered an annualized return of over 41% from 2003 to till date,much superior to the broader market(Selan was at 10rs 10 years ago).Hell,its even higher than what "Warren Buffet Sahab"s berkshire hathaway delivered in the same period.In my view creating and delivering shareholder value has been well handled by Selan. Selan is now all set to start the process of returning value to shareholders while they continue the value creation process.

5)Crude oil demand is projected to increase to about 1600-1800 mn barrels per year. Rising global crude oil prices have triggered increased domestic exploration and production activity.All this factors makes Selan a big beneficiary and helps one to have a lot of conviction on the stock.Selan posses robust fundamentals,amazing pedigree quality,mind boggling prospects,low business risk.Over the next few quarters it can have a production level of about four to five lakh barrels per year, which can lead to a cash flow of over Rs 150 crore.Have put a 8 times forward earnings to arrive at the target price.Selan is a stock which can be kept for lifetime.Make it a part of your core portfolio folks.


btw:People looking for midcap/smallcap positional call professional service may rush a mail at my mail id arunsharemarket@gmail.com to know more about it.  

66 comments:

Anonymous said...

Arun,

Thanks for recommending Selan. What's your take on Selan when compared to Cairn India for next 3-5 years of investment?

Cairn seems to be undervalued and has good long term potential.

Thanks for your time and reply.

Arun Mukherjee said...

Its no even comparable,I mean theres helluva difference between 400crs and 25000crs mcap.I have never been a votary of massive caps,Selan remains my sole bet and as can seen,reasons are clear.

SK ASIF Rahaman said...

Hi Arun,

Selan is doing well nowadays. However any information about the promotors track records?

Regards
Asif

Arun Mukherjee said...

Asif that can be put to rest as 41% CAGR wealth creation over the last 11 years is some stuff.Also the amount of buybacking that it has done,amazing stuff simply.

Anonymous said...

How do we value an E&P firm, as conventional metrics such as P/E, Revenue Growth, Debt/Equity, Sales/EV etc can't be applied to them?

Regards,
HR.

Anonymous said...

Also, What are the probable risk factors?? :-)

Regards,
HR.

Anonymous said...

The above doesn't seem to be original analysis of yours.
You said that you had given this to your paid members.
But the above analysis has been copy pasted from many other resources available on the net.

Pasting a link for example:
http://blog.profitkrishna.com/multibagger/

The above link was published in July 2012 recommending Selan. It has the same language that you have used in your analysis in 2014!!!!!!!

Similarly I see that your analysis has copied from other resources too!!!!

The technology you mentioned etc is not new and Selan has had it since last 4 years and is not something new that Selan has acquired!!!!

Where is the originality in the analysis???


Regards,
HR.

Anonymous said...

Also, how can you compare Berkshire Hathaway!!!!!!!!!!

You would find 100s of companie sin India which are penny stocks in 2003-04 or now also and which have outperformed Berkshire Hathaway.... That doesn't mean we can compare them to Warren's enterprise. There's just no comparison!!!

As I told earlier, try not to get emotional about stocks and try not to get carried away!!!

Regards,
HR.

Anonymous said...

Link on how to actually value an E&P firm!!!
This is the standard way to measure E&P firms!!!

http://www.slideshare.net/hfbe/oil-and-gas-company-valuations-business-valuation-review#

Regards,
HR.

Anonymous said...

can you name this company?



# Operating in a sector with huge potential with high entry barrier


# Only Very few companies are listed from this space


# This stock is trading at a P/E multiple of 1/4 th ( Approx) of the average P/E of the industry( As per FY 13 Earnings)


# Promoters are well experienced and pioneers in this sector.They came out with IPO for this business even when this industry was at nascent stage in India.


# This is the first company received ISO 9001 Certification from Asia Pacific Region in its business segment.


# Company having technology collaboration with more than one foreign companies.


# Company’s FY 2013 EPS is between Rs.5 and Rs.10


# Its market Capitalisation is less than Rs.100 Cr

Few more Clues added below as per the request of many readers :

# In Non- promoter Category ,a single share holder/entity holding close to 25 % stake in this company

# On a consolidated basis , Company's Net Cash flow from operating activities in FY 2013 was around Rs.15 Cr ( Positive)

# On a consolidated basis , Company's Long term Debt in FY 2013 is even below just Rs.2 Cr

Arun Mukherjee said...

Hr,

I had a paid member who used to copy my stuff and put in profitkeishna for a fat fees.Called them up and threatened them about issuing a legal notice.Profitkrishna guys have apologized to me and since then have terminated their contract with that guy.Not only selan,some other notes too got posted coz of that imposter.But since last 12-15 months or maybe more,cant recall as lot of months passed by,they haven't put any of stuff.Also for safety measures I have put a no copy paste device in my paid blog.Hope that clarifies you.

Arun Mukherjee said...

HR,

That wasn't a comparison but just a mere example as there's a huge number of them.I dont even care of the integrity provided they are committed towards making wealth for the minority shareholders.In corporate almost everyone is a chor,but if you can segregate the visionaries from the spoilt ones,you would be in money.

Anonymous said...

Thanks for the clarification!!!!
But you should put such information on your blog as well that your IP is being copy pasted!!!

Your credibility comes at stake otherwise!!!

I am reasonably impressed by your blog. It came as a shocker when I read the same stuff at other places!!!

Good that you clarified!!!

Regards,
HR.

Nani Bommasani said...

Good day Arun, Excellent call Selan Exploration. Some how I miss your call at the current price R450+ do you still recommending buying this stock? Your feedback is highly appreciated.

Regards
HariPrasad

Arun Mukherjee said...

Ya it would continue to outperform.

Nani Bommasani said...

Thanks Arun for your response, Would you suggest buying now Selan or mist I wait for any corrcetion? and 1 more question among AIA Engineering, Symphony, Kajaria Ceramics and Selan Exploration which one is your Favourite?

Thanks in Advance
HariPrasad

Kashish Agarwal said...

which company wil u recommend to buy in dis result declaration phase..
or any oder companies which can b thought for value buying fr longterm nd short term..

Arun Mukherjee said...

Selan and kajaria are great simple businesses and always would compound safely for many many years.Symphony the way I penned the note,you can sense how much am a fan of the story.So symphony,selan,kajaria are great bets.

Arun Mukherjee said...

I betted on Tata elxsi a quarter back coz of the results.Same happened in TT and mercator.Selan coming numbers would be amazing.

Anonymous said...

Dear Arun,

Thanks for this call.

I am holding 300 selan @ 320 levels. What could be a short term target for profit booking? Please advice.

Thanks & Regards,
RM

Arun Mukherjee said...

Lack the caliber of predicting short term stuff.However it is important to save profits while enjoying rallies.Put a trailing stoploss(stop profit here) at 10% below cmp and continue to hold.

Anonymous said...

Thanks for the quick reply Arun.

I have a major chunk of my investment locked with HDIL (avg 55) and JPASSOCIATES (avg 58). My plan is to exit this stock at cost price and shift to value stocks like symphony, PFS or kajaria.. Can I expect a bounce back from current levels to get a fair opportunity to exit? Or may be average at current levels?

Regards,
RM

Arun Mukherjee said...

I dont follow largecaps.Buy only what you understand and where you have immense conviction.

Anonymous said...

Hi Arun,
I have Repco Home @340 avg price. What's ur view on this company for coming years specially this coming result. Since I want to further add so as to average it to cut down my loss. Request if u could share ur view or pls look into it and accordingly suggest the way forward. I also request you to share ur views on Cox&King and Venus Remedies.
Thanks

Arun Mukherjee said...

Ya good quality business to be in.It would alwayscommand a pricey valuation.Looks to be a safe compounder.Rest I dont follow.

Anonymous said...

So you said this call have been given couple of month ago for paid members, but I see same analysis with same points on some other blog dated July 2012.
Now you got anything to add?

Arun Mukherjee said...

Why 2012,Selan I have been recommending since last 5 years.The note hardly needs to change as its a story which was same 10 years ago which will be same 10 years forward.Just some updation is required with quarterly numbers.

Nani Bommasani said...

Good Day Arun,
What is your view Selan Results? Is it less than market expected? Why stock is going down? Will you review your view on Selan after the results?

Thanks
Hariprasad

Arun Mukherjee said...

Its more on expected lines.From next quarter results wd be superb.

Nani Bommasani said...

Thanks for your Update Arun, I am betting on Selan, Symphony. Appreciate your kind response

Anonymous said...

I don't understand what has changed recently which has created so much buzz again for the stock. The production has been same for last few years. And same things have been said in past too that this company can increase production and profits will increase and so on.

Anonymous said...

dear sir,

Any idea hy caplin is not moving up from?

regards
Rajeev

Arun Mukherjee said...

Caplin moved from 43 to 150 in 7 months.You shouldnt expect a stock to move up always.Be patient and rational.

Arun Mukherjee said...

Selan story is or was pure patience and nothing else.In stock markets,stock price rises first and then follows the news or result.Stock market would always discount the future much before many can fathom.

Anonymous said...

Sir , Is anything wrong with Marksans pharma? its continuously moving down. Is it the right time to buy it or shall I wait for it to decline further.

Regards
Preeti

Arun Mukherjee said...

It moved from 1 to 21 in 2 years,don't expect it to move up always.

Anonymous said...

Arun sir,
can i buy jyoti laboratories and suven life at cmp for a period of 6 months from now.

Anonymous said...

don't worry who hold caplin point,it will become a multi bagger,for 2014 rs 400is sure.

Arun Mukherjee said...

Both are 4-5 year bets,no idea about 6 months.

Anonymous said...

dear arun,
the land bank story of bdh is going on since long,do you think management is intereted in this aspect,and what growth prospect bdh carries, apart from land bank concept.
regards,

Arun Mukherjee said...

You never know when the deal happens,if ever at all.Such realty places would always be very very valuable and price of it would only increase in future.Apart from it will grow 30% odd for the coming 2 years

vishal said...

DYNEMIC PRODUCTS LTD @ 24.95 has post very good result nine month eps of 7.08.Sir u have eailer recommended this stock any thing you like to add.

Arun Mukherjee said...

Dynemic business is a simple one to understand.I love it coz of the dividend yield.This company at some point of a time would get rerated.

mayur said...

Arun sir, What do you think about Aegis Logistics @cmp 143...m holding from 130..but very few quatities...is it advisable to add more @cmp? pls let me know your views. I'm long term investor...
Thankls

metu said...

Very bullish on the logistics sector.From aegis to abc to gati,all will perform well.

Anonymous said...

Hello sir,

I had bought few shares of morepan labs on friday on Delivery but was not able to sell it in either Del or Obligation yesterday or today as its part of BE group. Can you pls give some info BE group companies or some link where i can read about different groups and the companies belonging to these groups.

thanks

Preeti

Anonymous said...

sir,

Are u tracking Saksoft ltd, its gone down considerably when almost all the IT companies are doing well.

shall i exit from it.

regards
Rajeev

Anonymous said...

Congrats Arun . Target Achieved :)

Arun Mukherjee said...

No idea about saksoft.

Long way to go for selan.

Regards
Arun

Arun Mukherjee said...

BE is basically T group where you can only sell after it gets into demat,on a t+2 basis.

Anonymous said...

hey arun, any are u tracking panacea biotec. Its just gone down since many days

Priyanka

Anonymous said...

sir don't you think investors are getting trapped in stocks like nath biogene which ha sneither reliable promoters or consistent results and was delisted for many years and also may get delisted in future .investors can find other quality stocks in this sector .

Anonymous said...

you are wrong sir I am an invester from Jaipur with more than 25 years of exp. I still advice investors to exit nath biogene

Arun Mukherjee said...

I have no idea about nath bio.

Panacea will do well in near future.Strong management with a robust biz model.

Anonymous said...

Hi Arun, what's your views on Superhouse stock?
-mayur

Sujoy Bose said...

Sir,
You recommended "Bafna Pharmaceuticals Ltd" on July last year with a target of 50% CAGR.. Now I am siting on a 30% loss.
What you suggest now? - Hold or buy more or sell?

Joel Pinto said...

Hi Arun, any views on Sharon bio medicals for long term at current levels. Some analyst predicting 700% upside in two years

Arun Mukherjee said...

Bafna remains a hold and a buy.

Sharon bio is a very interesting stock with robust prospects.Looks to be a decent compounder.Not sure about 700% gain though.

Arun Mukherjee said...

Have commented a lot about superhouse.Please check,my bet remains on relaxo and liberty.

ruthin alex said...

Nice information and thanks for sharing such useful and informative post with us.

Anonymous said...

Hey Arun, your views on Sequent Scientific at cmp 175? it may turnaround in long run? What says?

Arun Mukherjee said...

I dont follow sequent so wont be able to comment

Mohmmad Mohiddin said...

Hello Arun,

1. Can i invest in Selan at current levels as it is already hit the target price? If so, what would be the target for 3-6 months?
2. Can i invest on JK tyres, Whirlpool for short/medium term?

Arun Mukherjee said...

Why to bother about targets?Ya can buy selan and whirlpool..Dont follow tyre stocks.

Sujoy Bose said...

Dear Arun,
What is your outlook on FIRSTSOURCE SOLUTIONS LTD for 1 year horizon?
Can it return 30% profit?

Anish Shah said...

Oil Prices going down and Selan Exploration also at 52-week low. IS it time to buy or wait more ?
I think Rs 260 would be right price. Whats your judgement Arun ?

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