Thursday, 19 March 2015

VALUE PICK - WATERBASE LTD.

About The Company & Products 
Waterbase Ltd. is a aquaculture company which started its operations in 1993 headquartered in Nellore, Andhra Pradesh.
The company is promoted by the respected Thapar Group. Thapar Group's past and present ventures include names like: KCT Coal, Crompton Greaves, Greaves Cotton, JCT, English India Clays, Ballarpur and many other companies.

The company as stated is into aquaculture and its main products are Shrimp Feed, Organic Feed and Processed Shrimp.

The feed mill of the company is into operation since 1993 and at present its capacity is 30,000 T.P.A. it is a smaller company when compared to Avanti Feeds which is more into prawn and fish rather than shrimp.

The Ace Investor - Value Pick
(BSE:523660) WATERBASE LTD.
Company listed on BSE, currently trading around 54 with a market cap of about 200 crores.
Promoter holding is at 52.47%, total debt on the books is at just around 12 crores as the company has reduced its debt.
The current price to earning ratio is around 11 and the stock looks very under-valued.

The company as mentioned above is into Aquaculture. Recent times for Shrimp industry has been bad, since the second half of CY2014 the industry is going through troubled times. More recently there has been news that Running mortality syndrome (RMS) is affecting the shrimp industry and India might miss the export target. But at the same time, there is a raw material shortage in Thailand which increases the chance of exports from Indian companies like Waterbase which is doing fairly well in troubled times.

The news about RMS and India missing the export target in the media has resulted in a correction in the share price of Waterbase, it was hovering around 95+ and now down to 50s so it is safe to assume that all bad news are now discounted and a healthy consolidation has already taken place.

Even in the testing times, Waterbase has reported good financial performance as for Dec14 quarter the company announced 10.45% sales growth and 30% profit growth YoY.
Check the annual result table below :-



Particulars
FY10
FY11
FY12
FY13
FY14
FY15
Period
12 months
12 months
12 months
12 months
12 months
Trailing
Sales
27.76
46.31
103.47
157.02
228.21
281.71
Operating Profit
1.20
4.09
10.47
12.05
23.74
32.33
OPM
-4.32%
8.83%
10.12%
7.67%
10.40%
11.43%
Other Income
0.61
0.8
0.66
0.58
1.38
2.13
EBIDT
-0.59
4.89
11.13
12.63
25.12
34.36
Interest
2.42
2.39
1.82
2.2
2.87
1.80
Depreciation
2.31
2.34
2.46
2.81
1.80
1.24
Profit before tax
-5.32
0.17
6.85
7.61
20.45
31.32
Tax
-0.38
-0.55
0.97
1.58
6.87
13.20
Net profit
-3.61
0.69
5.63
6.01
13.57
18.01
EPS
-1.46
0.28
2.19
2.34
3.52
4.66

As it can be understood from above result table, the company has turned around brilliantly in the last 5 years and even the trailing earnings show that in the testing times the company has performed well and exceeded the expectations.

Coming back to the industry, Aquaculture companies have requested the Andhra Pradesh govt. to take necessary steps to ensure seed quality as the vannamei shrimp farming seems to be under-threat from defective seeds by unauthorized hatcheries. It is feared that Vannamei shrimp could face the same problems as black tiger had years ago. I believe, that the govt. will be quick to act on it since there are no quarantine facilities in the state for the broomstick from the U.S. coming through port of Chennai.

Govt. policy plays an important part when any industry at whole is looking for a turnaround and for Aquaculture it looks awesome. Recent statement from A.P. C.M. N Chandrababu Naidu is: "Aquaculture to be a leading employment generator" at the Aqua Aquaria 2015 he asked officials and farmers to adopt the best technology and seeds to improve production so that sector could contribute Rs 2 Lac crores to the state's GDP by 2029. He also exhorted them to achieve a ten-fold increase in production in ten years to make the country leading one in aquaculture.

Another recent development is that the Chief Minister has also made a statement which states that aquaculture will get agriculture status in A.P. to increase fund inflows in the sector. A new aquaculture policy is also soon going to be announced to make A.P. the top exporter of marine products in the world.

Malaysian and Australian governments have expressed interest to work with the A.P. govt. in Aquaculture field R&D to improve feed and sustainability.

On the valuations front, as stated above Price to Earnings Ratio for the company is around 11. The key here is growth, Waterbase looks like Avanti Feeds of FY11 when Avanti had 200 crores sales and Net Profit of 4.28 crores. Now Avanti Feeds has transformed into a 1500 crores+ sales and 100 crores+ profit company.
At end of FY-11, Avanti Feeds too was hovering in the 30s and the 60s and now recently it was trading at 2000+.

All in All, I feel Waterbase is a value pick at current market price of 54. The future growth can make this a future Avanti Feeds, early to expect but i am really hopeful looking at the performance of the company. If we do not buy at these levels then we might have to buy after it would already have turned into a multibagger which is what has happened with many investors in Avanti Feeds.

Technically above 59 there is an medium-term triangle pattern breakout which suggests a target in triple digit but that is the technical charts part, this stock offers huge value for the long-term investors and hence a compelling buy.

Note: The above is not a research report but information as available on public domain and it should not be treated as a research report.

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

Disclosure: It is safe to assume that i might have Waterbase in my portfolio and hence my point of view can be biased. Readers should conduct their financial advisory before any investments.

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32 comments:

  1. ur view on DHP India, is it good price to buy?

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    Replies
    1. DHP looks undervalued but not sure about scalability of business.

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  2. Hi Ace i will be forced to place order at market rate. unable to get my buy order executed

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  3. With more and more countires approving food produce from India. Waterbase will rise like Freshtrop

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  4. Even boarders like Arvind and Anand are bullish on Waterbase

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  5. Ace ..Thank unlike others who just give buy calls you have done a detailed analysis and posted a great Coverage note. Your coverage note is better than professional analysts working in FII and DII.

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  6. Ravichandran Dhaya20 March 2015 at 16:29

    really good detailed review of the stock

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  7. Really good pick,its the next avanti feeds in the making :-)

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  8. Hi, Thanks for the new gem. I like to know your view on Sterlite technologies. The company have record orders this time but it will take at least two to three quarters to get billed. Can you please give your view.

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  9. sir any call on tirupati sarjan locked in uc today

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    Replies
    1. Studied it thoroughly 1 month back not sure if there is a fundamental change, lot of negatives observed not a good investment choice.

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  10. Dear sir.... Plz tell me the views on southern energy and ispat....

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    Replies
    1. Sorry nithin i am not tracking the stock.

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  11. Can u please tell me what is going ins Narmada Gelatin ?

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    Replies
    1. I think the Maharashtra Beef Ban has put the stock under pressure but i don't see much impact on its financials let us wait for march quarter numbers to be announced after which the stock can show great movement.

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    2. abe chuttad, beef ban se narmada gelatin ka kya wasta?

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    3. Your language shows your class, Btw check this out: http://timesofindia.indiatimes.com/business/india-business/Gelatine-makers-cowed-by-beef-ban/articleshow/46673273.cms

      It is only a sentimental impact on the stock and not a fundamental one.

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    4. ace sir dont reply to such losers

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    5. DONT WASTE TIME ON THESE PEOPLE PREM JI

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  12. Sir, What's your View on IFGL Refractories? Can it be a future multibagger from current price after some revival in the steel sector?

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  13. dear ace,
    any opinion update on guj automotive,which has slipped a lot.
    any thing negative in the underlying biz or from the management perspective...
    plz share

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    Replies
    1. No negative after quarterly results yet its falling.. Let us see whats in store in the March quarter results.

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  14. view on INDAG RUBBER & HARRISON MALYA

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    Replies
    1. In latest 4 FYs, Indag rubber hasn't shown any growth so it doesn't make sense at a p/e of 10 and same goes for Harrisons.

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  15. Sir, What's your View on IFGL Refractories? Can it be a future multibagger from current price after some revival in the steel sector?

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  16. Avanti Feeds has strong tie up & equity stake with worlds largest Seafood company Thai Union Frozen Products. Don't know if Waterbase is in that league... but hopefully it can grow substantially ..

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  17. Can you please advise, if i would like to know the delivery volumes of the stock in %age as well as volume wise. How do I know about this?? The BSE website (http://www.bseindia.com/markets/equity/EQReports/GrossShortPos.aspx?flag=1) shows the value for last trading day only. Can I find historical comparison also??

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    Replies
    1. If u open a stock quote on BSE and click on archives on the left pane, it will show u hist data incl. Delivery %

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  18. hi .... what has happened with this stock. It has plunged a long way. What is your suggestion on the future of this stock.

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