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Saturday, October 17, 2009

Small Cap Stock With Good Dividend Yield - Visaka Industries

Visaka Industries is basically a play on rural infrastructure. This company manufactures cement asbestos sheets and also reinforced cement boards. The company also has a textile division.

It has got six manufacturing plants for making asbestos products and two manufacturing plant for garments.

If you take a look at the financials of the company. FY09, the sales of the company were about Rs 575 crore, profit after tax of about Rs 36 crore. This was after paying a tax of about Rs 20 crore. EPS for FY09 was about Rs 23.

If you look at the first quarter sales are up by about 10% to about Rs 190 crore. Profit after tax for the June quarter is about Rs 26 crore as against Rs 36 crore for the full year last year. Tax payment for this quarter is about Rs 12.5 crore.

For FY10 we expect the company to do a profit close to Rs 55 crore which would mean an EPS of about Rs 35. This is the stock which has got a good potential going ahead, it is catering to a growth market and at the same time the stocks is available at sensible valuations. It is available at a price to earning multiple of about 3.5 going on FY10 earnings.

If you see the dividend track record of the company, this company has got an uninterrupted track record of dividend payment for the past 12-13 years. Last year they paid about 40% dividend. So dividend yield at the current price is also about 3.5 to 4%.

So you have a stock with the market cap of about Rs 200 crore. Cash profits for FY10 are expected to be around Rs 70-75 crore. So you are getting a business to market cap to cash ratio of less than three years which is under valuation. Dividend yield is also pretty good at about 3.5-4%.

My view on Visaka Industries:
This was a stock recommendation by Ashish Chugh. He has recommended it though he does not have any investments in Visaka Industries as per his declaration.

If you look at the valuations of the company, it is definitely available for lower valuations.

Market Cap 222.73
* EPS (TTM) 29.69
* P/E 4.72
* P/C 3.49
* Book Value 118.23
* Price/Book 1.19
Div(%) 40.00
Div Yield(%) 2.85
Market Lot 1.00
Face Value 10.00
Industry P/E 8.68

P/E of 4.7 with good dividend yield of 3% at CMP of 171 seems good. But this stock has run a lot in recent past. From Rs.31 to Es.141. That makes uncomfortable to buy at this level. If correction comes in Indian stock markets, it could correct considerabley.

I would advice to buy stocks of Visaka when it is in correction mode. Do not chase the stock. Wait for correction and you may get it at good bargain price.

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