Declaring Bonus Shares – It’s a Corporate Birthright

Diwali is fast approaching and both private sector and public sector employees start gossiping and speculating one month in advance about the likelihood of getting a fatter bonus pack this time around. After all, how your wife, kids and in-laws are going to treat you during ensuing Diwali largely depends on the large [ or small ] heart of your employer.

And as far as the owners of the company are concerned [ read shareholders ] the story is a bit different. There are three aspects of bonus shares that may be of interest to you as a shareholder of a company.

Indication of higher future profits

In simple terms, if say a company declares a 1 : 1 bonus, the total number of outstanding shares simply doubles but PAT remains the same because of which the EPS gets slit into half. Hence, sound financial logic would dictate that a company issues bonus shares only if it is reasonably sure of doubling/trebling its profits so as to ensure that earnings don’t get diluted.

Future dividend may increase:

A company would normally not declare bonus shares if a company is not too sure of increasing the dividend rate. Even, if the company retains the pre bonus dividend rate in tact, yet the overall cash outflow on this count will simply double in say a 1:1 bonus case.

So, a company should be able to churn out more profits to pay dividends on an enlarged equity base whilst taking care of its capex requirements.

Psychological value:

The declaration of the bonus issue may have a favourable psychological effect on shareholders. The receipt of bonus shares gives them a chance to sell the shares to make capital gains without impairing their principal investment. They also associate it with the prosperity of the company. Because of these positive aspects of bonus issue, it is usually received positively by the market. The sale of the shares, received by way of the bonus shares, by some shareholders widens the distribution of the company’s shares. This tends to increase the market interest in the company’s shares; thus supporting or raising its market price.

Following is a list of some companies that have declared Bonus recently. The list is indicative and contains only those companies whose record date occurs in current month only. .

Name of Company Ratio Record Date CMP Rs.

Savera Industrie	1 : 1	26-Oct-10	107.05
Birla Power Sol.	1 : 5	21-Oct-10	1.82
Indsil Hydro	2 : 3	18-Oct-10	102.75
Gold Rock Inves.	2 : 1	13-Oct-10	37.85
Tulive Developer	4 : 1	08-Oct-10	165.9
Baba Arts	1 : 1	01-Oct-10	11.06
B.L.Kashyap	1 : 1	01-Oct-10	39.7
Birla Cotsyn	1 : 5	01-Oct-10	0.88

I have my own doubts about the financial robustness of above companies except perhaps Indsil Hydro. The less spoken about Tulive Developers which has no Sales/Revenue to speak off and yet it generated profit in fiscal 2009-10 and now it declares bonus shares and that too in the ratio of 4:1 – now that really spins my head!

Never invest pre-bonus or post bonus cases unless you check the fundamentals of the company besides trying to gauge the future prospects of the company in question. That’s easier said then done.

And by the way, if your employer refuses to give you Diwali Bonus citing global turmoil and recession as the main culprit then do consider selling your bonus shares if you don’t wish to be treated as a stranger whilst dropping in at your in-laws place during the ensuing Festival of Lights!

Anyway, Happy Investing.

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

So, you got a 26 bagger in Z Group – Lucky You!

If you ever happen to buy  Z category stocks then your knowledgeable Stock Guru next door may scoff at you as if you are investing his/her money! And even if its not your neighbours money, yet the scoffing may be justified. And for good reason.

Stocks get shifted to Z category for not following certain norms. To cite a few norms; companies, failing to submit annual listing fees, yearly annual reports, failing to make demat arrangement with both the depositories; are placed under ‘Z’ Group. The stock exchange does so as an investor-friendly measure and to inform and warn the potential investors about the level of non-compliance of the listing agreement or as a surveillance measure. Way back in September 2003, BSE had shifted over 600 companies to the Z category. The companies shifted by BSE in Z category are under trade-to-trade. This is mainly done by the stock exchanges to avoid excessive speculations.

You really require nerves of steel to take a call on Z category stocks.

Interestingly, I came across 2 companies having sound business models but were unfortunately languishing in the Z category way back in 2004. Just have a look below and see for your self how these 2 stocks have risen from the ashes to become multibaggers, so to say.

Share Price	Z GROUP  27 May 2004	B GROUP 8 Oct 2010	Multibagger
Kirloskar Pnumetic	23	598.70	26 bagger in 6 yrs
Gujarat Reclaim	64.20	1170.00	18  bagger in 6 yrs

Kirloskar Pnumatic Co. Ltd 

This company operates in two segments: compression systems and transmission products. Compression systems manufactures a variety of compressors and also undertakes designing and packaging of refrigeration systems, and serves various industries, such as power generation, air separation, textile, iron and steel, oil and gas, cement, defense, railways, construction and mining, fertilizers, pharmaceuticals, dairy, brewery, fish and meat processing, cold storage and ice plant. Its products include air compressors, air conditioning and refrigeration compressors, and systems. The transmission products are manufactured for rail traction gears, wind turbine gearboxes, marine gearboxes and gearboxes. The transmission products include power transmission equipments (torque convertor), reverse reduction gears for marine gear engines etc .

Market Cap of the company is Rs.768 crores and its PE is 13.9.Annual Revenue in FY 2009-10 was Rs. 474 crores and PAT was Rs.47.5 crores. PAT Margins were 14.39 per cent, ROCE was 41.21 per cent and ROE was 32.85 per cent.
The company recently received an order for supply of Refrigeration Compressor Package, from Jindal Steel & Power Ltd, Orissa. the order is worth Rs. 118 Crores gross, taking the total order board for ACH & Process Gas Division to the tune of Rs. 460 crores.

No way to know how many folks out there picked up Kirloskar Pnumetic Ltd at Rs.23/share and still hold it when its shinning crimson bright like a 26 bagger – guess many of you may give these folks a standing ovation with hidden remorse because you probably did not buy it then since it was branded Z.!

Gujarat Reclaim and Rubber Products Ltd [ GRRPL ]
GRRPL produces reclaim rubber from scrap of whole tyres, tread peelings, natural rubber tubes, butyl tubes, moulded rubber products for different applications in both, tyre and non tyre rubber products. Today, through steady growth and a strong vision, GRRP has emerged as the largest manufacturer of reclaim rubber in the country and among the largest globally.

GRRPL has an Equity base of just Rs.1.33 crores, Reserves are Rs.51.93 crores. and the company does business of Rs.140.81 crores and generates PAT of Rs.13.81 crores – that was the fiscal 2009-10 results.. PAT Margins were in the range of 11 to 17 per cent during last 5 fiscals. ROCE was 33.64 per cent and ROE was 28.82 per cent in 2009-10..

Those who had the gifted foresight to pick up a ‘Z’ listed company like GRRPL which makes saleable products from scrap way back in May 2004 @Rs.64/share may perhaps be sitting like a Prince/Princess on a 16 bagger!

In short, you will need Lady Luck to be by your side for months or years at a stretch if you were ever lucky to spot a potential multibagger languishing in Z category.

By no means am I suggesting that you should buy Z category stocks which could be delisted to your horror after taking a call on the same – so, staying away from Z category stocks is a prudent decision. But, exceptions are always there.

No matter how good a company maybe, we at HBJ Caps would not look at companies listed under Z category but we could certainly re-vist the company if the business models appear to be as good as the ones that’s just covered..

After all one needs to be careful when dealing with this ”stock market” monster and in this world of stocks and scams, if companies can rise from the ashes they can also tumble from heavenly glory “Enron” style!

Wall Street or Dalal Street – you can find smart folks out there who know how to make money even from the depths of the ocean and crust of the earth! Do you have the courage to put on the shield of risk on your chest and the badge of fortune on your sleeves and go onward and forward to take the markets head on with the grit and determination of  emerging victorious with the trophy of wealth and prosperity that is beckoning you every day, day by day. Come on, wake up, Sid or whatever your name is and just do it! Start investing now in the great Indian story if have never done it before. And when in doubt about victory or defeat, just call us and we’ll be honoured and delighted to help and guide you.

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

Dear Investors,

Whilst wishing you and your family members a Very Very Happy Navratri, I have pleasure in disclosing the names of our maiden  IVI stock recommendations on the auspicious commencement of Navratri. 

1. Short Term Stock recommendation : Target Returns 25 - 50 per cent in 1 to 3 months 

    Name of scrip : SPICE JET

2. Medium Term Stock recommendation : Target Returns 100-300 per cent in 1 to 3 years

    Name of scrip : TULIP TELECOM

Both stocks are doing pretty well and both these Stock Research reports will be dispatched to you if you opt for an appropriate Navratri  package that will entitle you to free Bargain Stock Package.

We are currently researching a few stocks that have tremendous potential to generate outstanding returns and a brief of the same will be made public on or before conclusion of Navratri.

Happy Investing as you rock to the music with dandias.

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

 

Navaratri Special Offer [Oct 8th to 16th 2010]

[ Please Click on the image to see an enlarged version ] 

Dear Investors,

On the eve of the grand Navrati Festival, we are delighted to present you with one of the most sizzling offer that you’ll ever find and find hard to resist…...The offer is simple, singular and stupendous. Why we have specifically taken these 9 nights for the offer is because these are the most auspicious days for doing anything new in order to gain more power, more wealth & more wisdom. Don’t miss this opportunity, we are the slaves in the hand of lady luck and who knows you can become the most lucky person in this world just by taking a small decision to join one of the most innovative, creative and trust worthy company called HBJ Capital.

Those investors who are facing tough time in the market, seeing lots of red in their portfolio, finding difficulty in make profit in spite of market trading at the peak should take the decision to join HBJ Capital on 8th , 9th or 10th Oct 2010. This is the best 3 days to destroy all our impurities, vices and defects. This is also the best period for traders to start a new association or change their existing services to get rid of their losses.
First 3 Days [8th, 9th & 10th Oct’10] - On the first three days, the Mother is invoked as powerful force called Durga in order to destroy all our impurities, vices and defects.

Those investors who are making small profits but not good enough to really make a change in their lifestyle. If you are looking for pot of gold, a miracle to happen in your life, a turning point in your financial status then you should take the decision to join HBJ Capital on 11th , 12th or 13th Oct 2010. This is the best 3 days to receive spiritual & inexhaustible wealth from God.
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Those investors who are making good profits but not able to really deploy that profit into any other asset class or not able to re-invest again, those who want to safeguard their profits can look forward to subscribe during Oct 14th to 16th. If you are looking to gain more & more wisdom which ultimately leads to wealth creation for long run then you should take the decision to join HBJ Capital on 14th , 15th or 16th Oct 2010. This is the best 3 days to receive wisdom from God.
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We will look forward for your existing holdings/portfolio, for the purpose of portfolio health check. So that we can suggest which stock to hold/sell or buy; we will conduct a small interview/counseling (10-15min brief discussion one to one thru phone) of yours to understand the risk profile, age, responsibilities, short/long term goals etc in order to design the new portfolio suitable for you. Without understanding your needs we will not be able to create your portfolio which can help you to achieve your short & long term goals.

Once model portfolio is ready for you, start investing in those stocks which are reco as buy and the price levels mentioned in that. Also refer flash back every month and do SIP ways of investment.

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Rejoice when the markets fall

Believe me, I know many folks out there who dance with joy and bow down to the Gods and Goddesses whenever the Sensex goes up, the higher it goes the stronger the intensity of the dance and more fervently the prayers. Wow, that’s great. But, I have done the same thing today – the only difference being is that the markets went sliding downhill- the sensex lost 227.76 points and rested at 20315.32. Hope, Providence will give me more opportunities to redo what I did today. To tell you the truth, I have been going through sleepless nights for the past few months wondering when the markets will crash so that my customers/clients can buy good stocks cheaper than what they are today. But, as they say - Man proposes and God disposes. Nothing can be further from the truth- at least as far as I am concerned!

Come on folks, lets get this straight – a non-stop rise in the index is not something you should celebrate but it is rather frequent rises followed by gradual falls that you should be happy about – after all when the whole world knows that Destination India is one of the most powerful emerging markets in the world which has a proven track record of a vibrant economy backed by world class organizations and world class talent pool waiting on the sidelines to show the world that we Indians are better than the best – then knowing this fact why should you rejoice at all when the markets are rising and rising and you keep on buying and buying as if the Sensex will continue to rise and rise till eternity – guess who would rejoice the most if you did this – obviously the biggies and FII’s and institutional investors because they got in much much earlier than you..

Remember : let me put it most bluntly – the markets want us to eat crow off and on but you should put your foot down. And that’s why I say if the markets crash, please cheer up and thank your stars because God is presenting you with an opportunity to buy a star, buy a gem that will sparkle your life with the colour of money in the years to come. Falling markets make things easier for you.

From now on, before you go into your dream world every night, say this prayer:

Dear God in Hevean
Give the wise folks the wisdom to sell like crazy
And let the markets crash like crazy
So that me and my wife can buy like crazy.

And write it down in letters of gold – if God listens to your prayers [ if at all he listens ] then you will be richer than the richest – because perhaps then you can buy Reliance Capital for say Rs.100/share or SBI for say Rs.500 or a Titan for Rs.200 or a Larsen for Rs.250/share! Yeah, that’s wishful thinking but no harm to wish for such good things. After all, don’t you wish that you get wonderful dreams rather than frightful dreams that can wake you up in cold sweat, in shock and horror in the middle of the night.

To cut a long story short - ceteris paribus, you can find greater value in stocks in a falling market rather than a rising market. And never ever forget something historical about the markets which is gospel truth: whatever rises shall inevitably fall and whatever falls shall inevitably rise.

Moral : To derive maximum value from your hard earned money, invest more whenever the markets fall like crazy.

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

 

Western India Shipyard

There are quite a few wise  investors out there who pray fervently day and night for the markets to go downhill so that they get an opportunity to buy stocks cheaper but the markets are least bothered whether such guys are dead or alive - infact the markets  seems to be putting these wise and shrewd folks to shame. As the market refuses to correct sharply,  one of the simple ways to get value for your money is to :  get in quick and get out fast.  Call it momentum or whatever but the important thing is that you should profit from such quick moves.

To my mind, Western India Shipyard is one such scrip which offers you an opportunity to make some quick momentum gains. Don't read the charts and fundamentals with a magnifying glass but just read the following:

On BSE, 24.84 lakh shares were traded in the counter as against an average daily volume of 2.17 lakh shares in the past one quarter. The stock is not listed on NSE.

The stock last traded  today  6 October 2010  on  BSE at Rs.14.83/share, up 7.70 per cent over previous days close.

On 6 October 2010, the company informed the BSE that the company received a major order of Rs.7200 lakhs to repair INS Sujata, a naval  vessel. This is the first time that Ministry of Defence has entrusted such job to a private player.

The stock hit a high of Rs 15.59 and a low of Rs 13.97 so far during the day. The stock had hit a 52-week high of Rs 18.22 on 19 January 2010 and a 52-week low of Rs 8.30 on 5 November 2009.

The company has an equity capital of Rs 23.42 crore. Face value per share is Rs 2.

Western India Shipyard reported net profit of Rs 5.80 crore in Q1 June 2010 compared to net loss of Rs 9.75 crore in Q1 June 2009. Net sales jumped 188.5% to Rs 29.37 crore in Q1 June 2010 over Q1 June 2009.

Risk takers can buy  Western India Shipyard for quick  news driven gains – if you are able to make about 25-30  per cent in over a  fortnights  time then  you should consider your self courageous for riding the momentum. But don’t keep riding the momentum for too long else you may be flung hard  and get hurt. Good Luck to you in advance for riding the momentum and getting off at the opportune time without being too greedy!

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

Today is the last day to save Rs.5000/= and be a winner

Dear Investors,

The night is so young and the day was so nice but time is running out -until  today midnight our Promotional Bargain Stock Package will be available for Rs.5000/=  and from tomorrow onwards you need to pay Rs.10000/  in order to seek our fascinating short term and long term recommendations and our September 2010   maiden recommendations are faring pretty well on the bourses - and of course you will get the same in addition to our free stock recommendation - just subscribe for the Bargain Stock Package right away   to receive these 3 stock recommendations in your in box right away.

So, for Heaven's sake don't waste time - Just Do It.

Looking forward to welcoming you to IVI family.

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

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

Only 2 days left to grab the Promotional Bargain Stock Package

Dear Investors,

Opportunity seldom knocks on our doors and time and tide wait for no man nor does it wait for the woman. As the sensex continue to mystify the masses, it makes sense to get into the game sooner than later. It's not yet too late to opt for our  Bargain Stock Package which is available for Rs.5000/=  upto 5 th October 2010.

You need to shell out Rs.10,000/=  for the Bargain Stock Package after 5 October 2010.  So, you have just 2 days left to get a fascinating package for a deep discount and such an offer will not come your way again and again. Details of the Bargain Stock Package are available on this very site but for your ready reference I am reproducing the essence of the package: 

  

 “Bargain Stocks Package” –[ Long & Short term Offerings ]

[Long term recommendation]: 12 issues of “BARGAIN STOCK PICK" per year - Long term wealth creating Stock with potential return of 200-300% in 1-3 years holding period. A class of stocks that are widely overlooked by Street but can yield massive returns. These stocks will have limited downside.

[Short term recommendation]: 12 issues of “DEFINITE INCOME STOCK PICK" per year - Short term stocks with potential return of 25-50% in 1-3 months holding period. You can invest in these stocks for a decent regular income.

A combination of short-term + medium term Bargain Stock Package is now available from HBJ Cap's IVI Unit at a deep discount – it’s a once in a life time opportunity for those who wish to see money flowing into their coffers every month whilst patiently seeing their profits soaring on our medium term recommendations.

Actual Package Price = Rs10K/Year

Promotional Package Price = Rs5K/Year till October 5th 2010

And there’s a deeper reason for opting for our freshly baked idea of coming out with a scheme that empowers you with hard cash virtually every month whilst enabling you to continue partaking in a thrilling race that will make you rich beyond your expectations.The deeper reason is one Free sizzling stock recommendation that comes along with the Promotional Offer valid till 5 October  2010.

So, please hurry up and grab this great opportunity and save hard cash of Rs.5000/ upfront whilst getting a free stock recommendation which is rising by the day and refusing to go downhill, much to my delight - as those who have already subscribed to this Promotional Offer are already wearing the WINNERS SMILE. Don't be left out of this race - the race to riches has just begun.

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

Keeping track of your investments – It’s a good habit

Keeping close track of your stocks is indeed a good habit just as good neighbours keep track of  their neighbours movements, some of them Call Centre type 24x7!

So, friends,  good to know that you keep track of your investments. But, try not to be very emotional when dealing with stocks. Human nature is such that when news is good people are happy and when news is bad, people sell even good stocks out of sheer panic. Best recent example is Aban Offshore whose oil rig " Aban Pearl" sank a few months back in the Carribean Sea. Many firms at that time said in a note, downgrading the stock to "sell" from "buy." This was one of the best assets for the company with a day rate of $385,000, which is the second highest revenue for the company in day rate terms. Yes, Aban's stock price did take a beating but it bounced back pretty fast - after all there are very few companies in India who have business model like that of Aban. 

Remember : a good company is not necessarily a good investment. Case in point: At Rs.229.50 Bharti Airtel was a good company and a good investment too. If you did not buy it then why you buy today at Rs.365.15 [ today’s closing price] I am not suggesting that you should not buy Bharti at current levels but I am only saying that Bharti was indeed a Value Buy at Rs. 229 -240 levels.

Friends, once you are convinced and confident of your investment then you should not be too very emotional with news items whether its good or bad -unless the news is relating to creditors/bankers who are out to slit the promoters throats  because they  are not  getting their dues or if a  company is on verge of  bankruptcy and there could be other reasons like sliding sales, sliding profits and rising costs. Or, more importantly if the owners are navigating in private jets and taking their family and friends and relatives on a World Tour and staying at Five Star hotel and all this they are doing at company's expense! Then, you need to sit up, take note and take instant action to dump the stock right away.

And I am sure that fans of HBJ Caps who have purchased Confidence Petroleum [ CP ] may be eagerly tracking the scrip off and on  and  its good to know  that you guys are doing so.

Friends, understand one thing very clearly : Confidence Petroleum is basically a good company and a good investment even  in the range of Rs.15-18 per share. And all the things that the company is  going to do in the near future like  raising authorized capital, going for GDR/ADR, borrowing Rs.500 crores from market and its plan to declare interim dividend in current fiscal are all positive signs and is good for long term health of company. By doing all this the stock will get greater visibility thereby driving up volumes and consequently driving  the stock price too  - yes, the price of CP will obviously yo-yo from time to time but that’s true for Intel,   SBI ,  Sinopec, Titan et all.

Conclusion: Just stay invested in Confidence Petroleum and hold it for 2-3 years to get excellent returns.

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