Gujarat-based logistics company Accuracy Shipping is issuing 49.36 lakh shares at between Rs 81 and 84. The issue proceeds will be utilized for loan repayment,buying fleet and working capital requirements.
The company is considering a pre-IPO placement of 968000 shares. If this goes through, the shares issued to the public would be reduced to that extent.
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Accuracy’s niche is that it focuses on granite and marble logistics (inland and exports). The company owns 150 vehicles and operates mainly in the Rajasthan, Gujarat and Maharashtra. It faces a lot of competition, and in that sense it is has a below-average moat.
However, one thing to note is that the company has been adding fleet every year and that is a good sign.
2. A CURIOUS CASE
Here’s a question:
If you own a company that requires massive working capital, and you have obtained a whole lot of finance in the last 5 years, faced negative cash flow issues in the past. own subsidiaries that are in losses, and work in an intensely competitive field, would you or other promoters float a firm that competes with the main company?
I don’t know what your answer to the question is, but Accuracy Shipping does all of the above activities that are listed in the question. Here’s the dope:
Negative Cash Flows
Intensive Working Capital Requirement
In house Competition
Despite the slowdown in exports, the company has clocked a massive rise in turnover for the 9-month period ending on 31-12-17.
It’s book value was 21 as on 31-12-17.
One thing to note is that rising oil prices will hit its profitability in the near term until these prices recede.
The long term debt is 27 crore and the short term debt is about 12 crore. That makes it 39 crores. Now, the interest provided is 2.50 crores, which works out to a 6.4% rate of interest. This can be because the loans may have been obtained towards the end of the year. Still it is a factor that you should clarify before applying.
The post issue capital will be about 15 crores and assuming the current profitability is maintained, the EPS for 2018-19 would work out to about Rs 4.55. At Rs 84 issue price, the PE works out to 19, which seems fully priced for a new entrant.
I’d wait for the stock to list before considering trading it. Smallcaps too are falling and many are available at very attractive prices. In such a situation it is best to be a fence sitter.