Samtel Colour Eq 46 crs top line Rs 1200 crs Market cap just Rs 70 crs
Co had capacity of 11 mn picture tubes having three existing lines. It had recently increased the lines from 3 to 5 which made co sink into deep financial mess. Co reported loss of Rs 35 crs for the full year out of which Rs 25 crs was for Q4 alone. This includes a one time write off of Rs 30 crs (under the head stock adjustment) which means in effect the co has earned Rs 5 crs for the March quarter.
In the March quarter results co also announced confirming that it went into financial mess due to extension two news..
"Despite increased Sales Company is passing through liquidity tightness because of delay in ramping up of the two new lines and insufficient accruals. Company has decided to restructure its debts and has submitted a proposal for Corporate Debt Restructuring under the CDR guidelines issued by the Reserve Bank of India. The proposal is under evaluation by the lenders"
Co has debt of Rs 375 crs and as we understand from the CDR proposal co will not repay any principal or even interest for next 2 years as a package of CDR and also will go for OTS. It is also expected to see reduction of interest rates to 12%. Co has interest liability of 18 crs p a.
Co has successfully commissioned its fifth line in March 2007 for picture tubes for 27" and 29" flat screen (mainly for exports) by spending Rs 400 crs and immediately bagged an order of 2.5 mn picture tubes p a for three years. This should transpire into good bottom line in 08. We expect Samtel should announce top line of Rs 1200 crs and bottom line of Rs 53 crs for 08.
Samtel has the gross block of Rs 900 crs whereas the debt is just Rs 375 crs which is again subject to OTS and CRD. Book value per share is Rs 60 and Networth of the co is Rs 280 crs. At current market cap of Rs 70 crs there is strong case of making a multi bagger investment in Samtel Colour Ltd.
India Advantage Fund has sold close to 2 mn shares which were quietly grabbed by market maker. Also ICICI Venture has sold off its entire stake in the market.
Most of the market players had entered Samtel during 2005 at Rs 80 levels with lot of value in it which has now eventually come a bottom where even industry fortunes are changing with demand revival in flat screen segment. Samtel with Rs 1200 crs top line yet available at Rs 16.
In view of the fact that a smart investor has cornered more than 3 mn shares in Samtel in June 07 at Rs 18 thr blokc deals is a fair indication of revival of interest in this co.
Company has issued and alloted 22 lacs (2.2 million) Warrants having optional right of conversion into equity shares to Promoters Companies namely Roxy Investment CEA Consultants & Teletube Electronics at Rs 90.18 per warrant to be converted into 2.2 million equity shares of Rs 10/- each at a premium of Rs 80.18 per equity share within a period not exceeding 18 months from the date of allotment.
There is an additional trigger for stock re-rating. Co has 12 acre land which it is planning to sell at Rs 90/92 crs which means Rs 20 cash coming in the books of accounts.
We strongly recommend buying this stock for at least 1 to 2 years perspective with price target of Rs 95.
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