Tag - company analysis

November 2012

Tara Jewels IPO Analysis

Tara Jewels IPO Analysis, Buy, Subscribe, Indian Jewelry Stocks, Gitanjali Jems, Rajesh Exports, Gold, .

Tara Jewels Limited is coming out with a 100% book building; initial public offering (IPO) of 79,77,778 equity shares of Rs 10 each in a price band Rs 225-230 per equity share. The issue will open on November 21, 2012 and will close on November 23, 2012.

  • Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
  • The issue opens for subscription on November 21, 2012 and closes on November 23, 2012.
  • The shares will be listed on BSE as well as NSE.
  • The face value of the share is Rs 10 and is priced 22.50 times of its face value on the lower side and 23.00 times on the higher side.
  • Book running lead managers to the issue are Enam Securities and ICICI Securities.
  • Compliance Officer for the issue is Amol Raje.

Profile of the company

Tara Jewels is an integrated player in the jewellery industry with experience ranging from designing to retailing of jewellery. It is conferred with the status of a Star Trading House by the Ministry of Commerce & Industry, Government of India and have been the highest exporter in gems and jewellery sector for the years 2008-2009 and 2009-2010. The company’s business can be divided into three operations namely, manufacturing, exporting and retailing. Its portfolio of products includes gold, platinum, honeydium, pristinium and silver jewellery with or without studded precious and semi-precious stones. The products have presence across different price points and cater to customers across high-end, mid-market and value market segments.

The company has four manufacturing units, of which one is located in Panyu, China. The other three units are located in Mumbai out of which two units are situated in SEEPZ and one in MIDC. For the two months period ended May 31, 2012, Fiscal 2012, 2011 and 2010 the company has achieved an aggregate production of 554.77 kgs, 10,616.40 kgs, 4,753.25 kgs and 2,562.91 kgs of jewellery, respectively. The manufacturing units are spread over an area of 84,584 square feet employing 35 designers and 955 craftsmen, as on September 30, 2012.

It exports studded jewellery which is manufactured by it and by third party manufacturers. The company exports studded jewellery to jewellery chains including Christ Uhrean and Schmuck and retailers including Walmart. Tara Jewels primarily export to Australia, China, Canada, European Union, South Africa, UAE, UK and USA. In the European Union, the company export to 12 countries including Austria, Germany and Switzerland. The company’s income from export operations has grown at a CAGR of 19.77% from Fiscal 2010 to Fiscal 2012. For the two months period ended May 31, 2012, Fiscal 2012, 2011 and 2010, the income from export operations constitutes 78.82%, 80.90%, 80.99% and 97.59% of the company’s total income, respectively.

IPO Grading

CARE has assigned an ‘IPO Grade 3’, indicating average fundamentals, to the initial public issue of the company.

Proceeds is being used

  • To meet the expenses of establishing retail stores
  • For repayment or prepayment of loans; and
  • For general corporate purposes

Industry Overview

US is the world’s largest market for jewellery followed by China, India and the Middle East and in Europe, the UK and Italy are the largest consumers. (more…)

June 2012

Common Multiples used in Valuation

Common Multiples ,  Valuation, EBIT, EBIDTA, ROE, ROIC, WACC, Debt, Equity Ratio, Returns, Revenues generated.
You can analyse the past, but you have to design the future
~ Edward de Bono 
 
A multiple is simply expression of market value of an asset relative to a key statistic that is assumed to relate to that value
 
 
 
Here are some of the most common multiples used in evaluating a business :
 
1.Earnings of the asset
–Price/Earnings Ratio (PE) and variants (PEG and Relative PE)
–Value/EBIT
–Value/EBITDA
–Value/Cash Flow
 
2.Book value of the asset
–Price/Book Value(of Equity) (PBV)
–Value/ Book Value of Assets
–Value/Replacement Cost (Tobin’s Q)
 
3.Revenues generated by the asset
–Price/Sales per Share (PS)
–Value/Sales
 
5.Asset or Industry Specific Variable , specific to the industry make analysis relevant.
–Price/kwh
–Price per ton of production
–Price per subscriber
–Price per click
–In PR industry – pricing based on coverage
–Pb with sector specific multiples – One needs to be careful if industry is mis priced
 
We really want relationship to cash flows!!!
Comparisons which matter in Valuation
– We cannot compare profit margins ((NP margin / Gross Profit Margin)) across industries because profit margins is useful for comparing companies within an industry and not across.
– However we can compare (ROE or ROIC) across industries since ultimately investors and entrepreneurs chase return on investments, it makes sense to compare them across industries.
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– But investments need not necessarily be made into the industries with highest RoE. Both RoE as well as the quantum of capital that can be deployed have to be studied.
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– Similarly if two companies in the same industry have different depreciation policies and operate in different tax environments, it makes sense to use EBIT(1-t) to factor in (remove) the tax impact / depreciation impact and then compare
 .
– This will also imply that cost of total capital should be compared to RoIC and cost of equity to RoE and the two should not be mixed and matched
 
More information and an Interesting note on relative valuation here

December 2011

October 2011

Analyzing Financial Statements — What is your perspective?? — Part2

Analyzing Financial Statements ,What is your perspective, Auditor, analyst, Risk Analyst.

Analyzing and trying to get insights from Financial Statement is one of the most interesting aspect. A Financial Statement can be dissected in many ways. We had looked at three angles or lenses thru which these statements can be looked at: Here are three more ways to look at these statements :

4. AUDITOR

An auditor’s primary objective is an expression of an opinion on the fairness of financial statements according to generally accepted accounting principles.  As auditor, you desire assurance on the absence of errors and irregularities in financial statements.  Financial statement analysis can help identify any errors and irregularities affecting the statements.  Also, this analysis compels our auditor to understand the company’s operations and its performance in light of prevailing economic and industry conditions.  Application of financial statement analysis is especially useful as a preliminary audit tool, directing the auditor to areas of greatest change and unexplained performance.

5 RISK ANALYST

Accounting risk results from the need for judgments, estimates, and impression inherent in the accounting system.  Accounting risk increases our uncertainty in decision making.  Accounting risk also involves accounting conservatism.  Assumptions play an important role in accounting measurements, and these assumptions can be too conservative or optimistic.

6. YOU ARE THE ANALYST/FORECASTER

More persistent earnings reflect recurring, stable, predictable, and operating elements.  Your estimate of earnings persistence should consider these elements.  More persistent earnings comprise recurring operating elements. Finding 40% of earnings from unusual gains implies less persistence because its source is no operating.  You can also question classification of litigation gains as “unusual” – they are sometimes better viewed as extraordinary.  The extraordinary loss component also implies less persistent.  In this case you need to assess whether environmental costs are truly extraordinary for this company’s business.  Together, these components suggest less persistence than suggested by the stable and steady growth trend in aggregate earnings.  This lower persistence should be reflected in both the level and uncertainty of your earnings forecast.

Gaining Insights into an organization’s financial statements is also a matter of perspective. Thus analyzing a company from one of the lenses makes a huge difference!!!!!

September 2011

Analyzing Financial Statements — What is your perspective?? — Part1

Analyzing Financial Statements ,What is your perspective,Banker, Investor,Director

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Analyzing and trying to get insights from Financial Statement is one of the most interesting aspect. A Financial Statement can be dissected in many ways. Here are 6 different lenses from which the financial statements can be looked into…..

1. BANKER

A banker is concerned about the company’s ability to satisfy its loan obligations.  Concern about the composition of company’s financing sources is twofold.  First, the greater is owner financing, the lower is a banker’s credit risk.

Second, creditors are also concerned with Adaptec’s other current and future creditor financing.  Creditors often write debt covenants to restrict a company’s future lending, or require collateral in case of default, or limit the amount of dividends payable to shareholders.

2. INVESTOR

As an investor, your review of financial statements focuses on company’s ability to create and maintain future net income.  All the statements are important in your review.  The income statement is especially important as it reveals management’s current and past success in creating and sustaining income.  The cash flow statement is important in assessing management’s ability to meet cash payments and the company’s cash availability. The balance sheet shows Adaptec’s asset base from which future income generated, and reports on liabilities and their due dates to creditors.

3. DIRECTOR

As a member of a company’s board of directors, you are responsible for oversight of management and the safeguarding of shareholders’ interests.  Accordingly, a director’s interest in the company is broad and risky. To reduce risk, a director uses financial statement analysis to monitor management and assess company profitability, growth, and financial condition. Because of a director’s unique position, there is near unlimited access to internal financial and other records.  Analysis of financial statements assists our director in (1) recognizing causal relations among business activities and events, (2) “seeing the forest through the trees,” that is, helping directors focus on the company, and not on a maze of financial details, and (3) encouraging proactive and not reactive measures in confronting changing

—- Continued in Part II