This article appears on valuewalk.com and can be found here.
Who Is Benjamin Graham?
History has designated Benjamin Graham as the Father of Value Investing. He not only developed the concept but also lived it, both as a practitioner with a remarkable track record and as a professor who profoundly impacted his students.
Among his many accolades, Father of Value Investing is Benjamin Graham’s greatest title. Some of his other designations are Dean of Wall Street
and Dean of Security Analysis
.
Father of Value Investing
His research paved the way for today’s stock market analysts by introducing the concept of fundamental analysis and raising awareness of the correlation between stock prices and a company’s intrinsic value.
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StockArchitect wishes all of you a very Happy Diwali and a Prosperous New Year.
May your investments fly high like rockets and give explosive returns.
Let this new year burn all your bad times and enter you in good times.
Happiness Always.
Benchmark share indices on Friday ended higher, amid a choppy trading session, with Tata Motors gaining the most following a rebound in Tata Group shares while recovery in financials also aided sentiment.
The benchmark S&P Sensex closed at 27,942 level up 26 points or 0.1% whereas the Nifty50 index closed at 8,638 up 23 points. The broader markets outperformed the benchmark indices. The S&P BSE Midcap and Smallcap ended nearly 1% higher.
Top gainers from the Sensex pack were Tata Motors, Bajaj Auto, Coal India, Tata Steel and Dr Reddy’s Labs, all surging between 2%-3%. On the losing side, ICICI Bank, Cipla, Asian Paints, Bharti Airtel and ONGC were down 1%-2%.
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Monster stocks are those wonderful beasts that make you look like a genius trader.
Shorts think that they are way too expensive and will crash, so they go short and have to cover en-mass after another 10 point run; they create even more buying pressure. Traders that short monster stocks do not understand the momentum that earnings expectations and growth cause for a stock’s price. They do not understand supply and demand. A stock that is $300, $400, or $500 based on earnings per share, could still be fundamentally cheaper than a $10 junk stock that has billions of shares floating around with tiny earnings per share.
Sounds great, but where do we find these beasts?
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PNB Housing Finance is entering the primary market on Tuesday 25th October 2016, to raise Rs. 3,000 crore, via a fresh issue of equity shares of Rs. 10 each, in the price band of Rs. 750 to Rs. 775 per share. Based on the price discovered, company will issue 3.9 to 4.0 crore equity shares at the upper and lower end of the price band respectively. Representing 23.37% of the post issue paid-up share capital at the upper end, issue closes on Thursday 27th October.
51% subsidiary of Punjab National Bank, PNB Housing Finance is India’s 5th largest home loan provider (after HDFC, LIC Housing, Dewan and Indiabulls Housing) with loan book of Rs. 30,900 crore (30-6-16), 70% of which is housing loans, having average ticket size of Rs. 32 lakh. Average ticket size for non-housing loans, which constitute 30% of the loan book, is Rs 57 lakh. With operations mostly in the urban areas of North, South and West India, its loan book has posted CAGR of 62% between March 2012 to June 2016.
While FY16 revenue grew 52% YoY to Rs. 2,700 crore, Net interest income (NII) jumped 63% YoY to Rs. 840 crore, leading to net profit of Rs. 328 crore and EPS of Rs. 27.58, on equity of Rs. 126.92 crore. Net interest margin (NIM) of 2.98% was clocked in FY16, up from FY15’s 2.94%, while Return on average assets (RoA) stood at 1.35%, up from FY15’s 1.27%.
The stupendous financial performance continued into FY17, with revenue of Rs. 863 crore, NII of Rs. 255 crore and net profit of Rs. 96 crore for the June quarter. Q1FY17 EPS stood at Rs. 7.57. Despite the phenomenal growth, asset quality is has remained intact, infact better than industry average. Gross NPAs, as of 30-6-16, of Rs. 84 crore, represents 0.27% of gross assets.
As of 30-6-16, company had networth of Rs. 2,240 crore, translating to BVPS of Rs. 177. It has only 2 shareholders – parent Punjab National Bank (51%) and Carlyle Group (49%), the latter pursuant to its acquisition of Destimoney Enterprises in Feb 2015. Fresh issue proceeds of Rs. 3,000 crore will augment company’s capital base. Current capital adequacy ratio (CAR) stands at 13.04% vis-à-vis regulatory requirement of 12%.
Given the room which fresh capital will provide the company for further leverage, capital being lifeline for any finance business, FY17 expected EPS is estimated at about Rs. 35 per share. At Rs. 775, company’s market cap will be Rs. 12,837 crore, upon listing, based on expanded equity of Rs. 165.63 crore. Estimated BVPS, as of 31-3-17, is Rs. 340, which translates into PBV multiple of 2.3x, while the PE multiple works out to 22x, based on current year estimates.
Below is a comparison with other listed housing finance companies, both bigger and smaller than the company:
| Company Name
(Rs. Crore) |
Loan Assets
|
Revenue
|
PAT
|
Gross NPA %
|
Current Market Cap
|
Mcap % to loan assets
|
PE
|
PBV
|
|
As of 30-6-16
|
QoQ Growth
|
FY16
|
YoY growth
|
FY16
|
YoY growth
|
Margin
|
30-6-16
|
FY17E
|
FY17E
|
| LIC Housing |
1,27,437
|
1.8%
|
12,396
|
16.2%
|
1,661
|
19.8%
|
13.4%
|
0.59%
|
31,087
|
24%
|
16.9x
|
2.8x
|
| Dewan |
72,012
|
3.6%
|
7,312
|
22.2%
|
729
|
17.4%
|
10.0%
|
0.98%
|
10,455
|
15%
|
11.6x
|
1.7x
|
| Indiabulls Housing |
71,026
|
3.4%
|
8,290
|
28.2%
|
2,345
|
23.4%
|
28.3%
|
0.84%
|
37,121
|
52%
|
12.5x
|
2.7x
|
| PNB Housing |
30,901
|
13.7%
|
2,700
|
51.6%
|
328
|
68.9%
|
12.1%
|
0.27%
|
12,837*
|
42%*
|
22.1x*
|
2.3x*
|
| Gruh Finance |
11,543
|
3.9%
|
1,275
|
20.3%
|
244
|
19.5%
|
19.1%
|
0.56%
|
12,409
|
108%
|
44.3x
|
11.1x
|
| Can Fin |
11,183
|
5.1%
|
1,084
|
32.6%
|
157
|
82.1%
|
14.5%
|
0.24%
|
4,861
|
43%
|
22.1x
|
4.3x
|
* at upper end of price band of Rs. 775 per share
The growth rates which PNB Housing has posting is the highest in the industry (only Can Fin reported higher PAT growth in FY16, but its revenue and loan book growth was much lower). Moreover, PNB Housing’s NPAs have also been under check – 2nd best in the peer set. While net margins and RoE can improve further, based on valuation parameters of PBV multiple (2.3x) and market cap as a % to loan assets (42%), the pricing of the issue appears in-line. Growth visibility in the stock remains very high, given the fresh capital coming into the business, which provides added comfort.
Housing finance industry has been on a growth trajectory, with further headroom for growth. Company’s industry-leading growth coupled with sound fundamental position make it an attractive investment opportunity, albeit softening due to higher base.
Positive sector outlook coupled with stunning growth rates make the issue a subscribe.
Disclosure: No Interest.
The original article is authored by Geetanjali Kedia and is available here.
Benchmark indices ended lower weighed down by profit taking in financials and index heavyweight Reliance Industries. However, the downslide was limited due to buying interest in select IT and FMCG shares.
The benchmark S&P Sensex closed at 28,077 levels, down 52 points or 0.2%. Nifty50 index slipped 6 points, or 0.1%, to close at 8,693 levels. The broader markets out performed the benchmark indices. The S&P BSE Midcap and Smallcap rose 0.1%-0.3%.
Cipla was the top Sensex loser, down over 3% after the pharma major today lost a case related to overcharging in certain drugs, in violation of the provisions of drug (price control) order, 1995. As per the company’s latest annual report, it had received notices of demand aggregating to Rs 1,768.51 crore.
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Why it’s valuable to calculate how your investment price can go to zero
“Any time you manage other people’s money, risk management should be defined as preventing the permanent impairment of capital. Nothing can be riskier to an equity investor than losing all your money. Anybody who loses sight of this is – quite frankly – both a terrible fiduciary steward and value investor.” – Duncan Farquhar
In a recent article, Science of Hitting discussed the difficulty in adding to your position after Mr. Market plays havoc on the stock’s price and valuation. Making the decision to double down is tough for several reasons.
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We’ve created our Jargon Buster to explain some of the most commonly-used investment words and terms.
Active management
An actively managed investment fund is one where your money is invested in a portfolio of assets selected by a professional fund manager. Each fund manager constantly monitors companies, economic conditions and markets, and decides where it’s best to invest to meet the investment fund’s objectives.
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Benchmark indices ended marginally higher, amid a volatile trading session, after gains in oil & gas shares helped offset losses in Infosys and Hindustan Unilever.
Infosys slipped over 2% at Rs 1,026, after hitting 52-week low of Rs 996 in an intra-day trade on the BSE. Infosys reported a better than expected 4.9% growth in consolidated net profit at Rs 3,606 crore for the second quarter ended September 30, 2016 (Q2FY17) over the preceding quarter. Rupee revenue grew 3.1% to Rs 17,310 crore and dollar revenue was up 3.5% at USD 2,587 million on sequentially.
The benchmark S&P Sensex closed at 27,673 levels, up 30 points or 0.1%. Nifty50 index gained 10 points, or 0.1%, to close at 8,583 levels. The broader markets outperformed the benchmark indices. The S&P BSE Midcap and Smallcap rose 0.8% each.
The Investment Masters Class is based on the wisdom of the world’s greatest investors. Over the last few decades following investors with strong track records of compounding capital I’ve found that many common threads consistently surface. These common threads encompass a broad range of areas such as investor’s goals, processes, opportunities, obstacles, psychological construct, outlook and market views. Many are timeless. Below are 100 common threads of the Investment Masters which form the foundation of the Investment Masters Class tutorials.
- The Number One Rule is don’t lose money
- Harnessing the power of compounding is the key to investment success
- It’s better to be street smart than book smart when it comes to the market
- Investing is an art, study the Masters
- There are no get quick rich schemes, NIL, ZILCH Continue Reading →
