Allied Digital Services Ltd: Trading at Ridiculous Price!!
BSE Code: BSE: 532875
Ridiculous CMP: Rs.27.65
Target: Rs.95-100
Allied Digital Services Ltd. expected to report Q3 2012 results on February 9, 2012: Take Positions in Bulk before that........
Target: Rs.95-100
Allied Digital Services Ltd. expected to report Q3 2012 results on February 9, 2012: Take Positions in Bulk before that........
The Company provides credible, high class and customer oriented services and solutions to clients, actively participate to fulfill the needs and preferences of the customers, their requirements in a dedicated manner. Its centric approach has resulted in high levels of client satisfaction and retention.
The Company''s Net worth as on March 31st 2011, stood at Rs. 686.06 Cr (as against Rs. 635.13 crore last year)--against this the market cap of the company is only Rs. 127.82 Cr (CAN YOU BELIEVE??!!).
The CMP of the shares of ADSL is Rs.27.65, against the Book Value of Rs.148.37. The EPS of the company is Rs.7.32. Its P/E is 3.78, against the Industry P/E of 20.76. The Company maintains sufficient cash to meet its strategic objectives. As on March 31st 2011, it has liquid assets including investment in mutual funds of Rs. 82.09 Cr.SUBSIDIARIES:
Allied Digital Services Ltd has Seven subsidiaries and one Joint Venture:
1. Allied Digital Services, LLC. (USA)
2. Allied Digital, INC. (USA)
3. Allied Digital Singapore Pte. Limited
4. Allied Digital Asia Pacific Pty Limited (Australia)
5. Digicomp Complete Solutions Limited
6. En Pointe Technologies India Private Limited.
7. E-cop surveillance (India) Private Limited.
8. Digicomp Electronics Testing Services (Dets) Pte. Ltd. (50:50 Joint venture of Digicomp Complete Solutions Limited and TES-AMR PTE. LTD.)
Allied Digital Services Ltd has Seven subsidiaries and one Joint Venture:
1. Allied Digital Services, LLC. (USA)
2. Allied Digital, INC. (USA)
3. Allied Digital Singapore Pte. Limited
4. Allied Digital Asia Pacific Pty Limited (Australia)
5. Digicomp Complete Solutions Limited
6. En Pointe Technologies India Private Limited.
7. E-cop surveillance (India) Private Limited.
8. Digicomp Electronics Testing Services (Dets) Pte. Ltd. (50:50 Joint venture of Digicomp Complete Solutions Limited and TES-AMR PTE. LTD.)
INVESTMENTS: The investments of the Company as on March 31st 2011 were to the tune of Rs. 171.94 crore. The Book value of the quoted investments for FY11 was Rs. 42.71 crore and the realizable value as at March 31st 2011 for this investments was same as book value.
Moreover, as per NASSCOM-Mckinsey, global offshore IMS market would grow to US$26-28bn by 2013. India’s share of the above opportunity is projected to reach US$13-15bn. Domestically, system integration and infrastructure outsourcing segments are expected to grow at 15% pa each.
ADSL is an IT infrastructure management and technical support service outsourcing company which has been mentioned earlier. The company operates across a network of 132 locations across India with a team of ~2,700 employees from different managerial and engineering backgrounds. ADSL has a wholly owned subsidiary in the state of Delaware, USA, by the name of Allied Digital Inc and liasioning offices in sydney, Australia and New Jersey, USA. EPGS, LLC USA and Digicomp Complete Solutions Ltd are two newly acquired subsidiaries of ADSL. EPGS operates out of 27 locations in the US with ~340 employees. ADSL enables large and medium enterprises and service providers to reduce their total cost of ownership of IT infrastructure by using a combination of onsite and remote services. The company has been a preferred choice for outsourced technical support for large corporate customers in India. The experience and expertise in system integration (SI), wide onsite reach, sizeable remote infrastructure and technological depth make ADSL a very competitive IMS player. Company’s IMS clientele includes large domestic corporates. The IMS offering of the company comprises FMS (onsite proactive management), AMC (need-based reactive management) and RIMS (remote proactive management). Company typically signs three-year contracts with customers for providing IMS services. ADSL provides SLA-based IMS services. Key elements of a SLA are the infrastructure/assets to be managed (network, servers, desktops, storage, security, applications, etc) and the required uptime (availability) of these assets/applications. ADSL commits to a particular uptime level based on its own assessment of the client’s infrastructure. Company then decides on the onsite: remote mix of resources to provide the committed uptime level. The customers are less concerned about the number of resources deployed by ADSL and its onsite: remote mix but are more concerned about the availability of their IT infrastructure.
ADSL’s IMS services are significantly cost-competitive than some of the large Indian offshore vendors who provide onsite IMS services based on people-billing model. By shifting infrastructure maintenance to ADSL from these vendors, clients could save 20-40% for a similar or higher uptime service levels. For IMS contracts, company has a technology–process–people approach unlike competitors which have a reverse approach.
ADSL has entered into a deal with Lenovo to service all its client’s laptops and desktops for 3 years in the US. There are 3 levels of services involved from zero human intervention in Level 1 to onsite service engineer support in Level 3. Level 1 has automated resolution where issues are automatically sent to NOC in India and are resolved by pushing solutions through the network without any human intervention. Level 2 consists of relatively heavier updates and in Level 3 a service engineer is sent for onsite support. Though the deal is not exclusive with ADSL, its experience and knowledge base due to long incumbency in this field gives it a strong competitive advantage. The company is currently in negotiations to enter into a similar tie-up with Lenovo in Europe.
Advantage to consumers: The costs of servicing laptops are quite high in the US markets as a result such a provision helps to save on these costs for the length of the maintenance period.
The experience of ADSL in solving such issues has led to an automatic resolution of majority of the issues thus saving a lot of time and increasing uptime.
Advantage to ADSL:
The technology leveraged approach of ADSL effectively leads to non–linear revenue stream (most issues being resolved automatically ie without human intervention) ADSL accrues 30-35% margins per device per customer from the revenues emanating out of such services.
Possibility of similar deals with other OEM manufacturers will help ADSL scale-up non-linear revenue component. Revenues from this arrangement are expected to trickle from the current quarter. As per the company, full-year revenues could be US$15mn in FY12.
Moreover, as per NASSCOM-Mckinsey, global offshore IMS market would grow to US$26-28bn by 2013. India’s share of the above opportunity is projected to reach US$13-15bn. Domestically, system integration and infrastructure outsourcing segments are expected to grow at 15% pa each.
ADSL is an IT infrastructure management and technical support service outsourcing company which has been mentioned earlier. The company operates across a network of 132 locations across India with a team of ~2,700 employees from different managerial and engineering backgrounds. ADSL has a wholly owned subsidiary in the state of Delaware, USA, by the name of Allied Digital Inc and liasioning offices in sydney, Australia and New Jersey, USA. EPGS, LLC USA and Digicomp Complete Solutions Ltd are two newly acquired subsidiaries of ADSL. EPGS operates out of 27 locations in the US with ~340 employees. ADSL enables large and medium enterprises and service providers to reduce their total cost of ownership of IT infrastructure by using a combination of onsite and remote services. The company has been a preferred choice for outsourced technical support for large corporate customers in India. The experience and expertise in system integration (SI), wide onsite reach, sizeable remote infrastructure and technological depth make ADSL a very competitive IMS player. Company’s IMS clientele includes large domestic corporates. The IMS offering of the company comprises FMS (onsite proactive management), AMC (need-based reactive management) and RIMS (remote proactive management). Company typically signs three-year contracts with customers for providing IMS services. ADSL provides SLA-based IMS services. Key elements of a SLA are the infrastructure/assets to be managed (network, servers, desktops, storage, security, applications, etc) and the required uptime (availability) of these assets/applications. ADSL commits to a particular uptime level based on its own assessment of the client’s infrastructure. Company then decides on the onsite: remote mix of resources to provide the committed uptime level. The customers are less concerned about the number of resources deployed by ADSL and its onsite: remote mix but are more concerned about the availability of their IT infrastructure.
ADSL’s IMS services are significantly cost-competitive than some of the large Indian offshore vendors who provide onsite IMS services based on people-billing model. By shifting infrastructure maintenance to ADSL from these vendors, clients could save 20-40% for a similar or higher uptime service levels. For IMS contracts, company has a technology–process–people approach unlike competitors which have a reverse approach.
ADSL has entered into a deal with Lenovo to service all its client’s laptops and desktops for 3 years in the US. There are 3 levels of services involved from zero human intervention in Level 1 to onsite service engineer support in Level 3. Level 1 has automated resolution where issues are automatically sent to NOC in India and are resolved by pushing solutions through the network without any human intervention. Level 2 consists of relatively heavier updates and in Level 3 a service engineer is sent for onsite support. Though the deal is not exclusive with ADSL, its experience and knowledge base due to long incumbency in this field gives it a strong competitive advantage. The company is currently in negotiations to enter into a similar tie-up with Lenovo in Europe.
Advantage to consumers: The costs of servicing laptops are quite high in the US markets as a result such a provision helps to save on these costs for the length of the maintenance period.
The experience of ADSL in solving such issues has led to an automatic resolution of majority of the issues thus saving a lot of time and increasing uptime.
Advantage to ADSL:
The technology leveraged approach of ADSL effectively leads to non–linear revenue stream (most issues being resolved automatically ie without human intervention) ADSL accrues 30-35% margins per device per customer from the revenues emanating out of such services.
Possibility of similar deals with other OEM manufacturers will help ADSL scale-up non-linear revenue component. Revenues from this arrangement are expected to trickle from the current quarter. As per the company, full-year revenues could be US$15mn in FY12.
A decent P/E of 15 for the scrip (Allied Digital Services Ltd) gives the target as Rs.95-100, after giving suitable discounts. At the CMP of Rs.27.65, it is just a steal. Buy as much as you can at the CMP of Rs.27.65 and make merry.....
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