maverick
21-11-2007, 05:21 PM
Majestic Auto-Quiet Accumulation
BSE 500267; CMP Rs 36
The OP Munjal owned Majestic Auto stock is being quietly accumulated by the management and company insiders as can be seen be the regularity of block deals and increased volumes in the stock traded over the past fortnight. In many ways, OP Munjal has lived under the shadow of his illustrious and successful brother Brij Mohan Munjal-the Chairman of Hero Honda Motors, and all efforts made by the younger Munjal to turn-around Majestic Auto have started with a bang and ended into a whimper.
Still, there are three positives in the stock for a pure value investor who has the patience to bear out the entire exercise. For one, Majestic Auto owns 16,25,000 shares of Hero Honda Motors Limited worth Rs 114 crore at todays price. This is four times the market cap of Rs 37 crore for Majestic Auto Limited, and under scores the poor valuation that Majestic is fetching.
Second, Majestic Auto owns large chunks of land in the city of Ludhiana-one of the most prosperous cities in Punjab and host to such celebrity families like the Munjals, Mittals of Bharti Airtel and Thapars of JCT and BILT. The value of land owned by Majestic Auto itself runs into a figure that some estimates place at over Rs 100 crore.
Third, the management has recently modified its Memorandum to open up the possibility of entering the sector of fruits and vegetables and the Retail space which are politically acceptable sectors and are crucial to the growth of Punjab.
The management continues to own about 76 per cent of the Equity of Majestic Auto, with just 4 shareholders holding another 6 per cent. Some of these have sold off their stakes to the management over the past week paving up the way for the Munjals to make a bid to de-list the company.
Now, Majestic Auto inspite of its poor financials is not a defunct company. It manufacturers 5 models of mopeds-Hero Panther, Hero Panther 4S, Hero Gizmo, Hero Stallion 4S and Hero Ankur. Apart from mopeds, Majestic manufactures and exports Exerbikes, Steppers and Joggers under the Hero Allegro brand name. Most importantly, it has set up a fine blanking unit for the manufacture of components for the automotive industry and a unit for manufacture of Mufflers (Silencers) for all the bikes manufactured by Hero Honda.
The turnover reported for FY07 was Rs 116 crore with a loss of Rs 4 crore. The turnover for the first half of FY08 is Rs 57 crore with after tax profits of Rs 2.3 crore.
The Majestic Auto scrip is selling as a piece of scrap, and investors are playing right into the hands of vested interests ignoring assets in excess of Rs 200 crore and a planned foray into agri-produce, retail and marketing. Giving a market cap of Rs 37 crore to this company is like getting rid of something very valuable at throw-away price. This stock should quote atleast Rs 100 in six months from now.
BSE 500267; CMP Rs 36
The OP Munjal owned Majestic Auto stock is being quietly accumulated by the management and company insiders as can be seen be the regularity of block deals and increased volumes in the stock traded over the past fortnight. In many ways, OP Munjal has lived under the shadow of his illustrious and successful brother Brij Mohan Munjal-the Chairman of Hero Honda Motors, and all efforts made by the younger Munjal to turn-around Majestic Auto have started with a bang and ended into a whimper.
Still, there are three positives in the stock for a pure value investor who has the patience to bear out the entire exercise. For one, Majestic Auto owns 16,25,000 shares of Hero Honda Motors Limited worth Rs 114 crore at todays price. This is four times the market cap of Rs 37 crore for Majestic Auto Limited, and under scores the poor valuation that Majestic is fetching.
Second, Majestic Auto owns large chunks of land in the city of Ludhiana-one of the most prosperous cities in Punjab and host to such celebrity families like the Munjals, Mittals of Bharti Airtel and Thapars of JCT and BILT. The value of land owned by Majestic Auto itself runs into a figure that some estimates place at over Rs 100 crore.
Third, the management has recently modified its Memorandum to open up the possibility of entering the sector of fruits and vegetables and the Retail space which are politically acceptable sectors and are crucial to the growth of Punjab.
The management continues to own about 76 per cent of the Equity of Majestic Auto, with just 4 shareholders holding another 6 per cent. Some of these have sold off their stakes to the management over the past week paving up the way for the Munjals to make a bid to de-list the company.
Now, Majestic Auto inspite of its poor financials is not a defunct company. It manufacturers 5 models of mopeds-Hero Panther, Hero Panther 4S, Hero Gizmo, Hero Stallion 4S and Hero Ankur. Apart from mopeds, Majestic manufactures and exports Exerbikes, Steppers and Joggers under the Hero Allegro brand name. Most importantly, it has set up a fine blanking unit for the manufacture of components for the automotive industry and a unit for manufacture of Mufflers (Silencers) for all the bikes manufactured by Hero Honda.
The turnover reported for FY07 was Rs 116 crore with a loss of Rs 4 crore. The turnover for the first half of FY08 is Rs 57 crore with after tax profits of Rs 2.3 crore.
The Majestic Auto scrip is selling as a piece of scrap, and investors are playing right into the hands of vested interests ignoring assets in excess of Rs 200 crore and a planned foray into agri-produce, retail and marketing. Giving a market cap of Rs 37 crore to this company is like getting rid of something very valuable at throw-away price. This stock should quote atleast Rs 100 in six months from now.