Guru Speak: Bill Miller on current US market conditions

Thoughts from legendary investor Bill Miller.

Stock Update:CEBBCO

Salient Points from the Conference Call which was addressed by Ajay Gupta:-

• There is nothing wrong with the operations of the company. No reason for the stock to behave the way it did in the last 2 days.
• Deloitte is our auditor and they have not made any adverse comments about the management ever.
• There are more than 50% non-promoter board members
• Tata Capital has a board member by virtue of their 11% stake in the company. He sits on the management committee and audit committee of the company
• The inter se transfer of shares was requested for because they wanted to create a family trust for tax efficiency. Ajay Gupta and others would transfer their shares to Mr Kailash Gupta and he would then in turn create the trust where all of the promoters would have a stake as before. Because of the many rumours in the market related to this, they have now put this on hold, atleast till Oct 2013 (3 years of listing)
• For the FBV, the company is running at full capacity.
• There is a small delay in capacity expansion - expecting it to be ready in Q4 and available for the full FY14.
• There is no change in the dividend policy of 20% of PAT 

I did not get a feeling that there is something majorly wrong with the company (I may be wrong, but that is the impression I had) . I will wait for a day or two and probably add on some more.

Stock Update: CEBBCO

The last few days for investors in CEBBCO has been traumatic. The stock has literally tanked and is now close to 60 levels. On Friday, it was down nearly 20%. So, overall in a matter of a few weeks, the stock is down nearly 40% (from around 100 levels to 60).

The question in everyone's mind is what should we do now. There are 3 things one can do now -- there are always only these 3 things one can do ;-).
1) Buy more
2) Sell and get out
3) Hold and watch!!

Personally, I am a bit perplexed at the steep 20% fall on Friday. The results that the company announced was reasonable. Net Sales has gone up y-o-y; so has net profit & EPS.

The only negative news that has come out is the pledging of shares by the management. The percentage of shares pledged is fairly low (around 2% of total outstanding shares), so that too should not be a big deal. Unless, insiders know something that we retail investors don't - things like corporate governance issues - there may not be a fundamental case for such a dramatic fall in prices.

So, in this case, I am planning to hold on to my shares - just wait and watch to see further developments. The stock is fairly close to its 52 week low so there may be some buying around these levels (I doubt it though, given he steep fall last week).

Stock Update: JK Lakshmi Cement - Cementing its gains!

Last year in February, I had posted about JK Lakshmi Cement. It has given very good returns in the last year (from close to 60 to 160 today).

 JK Lakshmi cement is setting up a Greenfield cement plant of 2.7 MT at Durg, Chhattisgarh with a capital outlay of 1250 crore, which is expected to be commissioned by Q3FY14. Also, it is in process of reviving its subsidiary, Udaipur Cement works, which currently has a capacity of 1 MT. The company will invest 100-150 crore in this subsidiary. As the 0.55 MT grinding unit at Haryana is fully stabilised and after the commissioning of 2.7 MT Greenfield plant at Durg by Q3FY14, the company will have a total cement capacity of 8.1 MT. However, the full benefit of the Durg expansion will be seen in FY14E.

Q3'13 is expected to be flat or decline slightly in terms of margins. Currently, there is good traction in cement sales from Rajasthan and Gujarat, where JK Lakshmi has good presence. Jan-Mar quarter is usually the best quarter for cement dispatches.

Overall, I am positive about the prospect of the company and I think the best days are yet to come.

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Stock Update: Shriram Transport (STFC) - Piramal plans to take a bite

Ajay Piramal (Piramal Group) is in advanced talks to buy US private equity firm TPG Capital's 20.27% stake in STFC, for around Rs 3,500 crs. Piramal is holding a lot of cash from his sale of his formulations business to Abott, and STFC stake gives him a foothold into one of the best financial intermediaries in India (in my opinion!).

Ajay Piramal is well-known for his business acumen and has a lot of followers in the value investing community. Hopefully, with this stake, there will be some focus on STFC. With the new roll out of auto malls, growth in the LCV and mini CV segments, STFC is likely to do fairly well. If CV financing picks up (a couple of years down the line), the profits would soar. The main reason I like STFC is that they have a very strong moat in their core business, which results in NIMs of 7-8% (double that of the best run banks like HDFC Bank).

With possibiliities of reduced interest rates in 2013, it may be a harbinger of good tidings for STFC.

Happy New Year & Happy Investing in 2013.

Stock Update: Mayur Uniquoters - Expect a flat H2FY13

In a recent interview the Chairman and MD S.K. Poddar has mentioned that the company expects a flat growth for H2FY13.

"During April-September period, the company has registered a net profit of Rs 20.4 crore. Given the current global conditions, we are expecting that we should be able to do the same in the next half of the fiscal. Off-take in the market is down," he said. On the firm's export performance, he said "given the global demand slowdown, the company is expecting a moderate growth."

Poddar said the artificial leather is substitute for natural leather and its fine designing and texture is attracting people's attention. "The industry is growing very fast in the country. I think, the market size of the synthetic leather industry must double in the next five years. The sector's growth is being driven by the increasing buying power of people and growing consumption,".  The cuurent market size is about Rs 4500 cr and should double in the next 5 years.

Talking about the problems being faced by the sector in India, he said China is dumping its cheap products in the country and urged the government to look into the issue to protect the interest of domestic players.