Tide Water Oil Ltd

I was recently looking at an interesting company - Tide Water Oil Ltd (TWOL). 


The major product brands of TWOL are “Veedol” and “Nippon Mitsubishi”.The product range includes automotive lubricants (engine oils, gear oils, transmission oils), industrial lubricants (hydraulic oils, superclean hydraulic oils, gear oils, specialty lubricants) and automotive and industrial greases.

It has also invested in wind power (which a lot of companies have done primarily for tax benefits) but the revenues (2 cr) is negligible in the overall scheme of things. 


What is interesting is that this year the company aquired Veedol International Ltd from BP plc and has gained access to the Veedol brand in over 120 countries of the world. The company has established a subsidiary in Dubai, Veedol International DMCC, to cater to Middle East and North Africa.


Now some numbers:-

P&L Statement	FY12	FY11	FY10	FY9	FY8	FY7
Sales	1004.47	861.42	751.58	610.48	504.83	420.58
Other Income	1.98	4.72	3.51	0.05	4.35	2.39
Op Profit	75.65	99.06	91.66	47.7	35.97	15.8
EBDIT	75.65	103.78	95.17	47.75	40.32	18.19
Interest	1.1	1.89	1.93	3.1	2.59	3.52
Depreciation	9.26	9.71	6.18	3.39	2.5	1.76
PBT	86.13	92.18	87.06	41.26	35.23	12.91
Tax	27.11	30.3	31.54	18.23	12.14	3.98
PAT	57.92	64.16	57.79	27.55	23.18	8.97
EPS	664.86	736.46	663.34	316.23	266.04	102.96

Num of shares	871,200	871,200	871,200	871,200	871,200	871,200
Dividend per share	120	60	50	30	20	15
Dividend Yield	1.78%	0.89%	0.74%	0.45%	0.30%	0.22%

Dupont Analysis
OPM(%)	7.53%	11.50%	12.20%	7.81%	7.13%	3.76%
NPM(%) -- (A)	5.77%	7.45%	7.69%	4.51%	4.59%	2.13%
Asset turnover(avg) -- (B)	2.16	3.29	3.69	3.96	3.81	3.51
RoA(%)	12.45%	24.53%	28.38%	17.88%	17.48%	7.48%
Financial Leverage -- ( C)	1.51	1.00	1.00	1.02	1.05	1.13
RoE(%) -- (=A*B*C)	18.85%	24.53%	28.38%	18.24%	18.30%	8.49%

Key Risks:

• A lot depends on crude prices. 
• The company is owned by Andrew Yule (a PSU),  United India Insurance Company Limited and Life Insurance Corporation of India, so there is possibly some amount of government control or "inefficiency" built in.

Valuation:-

It trades at a PE of roughly 10 times earnings and 1.9 times Price/Book. It has been a regular dividend payer and is likely to continue to do so. Also, the company is available at a much cheaper valuation as compared to its peer - Castrol, although it is much smaller in size.

Catalyst for Valuation Trigger

The Dept of Divestment, Ministry of Finance, is planning to sell Andrew Yule's, United Insurance's and LIC's stake in TWOL to a strategic investor. 

Please refer to http://www.divest.nic.in/PIM_TWOL(19April).asp for further details. 

If the sale goes through, and we don't see any push back from political front (read Mamata Banerjee, as this is a Calcutta headquartered company), then this can act as a trigger for the stock price.

Disclosure:-

Please  consult your financial advisor for your investments. This post is not an investment advice and I do not take any responsibility for your gains or losses!