Sicagen India Ltd

[Excerpts from the Sunday Report sent to Paid Members on 09-08-09]

1. Sicagen India Ltd is now being certified by Borada based equity analyst and my friend Vikram Solanki. He is of the view that the stock has a long way to go and the rise will be sharp after 17th August, 2009. Vikram is of the view that Sicagen India Ltd will gain from the drum making division and selling of some of its subsidiaries, which are either not contributing any significant, amount to the company’s coffers or is making losses.

He is presently studying in details the company’s land holdings and soon will send a report to me, which will be put on this blog. However, what I feel is that even if we give a reasonable P/E to the stock and considering that its FY10, EPS will be around Rs.5-6, value of its quoted/unquoted investments, reserves and surpluses, book value of Rs.90.13, the stock should at least trade in Rs.60—70, ranges by March, 2010. The company as you have seen in the Q1FY10 results has huge reserves and will be come debt free in Q2FY10.

Since the four wheeler sales have been up in the recent months as compared to two wheelers—it is positive for the company as it is into selling of commercial vehicles. The Company is constantly exploring the possibilities of developing its core area of businesses for which new action plans are being initiated by the Management. With a strong business relationship with TATA Steel, TATA Motors, SAIL, Jindal Pipes, Maharashtra Seamless Pipes, Supreme Industries, etc, the Company is confident of making higher turnover and profits in trading of building materials and commercial vehicles.

The Company, as one of the leading providers of trading and marketing services for building materials and vehicle sales, has a very good opportunity to increase its market share. The value of quoted and unquoted investments in other companies and subsidiaries is a whooping Rs.27.63 Cr. The reserves and surplus is Rs.322.56 Cr. The Company has acquired the specialized drum business as the market for drums and barrels is buoyant. The company hopes to generate at least 15% revenues from this front and break even by December, 2009.

(i) The performance of the Building Material division during 2008-09 was commendable albeit recessionary trends. Turn over of Rs 26682.59 lakhs with a net profit of Rs.631.84 lakhs was achieved as against Rs 21961.24 lakhs and Rs 475.39 lakhs respectively in 2007-08. That year saw a quantum jump in sales of structural steel and other construction material. The Company is confident that the same thrust will continue in the current year also. The division has been enlisted as a SAIL dealer for TMT rebars and GP/GC sheets in 9 territories spread across Tamilnadu, Kerala, Karnatakka and Pondicherry.This division also bagged the SAIL Gaurav Samman 2008-09 award for Chennai region from amongst the top 60 dealersin India for its exceptional performance during the year.

(ii) Vehicles & Spares: The revenue of this division for FY09, was Rs.14284 lakhs compared to Rs.16139.76 lakhs in 2007-08. The profit before tax was Rs.161.82 lakhs compared to Rs.205.75 lakhs in the previous year. The total sale of this division was 3202 numbers compared to 3111 numbers in the previous year. Global downturn in the economy and paucity of funding by NBFC’s intensely affected the performance of the Commercial vehicle division. Mitsubishi lancer dealership which was not yielding the expected levels of profit was surrendered during the year. TATA Motors Ltd has given an LOI appointing the Company as dealers for the sale and service of SCV (Cargo & Passenger) range of commercial vehicles and spares in the districts of Thanjavur, Nagapattinam and Thiruvarur in Tamilnadu.

(iii) Goodwill Governor Services: The division continued to perform well and the revenue of the division during FY09, under review was Rs.818.87 lakhs compared to Rs.707.89 lakhs in the previous year and net profit was Rs.195.71 lakhs when compared to Rs 184.76 lakhs in the previous year. During the year, the Company has entered into a distribution arrangement with M/s. IMI Norgren Herion (P) Ltd, Noida for marketing of Norgren products such as cylinders, scoop tube actuators, solenoid valves, pneumatic accessories etc to State Electricity Boards and Captive Power Plants in 10 States.

(iv) Goodwill Travels: The total income of this division for the year was Rs.119.54 lakhs compared to Rs.85.55 lakhs and net profit was Rs.15.73 lakhs compared to Rs.17.96 lakhs in the previous year.

(v) Goodwill Engineering Works: The Company is taking necessary steps to resolve the technical issues and complete the pending patrol boat orders with BEML.

(vi) Speciality Chemicals: This division was acquired during the year. The chemical plant of the division is located at Pondicherry and produces eco friendly speciality chemicals such as water treatment chemicals, radiator coolants etc which are mainly supplied to power plants and various chemical industries.

(vii) Drums & Barrels: The Company has entered into a business transfer agreement on the last day of the financial year for acquiring the drums manufacturing business located at Minjur Chennai. This division manufactures Plain/Epoxy lacquer coated industrial type MS barrels. The company is expected to manufacture, 1.60 lakh barrels per year which will generate sufficient revenues for the company. The Company has successfully hived off its wind mill operations and coffee estates during the year.

2. The investors those who have still now not accumulated Expo Gas Containers Ltd (BSE Code: 526614) should invariably accumulate the scrip at the CMP of Rs.9.98. With the crude oil prices expected to shoot above $100 per barrel within some some months, the investors are likely to benefit. The Company is engaged in the fabrication business for crude oil refineries, power plants etc. Its business was suffering due to paucity of funds. A couple of months back the Company completed OTS (One Time Settlement) with its bankers and became debt-free. Now, going forward the Company is expected to be on the higher growth trajectory. It clients include Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd,Hindustan Petroleum Corporation Ltd, Oil & Natural Gas Corporation Ltd, Gas Authority of India Ltd, Bharat Shell Ltd, Hitachi Zosen Corporation – Japan, Gapco (Sudan) Ltd – Sudan, Mitsubishi Heavy Industries Ltd – Japan, Godrej & Boyce Manufacturing Co. Ltd, Kochi Refineries Ltd, etc. Its CMD is a Technocrat and an Engineer from IIT, Bombay. Its competitor is Artson Engineering (Face Value: Rs.1, CMP: Rs.34.2), which is making heavy losses but is still trading at Rs.340.20 (If we consider Rs.10 as the face value). If we consider the case of Artson Engineering then investor can imagine to what price this debt free company could rise. Buy the stock in bulk and wait for the Q2FY10 results to be declared. For more information on the company please visit: http://www.expogas.com.