The stock Bengal & Assam Company was earlier mentioned in a posting of investing in Holding Companies – http://www.nooreshtech.co.in/2010/01/value-picking-in-holding-companies.html
A recent research done by a very experienced deep value investor – CA Laxmikant Kabra has actually surprised me that such a deep value gem is available in the current market scenario.
Below is the synopsis of the excellent research pick by CA Laxmikant Kabra. ( All credits to him for his superb in-depth research).
“I have done a small research on the company called as BENGAL & ASSAM COMPANY LTD. I hereby invite the views and opinions of my friends/ other group members on the same.
I would like to tell you about one stock which can be considered as "CASH AVAILABLE AT A DISCOUNT" and the name of the company is BENGAL & ASSAM COMPANY LTD. ( J K GROUP’S HOLDING CO.)
This is over 63 years old company. The consolidated EPS of the company for the FY 10 is approx. Rs. 70/- and estimated EPS for the FY 11 is likely to be Rs. 85 to 90. The current Market price of the Stock is Rs. 225/-
Other Highlights of BENGAL & ASSAM COMPANY LTD. (BACL) are as under:
BACL owns 90% in Fenner India Ltd
Fenner India is an undisputed market leader in the manufacturing and sell of V Belts, Oil Seals, Eng products etc since years. There is no nearest competitor of Fenner in India. Fenner’s capital is Rs. 2.48 crs and Reserves are over Rs. 225 crs and Annual Sale is over Rs. 300 crs. Book Value of Fenner is approx Rs. 900 per share.
Other Subsidiary of BACL are
Southern Spinners & Processors Limited
Modern Cotton Yarn spinners Limited
Panchmahal Properties Limited
LVP Foods Private Limited
Dwarkesh Energy Limited
Acorn Engineering Limited
Besides the above, company is holding several other investments in many blue chip listed and unlisted companies.
Total Cost of BACL’s investments as on 31st March’ 2010 is Rs. 375 crs (Approx.)
The Book Value of BACL is approx. Rs. 500/- per share as on 31st March’ 2010 and the intrinsic value per share could be in the range of Rs. 2000 to 3000 per share.
Besides this, BACL owns sizable stakes (ranging from 30% to 50%) in other flagship JK group’s listed companies such as JK Lakshmi Cement, JK Paper, JK Tyre, JK Agri genetics, JK Sugar Ltd etc.
BACL owns several properties (either directly or through subsidiaries) worth hundreds of crores.
Considering the facts stated herein above, i strongly feel that BACL shares at Rs. 225 means "CASH AVAILABLE AT A DISCOUNT.
CA. Laxmikant Kabra
Some of my comments:
The last time i checked the stock the holding value of only JK group of companies was 350 + crores.
As of now the book value of the company is Rs 500 as per March 2010.
Fenner India + other holdings could be worth quite a lot of money.
If a detailed check is done the value of holdings could at least by 10 times the current market cap ( It could be much higher if the properties/subsidiary group companies are added totally ) . Generally holding companies trade at 30-50% of value of holdings. So in that case the stock should trade at 2-3 times higher than the current market price.
Also if we were to look at the earnings of the company it should quote much higher.
In brief its one hidden gem with extreme deep value. The stock could give a return of 2-5 times in the next 1-2 years as the story of the company is known.
Small Cap Coverage:
I would cover the above stock in the same category – Small Cap Coverage which is an attempt to find small caps with an excellent growth potential with long term view. But due to the technical bias at times it does move up in short term. Investors with 1 year or more of patience would create wealth out of the same.
The recommendation would be to buy Bengal & Assam Company at current levels and even if it moves up higher as volumes are low so not enough quantity available but a must stock for deep value pickers with patience.
A conservative target price would be 100% or more in next 1 year. There is nothing to lose as in the long run downside is very limited with that much value.
Technically the stock has hit a fresh high which suggests a quick move to 300 is possible.
Would invite views on the stock from the readers!
Team Analyse India