Standard Industries: Company for Free

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Category

 

NameReco DateReco priceTargetProspero RatingReport Date*
Standard Industries11Jun2013 Rs. 10 – Rs. 14Rs. 45 – Rs. 525 / 1011Jun2013

A) Company business:

1. Standard Industries is a Mafatlal group company that was originally in the business of textiles manufacturing and chemical manufacturing. However, since last many years, major business activities in both these domains have been shut.

2. Currently, Standard Industries is an “asset valuation play” where the company holds land and residential property worth Rs. 1,500+ crores against its market cap of Rs. 83 crores. This means that the company is available for around 5% of its asset value.

3. In addition to the prime assets, the company has a strong cash balance of Rs. 75 crores maintained as fixed deposits.

4. The company has a strong track record of paying dividends as Rs. 0.75 (75 paise) per year. This indicates a dividend yield of 5-6% on the current market price.

5. Current Land and Residential Portfolio:

· 62.25 Acre Land on Thane – Belapur Road: This land worth Rs. 1,375 crore is situated near Ghansoli station. Recent deal in the same area was done at Rs. 22 crores per acre.

· Stanroze apartments (Prabhadevi, Mumbai): The company has approximately 30,000 sq ft space which is a sea-front location in one of Mumbai’s most prime areas. This property should be worth at-least Rs. 150 crores.

· Other land parcels include Sewree (only TDR), salt pan land worth 3.200 Acres near Surat and a 10 Acre plot in Bharuch.

 B) Our view- Stock price, Returns potential and Investment Strategy:

Standard industries has being slowly monetizing its real estate portfolio. Out of the total 92.25 acres on Thane Belapur road, the company sold 30 Acres land for Rs. 230 crores in 2008-2009. The company further initiated a deal to sell the remaining 62.25 acres land to Peninsula Developers for Rs. 230 crores (in 5 years); however, the deal faced certain hurdles and had to be revered.

Very recently, auto maker, Maruti Suzuki purchased a piece of 3.5 acres land for Rs. 22 crores / acre from TPG Life science. This land is located in TTC industrial area, the same place where 62 acre land of Standard Industries is located. Assuming similar valuations, this piece of land is worth Rs. 1,375 crores for Standard Industries. That is BIG compared to its market cap.

Our view of investing in Standard industries is for a very long term as it is impossible to predict the time of value unlocking in the company. We recommend a BUY in the stock with target price of Rs. 52 in next 5 years due to value unlocking from land sale.\

6 Year Price History

*Report Date may sometimes be different from Recommended Date as drafting of reports can take time.

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