Friday, February 13, 2009

Stock Selling Below NCAV

Ricoh India Ltd

The first on my list would be Ricoh India, not only its trading below net current asset value but it also exhibits high ROIC and in the past has shown signinifcant amount of growth in sales and earnings without deteriorating the incremental return on invested capital, though this growth has been achieved largely becoz of its merger with Gestetner India in 2004. I havent studied the competitive landscape in much detail but it seems that it has abt 30% market share after Xerox and Canon in India. It has held a strong presence in the Government and commerical segments.

Free Cash Flow = EBIT+depreciation-Capex = 298mn

Return On Invested Capital = FCF/(Net Working Capital +PPE) = 36%

Market Cap= 555 mn (zero Debt)

Net Current Assets = 696 Mn

The Stock is trading at a signinficant disocunt to the NCAV of abt 21% whereas the rest of the PPE and the earning power of the business is available for free. Now thats wat I call a pure graham type bargain.