The Power of One

If there is one thing in this universe that thrills and fascinates me the most is the number 1. You name one and I’ll name another one – one universe, one sun, one moon, one God and yes of course one wife! Yeah, if you believe in reincarnation then you’ll probably have as many wifes as you have many lifes but in every life you’ll still have just one wife. Now, just imagine if there were two suns – then probably I wouldn’t be writing this and you wouldn’t be reading this. Now, in the world of stocks it would be rare to come across a stock that Quotes at Re.1 and whose PE is 1 too – and that too when the most dud amongst dud stocks are quoting at ridiculously high PE’s as if they are from the house of Tata’s, Birlas or Ambanis. On 13 September 2010, the stock that I am talking of had a PE of 1 and was quoting at Re.1 and probably you may be whether this could be a 50 bagger. And you must be getting ready to buy truckloads of this stock. But hold on – do you think its worth taking the trouble to bet your hard earned money on this stock.

I know you are getting a bit excited and want to know the name of the scrip – but hold on. Learn to control excitement and greed especially when the markets are zooming.

An old Latin adage goes like this: Res tantum valet quantum vendi potest. Translated, it means: that a thing is worth only what someone else will pay for it. If one or two years down the line, if Gold sells for Rs.25000/= per tola then so be it – it will sell at that price because people are willing to buy at that price because of fear, greed or whatever. 

And now allow me to disclose the name of this stock : It’s Asahi Infrastructure & Projects Ltd, a Akola based company in Maharashtra State. The most perplexing aspect of this scrip is :  FII’S stake in this company was just 1.69 per cent in December 2009 and it stood at 6.39 per cent in June 2010. OK this company is into low cost housing – that’s good but when Net Profit margins are in decimals then we would wonder why on earth did the FII’s buy a stake at all in this company.

The stock rose today [ 4 .10 .2010 ] by 5.88 per cent to close at Rs.1.08 per share. You must be wondering what on earth might have prompted the FII’S to buy a stake in a company whose book value is Rs.. 1.31. Maybe, the FII’s took note of the most recent performance of the company as shown below:

1.Net Sales in FY 2009-10 was Rs.379 crores, up by 742 % previous FY 2008-09 being Rs.45 crores.

2. PAT in FY 2009-10 was Rs.34.94 crores, up by 20452 % previous FY 2008-09 being Rs.0.17 crores.

The company has total work orders of approximately Rs.200 crores from Municipal Corporation, Akola etc. The company is also negotiating Rs.300 crores project for construction of housing and infrastructure facility in Maharashtra. Further, the company has also acquired a mini cement plant having capacity of 150 MT/day, expandable to 750 MT/day.

The company could do be well in the years provided it spreads its wings beyond the boundaries of Akola and tries to capture a decent share of low cost housing various cities/town across different states. Then, probably this scrip could eventually give decent returns. So, friends you may consider buying this scrip provided you are willing to take considerable risks and you are wiling to wait for a pretty long time – maybe 1-2 years.

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd