Saturday, 20 June 2015

VALUE PICK – TALWALKARS BETTER VALUE FITNESS LTD - GTS 4 ANSWER






The Ace Investor - Value Pick
Talwalkars Better Value Fitness Ltd
  Listed on both BSE:533200 and NSE:Talwalkars
Talwalkars is currently trading around 310 with a market cap of under 900 crores.
Promoters hold 43.32% stake, 29.99% stake is with investors/institutions holding more than 1% stake. Individual shareholders hold only 17.63% stake out of which 6.01% is with noted investor Prof. Mankekar's family. Only 11.62% of total equity is with small retail investors.
Total Debt is around 150 crores, 52 week high is near 410 and 52 week low is near 170.
Established back in 1932 with its maiden gym in Mumbai. Talwalkars with its superb brand value has become the sector leader today with its wide branch network spread all over India.
Talwalkars as of 31st March 2015 is having a total of 150 fitness centers (Gyms) across 79 Indian cities and towns. Highest for any company in India.
 Talwalkars and UK based sports and leisure club company The David Lloyd are in a JV to develop sports and leisure clubs across India in the future.
Talwalkars has been a trend-setter in the Indian fitness industry and it has also recently launched NuForm which is a unique training program based on EMS (Electrical muscle simulation) a training technique which is gaining momentum in the USA right now with sports scientists backing it and sportsperson and atheletes prefering it more over the normal strength training. Talwalkars plans to make NuForm available in majority of its fitness centres soon.

Talwalkars has recently launched the REDUCE plan which is a total diet plan where the food packets will be given to you at the Talwalkars outlet with time written on it, You must have it as per the diet plan. In this package you don't have to workout and they say it is a sureshot way to lose weight. This is quite similar to US based Nutrisystem's weight loss program. Nutrisystem is listed on NASDAQ and trades at a P/E of 33 with poor margins.
Talwalkars the brand is doing well but do they have a good marketing strategy? As a strong brand business let us take a look at Talwalkars branding against another brand-business company Page Industries.
The success of Page Industries's Jockey brand has been great mainly because they spent on targeted local advertising instead of spending money like water on celebrities which their peers were busy with. A good marketing lesson for a non FMCG but consumer oriented business such as that of Talwalkars.

Now here is the comparison with other GYM brands. 
Almost all the companies are promoting their brand with the help of local marketing. John Abraham was maybe Gold's Gym India's face earlier but off late it has only been sponsoring bollywood events instead of entering contracts with celebs.
  With its amazing network reach Talwalkars is right now in a position where massive growth is very much possible.
Coming to the Financials, Talwalkars has been growing steadily over the years. Take a look at its annual performance.

Above chart shows Talwalkars having great margins and steady growth. Now lets compare financials of Talwalkars with lone listed company in wellness sector which is Marico Kaya the company which runs the chain of Kaya Skin Clinic across the country.
Talwalkars OPM is around 53% against Marico Kaya's OPM of 9.88%. Talwalkars gross margin is at more than 80% and Marico Kaya's gross margins is around 50 or so. Gross margins and Operating Profit Margins indicate operational efficiency of a company and how successfully they are running the business. And of course coming to the Net Profit Margin it actually is the sum up of business performance and there too Marico Kaya is lagging well behind Talwalkars.
Now lets take a look at membership fees comparison: Talwalkars v/s Golds.

Talwalkars membership is cheaper compared to Gold's Gym as its business strategy is to attract all from middle-class to the rich class while Gold's Gym is more of a luxury gymming experience. Zumba is another service offered by both Gold's and Talwalkars which was missed in the above chart and is usually not available in small standalone gyms. SnapFitness as reviewed by customers don't have an upto the mark service record to be compared with Talwalkars and Gold's.

The membership fees and facilities info was acquired by calling up the fitness centers in Mumbai,Delhi and Kolkata and might not be totally accurate for other cities. But is clear that Talwalkars and Gold's are the two giants operating in this field in terms of network spread, customer base, services and clients satisfaction and Talwalkars is the sector leader and actually the only listed player in its field. 

The fitness industry in India is currently around Rs 6,000 crores and expected to grow at a CAGR of 20-25%>. Almost 95% of The Indian Fitness sector is unorganized while brand entities such as Talwalkars, Golds etc. form the remaining 5% of the total Rs 6,000 crores market.
Only 0.05% of urban indians have a gym membership as against 3.11% in rest of Asia pacific and 17.5% in USA. This data shows us the untapped opportunity in the fitness industry which Talwalkars should be able to exploit.

The Demographics of India almost forces growth in the Fitness Sector.
India has world's largest youth population according to a U.N. report with about 356 million 10-24 year olds despite having a smaller population compared to China.
By 2020 India is set to become the world's youngest country: In 2020 the median individual in India will be 29 years.

Warren Buffett had coined a new term "Economic Moat" which is what he looks for in the stocks he picks. 

What are the common Economic Moats?
Patents, Brand identity, Technological advantage, Buying power, Higher switching costs and Operational efficiency.

If we try to find Economic Moat in Talwalkars we find it matching some or all principles:
+ Strong brand identity
+ Technological Advantage: EMS is not available in other GYMs however not sure about it
+ Buying Power: The massive expansion over the year hints at strong backing and buying power
+ Higher switching costs to other brands
+ Financials indicating strong operational efficiency.

A brand-business sector leader, only listed player in a hugely untapped sector with wonderful growth opportunities operating in a wide network and matching the Economic Moat criteria of the Great Warren Buffett is available at a P/E of around 17 and they think we will miss this opportunity? Talwalkars should hopefully be able to do well in the sector which will shape up The Young India.

Even with present financials: The current P/E of around 17 is dirt cheap for a lone listed player. Just take look at the astronomic valuations a lone listed company in a sector commands. Wellness chain Marico Kaya which traded at a peak p/e of 90 as the stock rallied from Rs 200 to Rs 2000 in just 9 months, Jubilant Foods the only listed Pizza chain (Dominos) trading at a p/e of almost 100 and MCX the only listed financial exchange is trading at a p/e of around 45 despite all the negative news flow related to group company Financial Technologies.

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 Talwalkars Better Value Fitness Ltd in my portfolio and hence my point of view can be biased. Readers should consult their financial advisory before any investments.

:Links:

  Name of the winners for Guess This Stock - 4 is posted below as "comment" on this post.

65 comments:

  1. There was huge response to Guess This Stock - 4 but mostly people guessed it wrong as PC Jewelers and Specialty Restaurants.

    About 550 answers were received again out of which only 9 were right.

    01 - Sushil Motilal
    02 - Varghese Abraham
    03 - Neha Roy
    04 - Sumit Agarwal
    05 - Ankush
    06 - Quazi
    07 - Tushar Mohta
    08 - Kritesh
    09 - J Jani

    ReplyDelete
  2. News Update:
    Talwalkars Better Value Fitness Ltd has raised Rs 107 crore through a Qualified Institutional Placement (QIP). The issue received bids from investors such as Capital International and Ascent Capital among others. The funds would be deployed for setting up new fitness centres, acquire existing gymnasia and gym chains, setting up leisure clubs, besides advertising and promotion. The company recently entered in the sports club segment in India and set up a 50:50 JV with David Lloyd Leisure Limited (UK). An investment of Rs 500 crore has been planned over the next five years for developing 7-10 clubs across India. Centrum Capital Ltd was the Book Running Lead Manager to the issue.

    http://www.thehindubusinessline.com/companies/talwalkars-raises-107-cr-thru-qip/article7333848.ece

    ReplyDelete
    Replies
    1. Latest QIP before Talwalkars was Bajaj Finance, Bajaj Finance QIP was successful and stock has rallied 20-25% in just 7-8 days... So things looking great for Talwalkars :)

      Delete
  3. Hi, ur view on Era infra engineering, any turnaround possible?

    ReplyDelete
    Replies
    1. Hello , Era infra weekly chart shows sell mode , you can wait for buy signal
      see image of chart

      http://prntscr.com/7jt48l

      Delete
  4. What is your take on Lycos Internet

    ReplyDelete
  5. Sir...one idea for easy rerating of your value pick is to make these stock name highlighted to the great small n midcap investors like Ashis Chug, Porinju, Andrade, Vijay Kedia...m looking for ways to contact these persons ...can u also do so?...also xan u help in which way yo contact them like their mail addresses etc.

    ReplyDelete
    Replies
    1. Haha as an investor we should be patient in good stocks, has happened in Palred hopefully other picks will hog the limelight in future let's wait.

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  6. Subex... dont you think its better to buy at rs 11.40?

    ReplyDelete
  7. Hello ACE .. pl share ur view in PDS multifashion as uts presence is in world wide wd great n huge revenue

    Recently company announce presentation

    http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/B88946F4_75B0_4DF3_A2E7_40BE3F7C8FAE_134319.pdf

    ReplyDelete
    Replies
    1. Pathetic margins for PDS and nothing significant in it, already over expensive stock, should correct from cmp.. Looks like a pump and dump

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    2. Sir ... did u gone through uts presentation file

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    3. Company will not give a presentation showing itself in poor light but the matter of the fact is that margins are pathetic.

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    4. Presentation alone should not be the benchmark for stock selection

      Delete
  8. Hi Ace what are the best stock in which we can invest now for better returns?

    ReplyDelete
  9. Hi, whats your take on Essar Oil and Adani Ent.

    ReplyDelete
    Replies
    1. I don't like ESSAR group, Adani Ent no call.

      Delete
  10. Hi, ur view on Era infra engineering, any turnaround possible?

    ReplyDelete
    Replies
    1. Not tracking the company hence cannot comment.

      Delete
  11. Hello What's your view on Nahar spinning mills.

    ReplyDelete
    Replies
    1. Sorry jagadeesh ji i am not tracking this particular script.

      Delete
  12. Hello What's your view on Nahar spinning mills.

    ReplyDelete
  13. Whats your call on Uniphos Enterprise which holds 2.53 cr shares of UPL . It has debt of just 10cr. Its investments in UPL, Advanta and Uniphos house Mumbai is available at just 15 % market cap plus debt.

    ReplyDelete
    Replies
    1. Not aware of this company, will have to go through it once.

      Delete
  14. Hi sir, whats your opinion on GATI? i have brought it for 300 rs

    ReplyDelete
    Replies
    1. For the long-term Gati should do well.

      Delete
  15. Patrick Mathias21 June 2015 at 10:17

    The concept of Economic Moat applies well and hence makes its a strong stock for long term investment with medium term gains. The report nearly covers all aspects and has been able to draw out interest level in the average retail investors. Once again thank you and congratulations on the proggressive quality of the reports

    ReplyDelete
  16. Hello Ace,
    can you look into this company gabriel India limited
    a industry leader, high eps growth in last 5 years, good return on investments and a debt/equity around 1.8.
    it has a p/e of 18 but i personally think it has great chances of growth
    what do you think about it?

    ReplyDelete
    Replies
    1. Looks good to me but even though it is a leader its not the lone listed player hence a p/e of 18 is justified... For growth investing looks good

      Delete
  17. Nitesh Estates Any Thoughts Please ?

    ReplyDelete
  18. another good script i find is mindteck india.
    it is a grossly undervalued stock from what i see in the it industry
    Has a modest p/e at 7
    has a great presence worldwide
    has a eps growth rate of 41 in last 5 years.
    whats your view on this

    ReplyDelete
    Replies
    1. Mindteck has been covered on the blog earlier, http://theaceinvestor.blogspot.in/2014/12/value-pick-mindteck-india-ltd.html

      Delete
  19. Hello cud u pls share your views on rs software and bodal chemical

    ReplyDelete
    Replies
    1. RS Software seems to be interesting. Almost all IT companies have corrected after the quarterly results maybe thats why it has crashed.. However not aware about Promoters background and integrity.

      Bodal is into the textile dyes space which has a lot of listed competitors it is not operating in a niche business like Vidhi and Dynemic (Food Colors) therefore i think exposure to Dynemic and Vidhi should be preferred over Bodal.

      Delete
  20. Hello sir, I have made some investments in some companies can u kindly provide me your views on it.
    1. Kovai medical.
    2. Atul auto.
    3. Seven life sciences.
    4. Pantaloon fashion.
    5. TV today.
    6. Capital first.
    7. Repco home finance.
    8. Gruh finance.

    Thanks,
    Shailesh

    ReplyDelete
  21. ace ji you are bang on with talwalkars comparison with marico kaya and i think talwalkar fair value works at 700 and aggressive valuations will give a stock price of 1700, 50 and 90 p/e respectively.

    ReplyDelete
  22. Sir can u tell me abt paul merchant??52 week low 10 and cmp 1800?is something fishy abt this stock??ur views on it??

    ReplyDelete
  23. Sir ur view on adlabs entertainment

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  24. Sir, what's your view on poddar pigments?

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  25. Any views on dish tv

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  26. ur view on mangalam drugs?

    ReplyDelete
    Replies
    1. I am not aware about it, i have read a good report on it some other blog i don't remember maybe you should google.

      Delete
  27. ACe,
    The Promoter holding has been reducing from last 3 qtrs.

    Promoter 43.32% 47.67% 53.40%

    isnt that a scary sign??

    ReplyDelete
  28. What is ur view on SHIVALIK ( 539148 ) ......Why there is lot of huge buy pending order ( Nearly 1,20,000 ) in this share......The share opened two days before........I am unable to buy....Only 200 shares trades every day...What will happen to this stock.....Whats ur view..................

    ReplyDelete
  29. Sir ur view on richa industries and ucal fuel..can i buy at current level?

    ReplyDelete
    Replies
    1. Richa already suggested, Not tracking UCAL.

      Delete
  30. ACE,
    Reposting,

    Mar-15 Dec-14 Sep-14
    Promoter 43.32% 47.67% 53.40%

    thanks,

    ReplyDelete
  31. Sir any views on Dish Tv,
    do you think Citi group & Apollo exiting with their share of 4.4% is a concern for the future of the company and what are your views on shorterm

    ReplyDelete
    Replies
    1. I don't like the business honestly.. india progressing towards 4G and VoD, don't see Much for dish tv in future. Will be back in losses soon.

      Delete
    2. Prem Sir, If dishtv does not have much future for reason mentioned by you, same will be true for cos lik Inox, PVR, as people will stay home rather go to theaters. Wats your view?

      Delete
    3. No seeta, People go out to go out and have a good time else they would be shut down long before

      Delete
    4. Sir, many thanks for ur response. Any view on PVR? Its performance is also dependend on higher disposable income similar to talwalkar.

      Delete
  32. Dear Ace Sir,
    What do you think about Chaman Lal Sethi Exports, I think its a good bet for the future. Please pass on your comments.

    Thanks
    Srini

    ReplyDelete
    Replies
    1. Chaman lal sethia exports looks good but haven't deeply analyzed it.

      Delete
  33. Ace,
    Normally promoter buying is considered very encouraging then why selling is not a big deal?? Just because you want to recommend it?
    And the promoter holding decreasing every qtr and from 53% to 43% which is significant.

    pls post this and reply sir

    ReplyDelete
    Replies
    1. Promoter holding declining along with business of the company declining will be a big deal.
      This company is owned by two families, Promoter holding may well be cut for personal reasons.

      I like your style of questioning though :))

      Delete
  34. Dear Ace

    i want your opinion on suzlon. The company stock is very low and i have suffered great losses .Do u see any chance of revival in stock.
    Also want your technical judgement on sintex industries.

    ReplyDelete