#Disclosure - The stock has been recommended at various levels between 90-105 in Technical Traders Club and Big Value services.
This is a company which i have covered many a times before at 40 bucks in 2012 on the blog. In terms of relative opportunities it has not been a great one but a doubler or more in 2-3 yrs is not bad.
The thesis from 2012 has not changed much but think finally the company might find their business right.
The Fundamental Theis is very simple
- Cash on Books - 350 + crores ( it was same in 2011... so company has been losing interest money )
- Market Cap 350 crores.
- Company has a full fledged manufacturing unit at Goa.
- Promoter is ethical and holds 74% stake. ( almost 10% stake bought from open market in last 3 years ) . Sold the brand name to company at 1 rs. Strong track record of good governance.
- Good dividend payout. ( Paid 25% of the amount received in the Digilink sellout to schneider. Continues to pay 2 rs every year )
- The concerns on business acumen could be as the Motherboard business, the tablet business etc have not picked up and the company has decided to stop the Digilite Business ( Learning from the mistakes ) . Also Mr K R Naik bought Dlink to india and ran it well over the years and good wealth created for shareholders.
- Roped in Sonakshi Sinha as a brand ambassador ( doubt it makes a difference but shows intent )
- The demand for its products in Networking space is increasing but so is the competition. But if they can get their act right it can be a big beneficiary of the Digitial India growth. The non compete clause for the Digilink also gets over in 2016 but doubt if they plan to start that too.
- Would trust the management to not siphon off cash but whether they will get their business acts right in coming years is the call to take.
- But at market cap = cash even if they break even on their business the Interest income itself could be 25 cr . There is a big IF in it. But one thing am confident on is there will be no capital mis allocation.
- The performance of the company will need a year or two to evaluate ( market prices could be anything )
Bottomline :
A trustworthy management is worth the market cap = cash on books. If they get the business act right then there is a huge opportunity in coming 1-2-3 years.
So i would look at the stock at 300-350 cr mkt cap at 90-110 levels.
Do read the disclaimer and do understand its #biased #vested interests opinion so please do your own research. No onus.
Technical View
Technical View
- After making a good breakout above 90-95 the stock moved up to 120 in short span of time with huge volumes.
- Post the results which were anyways not supposed to be great the stock saw a drop to 100-105 levels with low volumes ( Initiated a buy in last 2 days again )
- A retests of supports at 90-105 is a good support zone.
Multi Year Highs
As explained in this Webinar on Multi-Year Highs its a good sign when stocks cross into fresh multi year highs.
- Smartlink has had 2-3 tops at around 80-90 in last couple 6-8 years.
- Stock has crossed above 90-100 with very strong volumes.
- This could be start of a long term trend.
Bottomline : At 90-110 its an interesting stock in my opionion. Also every time you take a cash bargain you got to realize its not a compounder and think of alternative choices. So till the time I would not see more clarity on results this will not be a 10% of portfolio allocation but a 2-5%. Not expecting it to be a huge performer but a low risk low return opportunity with a chance of huge potential.
Fundamentally things to take a 12-24 months to clear out. Technically a trend has started. So take your own decision.
Do read the disclaimer
Nooresh Merani
Securities covered above:: Smartlink Network Systems
SEBI Registration disclosure – Investment Adviser
Financial Interest:
Nooresh Merani and his family/associates/ analysts do have exposure in the securities mentioned in the above report/article.
Nooresh Merani and his family/associates/ analysts do not have any financial interest/beneficial ownership of more than 1% in the company covered by Analyst.
Nooresh Merani and his family/associates/ analysts have not received any compensation from the company/third party covered in the above report/article ever.
Nooresh Merani and his family/associates/ analysts has not served as an officer, director or employee of company covered in the report/article and has not been engaged in market-making activity of the company covered in the report/article.
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