Ashish Chugh's view on Nucleus Software

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Ashish Chugh's view on Nucleus Software

Ashish Chugh, Investment Analyst & Author of Hidden Gems share his view on Nucleus Software.

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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 Nucleus Softwar See messages about Nucleus Softwar

Ashish Chugh, Investment Analyst & Author of Hidden Gems share his view on Nucleus Software .

Chugh told CNBC-TV18, "Nucleus Software currently trades at about Rs 68. At the current price the market cap of the company is about Rs 225 crore. This is a totally debt free company. If one looks at the latest balance sheet of the company, it had investments mostly in debt and liquid mutual funds of about Rs 126 crore."

He further added, "It had cash and fixed deposits of about Rs 62 crore, which makes cash and cash equivalent of about Rs 188 crore. The business of this company is going at an enterprise value of less than Rs 40 crore."

"This company caters to banking and financial services sector. It claims that its product FinnOne is world's number one selling lending software. Given its product portfolio, Rs 40 crore enterprise value is too low. It has got clients across the globe."

"It derives most of its business from Far East and South East Asia. Besides that the company has presence in UAE, Africa and also small presence in Europe and US. US contributes just about 1.5-2% of the total revenues but major revenue comes from Japan, South East and Far East."

"This company has got facilities in Noida. They have just started another facility in Jaipur. For FY11 sales were about Rs 270 crore, PAT was about Rs 26.3 crore, which was lower than FY10 and EPS was Rs 8. In the first half of the current financial year it has managed to maintain sales which were at about Rs 138 crore. But they have seen an improvement in PAT mainly because of rupee depreciation which happened recently. PAT is up by about 15% to Rs 16.5 crore."

"Now in an era of slowdown, we have a company which is able to maintain sales and show an increase in profits. The company has been getting new orders and has been adding new clients. They have opened up a new facility in Jaipur and are hiring aggressively for this facility."

"So here is a company which has got high entry barriers. They have created proprietary products, which are difficult to replicate in a short period of time. It is a totally debt free company. The best thing about this company is that it is a well managed. At current valuations it is available at extremely attractive valuations."