VALUE PICK - MINDTECK (INDIA) LTD.

About The Company

  Mindteck (India) Ltd. is a Bengaluru based IT company headed by Mr Yusuf Lanewala who has vast experience of over 35 years in the IT industry.

 

About Business

The company is mainly into Product Engineering and IT services.

Product Engineering refers to the process of designing and developing a device/assembly or system while in IT Services the company offers services such as Cloud Computing, App Management & Support, Data Analytics, Business Intelligence, Enterprise Information Portals for back-end, Mobility, SAP Services & Software Testing, All their IT Services including Data Bank have a 24/7 Helpdesk.

 

The Ace Investor – Value Pick

(BSE:517344) MINDTECK (INDIA) Ltd.

The stock is currently trading around Rs 67 with a market cap of about 160 crores.

Current P/E is around 8 and Promoter Holding is strong at 64.63%.

The company seems to be turning around, i.e. the Total Sales for FY13 were at 264 crores and Net Profit was at 1 crore while for FY14 sales rose to 328 crores and Net Profit rose to 18 crores, OPM improved from 1% to 8.81%

  Mindteck actually was unstable right from FY08 to FY13 due to management change, lot of merger and acquisitions, As of date things look settled for the company financially but of course there is no guarantee that in future too the management will remain the same.

One thing to note here is that entire 64.63% of the promoter holding is held by one single entity called "Embtech Holdings Ltd" which was an subsidiary of Taib Bank (Bahrain) and has now been sold to The Vanguard Group (US) which is an Investment Management company, An IT company owned by an Investment Management company definitely raises a lot of eyebrows but as we feel that the performance of MindTeck now is going to be stable then there are lot of possibilities of a probable takeover, Recently Cyrus Mistry of TCS told the press that Data, Cloud Computing & Mobility is going to be in focus as TCS continues to eye acquisitions in this field to increase their role in Digital World.

At far as the business prospects are concerned for Product Engineering, As published on (Economic Times) Recently ADI (global chip major) helped MindTeck grab 2 projects worth $1 Million each, 1 Project was to connect over a million mirrors in the Nevada desert for solar energy to drive power generation projects and the other is to develop a smart meter that can wirelessly transmit data, It is noted that global semiconductor companies to push their own revenue are playing matchmaker by helping small Indian companies bag orders from international clients, the new trend is that the small companies get early access to products and solutions developed by the multinational majors, even before they hit the market, giving the small IT companies a first mover advantage.

Now coming to the IT Services, Stuff like cloud computing have huge prospects and have already been covered in all leading business dailies, There is something specific with MindTeck which should not be missed. The company since 1999 has experience of working with US Govt. and State Govts helping them implement some key policies and projects in the field of health, education, constituency policies and public safety etc. in states of Pennsylvania, Texas, Michigan, Massachusetts, Oregon, Columbia, Wisconsin, California, West Virginia, New York, New Hampshire & Florida.

At current P/E of 8, MINDTECK is not extremely cheap but there are also not any cheaper option to play in IT especially with an eye on E-Governance & Smart Cities, As MODI's plan of 100 new smart cities & e-governance require more IT Services, These small companies like Mindteck & Cybertech do tend to gain a lot from it, Cybertech though has a larger range of services & products has already start bagging orders from civic bodies in Thane, Bengaluru and is trading at a P/E of 14.

Right now for MindTeck the financials look stable as quarterly results for this FY too suggest that the company has been able to sustain the FY14 heroics. The zero debt on the books of MindTeck is another great positive factor along with their reserves which have swollen over the years.

After digging deep into its holding company etc. we have decided that we are buying the business and not the stock (Remember Mr Buffet saying "If a business does well, the stock eventually follows"

At current market price of around Rs 67, Go ahead and buy this stock for mid to long-term for target 150+ in  mid-term and probable atleast 350+ in the long-term, Will update on the blog when to book profits in this stock, So all Value Investors go for it!