Accumulating Bombay Burmah at every decline: Ashish Chugh

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Accumulating Bombay Burmah at every decline: Ashish Chugh

Accumulating Bombay Burmah at every decline, says Ashish Chugh, Investment Analyst & Author of Hidden Gems.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See previous views by Ashish Chugh See what other Experts & Brokerages are saying about Bombay Burmah See messages about Bombay Burmah

Accumulating Bombay Burmah at every decline, says Ashish Chugh, Investment Analyst & Author of Hidden Gems.

Chugh told CNBC-TV18, "Bombay Burmah has seen two major transactions in a matter of last three months, which probably have gone unnoticed in the market. It has sold its non-core businesses- the laminate division for a total consideration of about Rs 100 crore. Also, they have sold the specialised spring division to NSK Spring for Rs 180 crore. These two transactions will bring in cash of about Rs 280 crore in their books. Given the market cap of the company of about Rs 620-625 crore, this cash of Rs 280 crore is significant."

He further added, "This is a 150 year old company. It is probably the oldest listed company on the stock exchanges. It's a diversified company. Even after sale of these two divisions it still operates in tea and coffee plantation, auto electrical, dental products and real estate."

"Talking about tea and coffee, they have got 2,800 hectares of plantations spread across Tamil Nadu, Tanzania and coffee plantations in Coorg. This company also holds investment in group companies. Incidentally, Britannia Industries is a 51% subsidiary of Bombay Burmah through its subsidiaries and step down subsidiaries. This company also holds about 51% stake in Bombay Dyeing. The valuation of these two investments is substantial."

"Their real estate division is developing properties at Kanjur Marg in Mumbai and Coimbatore. Given the market cap of about Rs 625 crore, recent cash inflow of about Rs 280 crore and the fact that it is a 150 year old company the assets in the books would be at historical cost. So there is great value in the company."

"This company did an EPS of about Rs 40 in the last financial year and paid a dividend of 70%. The dividend yield is just about 1.5-2%. But there is potential for bigger profits from the core business of tea and coffee in which the company wants to concentrate now. Also, there is potential for untangling of complex structure in the company as of now, also unlocking of some of the investments."

"At the current price this stock provides margin of safety. There is value in company but I would like to caution that this is a slightly illiquid stock. It may have gone up today but once it settles down below Rs 450, investors can then buy in a staggered manner."

"There is no hurry to buy because given the state of the market I don't expect the company to go up substantially in a short period of time. So this will give opportunities to accumulate quantities at your price. Just keep a watch on this company and keep on accumulating the stock at every decline."

Disclosure: Me and my family have small investments in Bombay Burmah.