Precision Camshafts Ltd IPO Message Board (Page 45)

To further add to our worries ... it has a very large component of interest income (non-operating profits) ... so if we were to take that out of the equation ... the operating profit is much lower .. thereby the PE will go up significantly higher ...

Correct...but if you remove the interest income then RoE is even higher...so basically which is why this business must be evaluated on RoE and cashflow rather than PE in my opinion!

Good Point Neotrade ... so please explain ... what multiple of ROE should we consider for arriving at fair Market Cap ?

Dr members, plz share your views on the business model of Teamlease...

Restated Consolidated Statement of Profit and Loss (as it appears on page 49 of DRHP)

For the year ended      Mar-15      31-Mar-14      31-Mar-13      31-Mar-12      31-Mar-11
Net Profit/(Loss)      30.78       17.77        (4.27)       (16.55)       (39.54)
Other Income       11.39       7.88        10.96        8.26        11.49
Operational P/(L)      19.40       9.89        (15.23)       (24.81)       (51.03)

Restated Consolidated Statement of Cash Flows (as it appears on page 50 of DRHP)
Operating Profit/ (Loss)      28.83 18.32        0.28        (13.76)       (7.31)
before Working Capital Changes

All figures in Crores

Dear NeoTrade Sir,

I agree with your statement that ..... "I think one needs to think of this business more from its cash flow resilience and then add a premium PE due to very high and sustainable RoE!"

But please look at the past 5 years data as given in their DRHP pages (49&50) ... and please elaborate ... I am quite confused ...


BTW ... Teamlease GMP is now 240 ... only Buyer !!!

For your reference Teamlease DRHP is available at ...

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1442291914518.pdf

TeamLease:
The CF Valuation yields following RoEs:
1. 11.1% at Floor price
2. 10.8% at Cap price
3. 10.9% at Mid price of 818
4. 11.0% at 805.

This is indeed better than PCL for which I was getting only 10.5% at Floor price even though its P/E was much lower (26) than TeamLease (60-66).

@Neotrade, ur observation that Valuation based on CF & RoE would look better for TeamLease was spot on.

Disclaimer: RoE figures are subject to analyst''s assumptions.

@Eagleye, you will not get any multiple when valuing a company based on RoE. You would get an implied IRR (i.e. RoE). Now u have to decide whether the IRR satisfies ur expectations. Invest if it does, otherwise avoid. The risk free return today can be taken as 7.7%. So, if RoE is (say) 11%, you have to decide whether you would be happy with 3.3% premium (11-7.7) for the risks that ur taking by investing in this stock.

got a migraine reading the price they want as i said many time in the forum i stay away from such valuation.... also got double migraine looking at premium....

and the argument of return of ROE will be good give the built of loss in layman term 100 loss 20 next year 80 loss 20 next equity 60 next loss 20 equity 40 now profit 10 return would 25% on equity but EPS is whole capital so return is only 10% ..... BTW i like ROE then EPS for analysis valuation.... In case of TL ROE will better bcoz of loss in books

looking at break up 75% QIB 15% HNI and 10% retail.... manspand had such break up and rewarded well..... I do not understand why someone buy at such steeply valuation.... IMO valuation goes for toss when interest is high from QIB

I will present below the way I rationalize the valuation for Teamlease and boarders are free to agree or disagree with me (also please correct if any calc is wrong):

@ INR 850 (upper end of price band) with the implied premoney is INR 1303 cr and postmoney is INR 1453 cr. INR 30.7 cr is FY15 PAT and the same has shown a trend of 20% yoy growth over the last few years as the business is characterized by high revenue growth, high operating margins and negative working capital. With current trend of uptick in macro environment and hiring activity I am fairly confident of 20%+ PAT growth sustaining.

Based on postmoney valuation, FY15 PAT the trailing PE is 47x...will be 37.7x based on FY16 PE (assuming 20% PAT growth) and 30x PE FY18 (again assuming 20x growth). At this stage of FY16 the market is pricing in FY17 / FY18 performance for all companies and 30x+ P/E for a Company with such a high cashflow profile is not at all bad. Also, there is the added prospect of the Company becoming dividend paying or striking an acquisition, given the high cash on books, which could lead to further operating leverage (in case of acquisition) and thus higher RoE!

I will thus DEFINITELY APPLY in this IPO!

Read "high operating margins" as "high operating leverage"...typo!

i agree HR is growth sector but why such steep valuation agree with future potential of TL but question is the same why nothing is left on the table.... my case with prabhat was the same is like the sector but nothing is left on table and they had to reduce the price big time still the issue was not over subscribed....

At least with TL margins r good and with temp staffing which new in india the margin will increase however if you compare with world peers it is expensive.... of all i know this could list in premium but i still think valuation is very high

Tks for ur observations, NeoTrade.

TL''s 1H16 (Sept15) was only 10.9 Cr which annualises to 22 Cr vis-a-vis 31 Cr in FY15. So, instead of PAT growing at 20% as u would expect, it could be a ificant way esp so for a small/ midcap company.

I don''t want to play spoil-sport but thought it''s a point worth sharing.

Gravitas...point well taken and worthy of highlighting. But these businesses tend to be very seasonal with bulk of activity focused in second half. So I would certainly not back a 50/50 PAT for H1 & H2.

Some text got lost in the above message!!!

.....instead of PAT rising, we could see a '' (IPO) as it often distracts promoters in a big way esp so for small/midcap companies......

Again I lost some text in my message!! Don''t know what''s happening.....

But Sir... issue price is 850 + GMP 220 = 1070 ... is it really worth such ridiculously high valuations?

Still waiting for the RHP ...

Good for you! Half the battle is believing....

Unfortunately I am still mired in indecision...

WOW Septaji .. NICE !!!

I would like to invest in such IPO. In case the listing price slipping during market volatility, I would add some more to my kitty to hold for short term to long term

PCL MA APLLICATION KARAY KE NAHI,
Whate Ruls of new ipo after date 01-01-2016 ASBA form & .Non ASBA by bank-cheq.thi bharai ke nahi ,Get mi syor mahiti to me.

Thanx septa sir 4 clearing ur stand on PCL IPO..

Septa I m with u. I was so sure about this but everyone was so negative that it created doubts whether everyone is correct or I m wrong. I have got the same take as urs. I will also apply as I said before. Best of luck and happy investing.

take shree pushkar all said it not good issue will list on discount and they where right on listing on discount but today it is on 80% return one of the best IPO of 2015.... i like to invest in such company where growth is there and money collected is used to increase capacity....

That article says ....

"grey market premium on Precision Camshafts IPO are in the range of INR15-18 per share which indicate that the stock’s listing is expected at more than INR300 per share."

This is wrong on 2 counts:

1) The author has erred in simple maths ... we all know that issue price = 186 ... + grey market premium = 15 to 18 (as per the author) ... and then author goes on further to say .... "which indicate that the stock’s listing is expected at more than INR 300 per share."

I do not understand the maths ... how can we rely on just stupid utterances ... ?

2) the current Grey market premium is INR 8 to 9 only.

Nice

nice observation eagle EYE i think it is typo 200 is right answer these guys at IPO central r good with correspondence send a twitter to there twitter account surely u will receive a reply NICE

At the bottom of the news article ... Description given about the Author

Anurag Gupta
With a profound experience in the finance field, Anurag also has years of experience in writing about different domains including finance and technology. He used to write for different content portals along with his association with IPO Central as a frequent contributor. His financial analyst’s background supports his writing and help him to get aware about different news’ of finance world.

So I guess he will very conveniently say ... it was a typological error ... Humbug !!!

The easiest thing would be to ask your bank ...

Sir please suggest can apply in pcl for listing gain

PCL is a good quality Company ... but asking for rich valuation ...
Hence we may have only modest gains on listing .. but there it seems definitely nothing to loose by applying ...

Seperately, the rumours on the street are .... GMP of PCL is likely to shoot up on the weekend ... after issue closes ... and before Teamlease issue opens

WHAT IS THE PRICE BAND OF TEAMLEASE?

785-850