Analyst/Equity Research Report

Viewing 7 posts - 21 through 27 (of 27 total)
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  • #7561
    Saul Goodman
    Registered Boarder

    @odysee, you are right, and the problem with retail investors is that they are naive and want binary answers for everything.

    If you see many startups, they are highly valued even if they don’t have profits and that’s because there’s no retail investors involvement in startups. Venture capital or private equity firms invest only after doing thorough analysis and they buy even if they know that they won’t get profits/dividends. They understand that investing is more than just dividends or profits but retail investors don’t understand that (especially in India). All retail investors care about is dividends and if any startup took money from retail investors then they would never survive. I’m guessing that’s the reason Ola,Flipkart and other startups haven’t come to Indian stock market. They know that the market is not mature enough to value then accordingly.

    Coming to BCG, the prices have always been in bargain levels because the market believes that it’s too good to be true. Most people don’t believe the numbers because they think that all profits should be given out as dividends(also there were other issues like daum, write off, FIIs selling). They don’t understand which sector the stock is in or they don’t do enough research on BCG’s peers.

    I wanted everyone to understand BCG’s situation and that’s why at first I started comparing BCG with TTD,I wanted everyone to know that BCG is better than TTD in many metrics and only thing TTD is doing better was growth but I don’t know how many people understood that.

    The good thing about Affle coming to market is that finally BCG has a peer who’s listed in India. When people get to know that even Affle won’t pay dividends, they’ll start looking at BCG differently and they’ll finally change their views and understand that it’s not too good to be true.

    We are very lucky to have a new age technology company trading in India (that too at bargain prices). If BCG improves it’s cash flow then they can grow bigger and they’ll pay dividends also. So, in my opinion, only fools are selling the shares.

    #7563
    odysee
    Registered Boarder

    Thank you for your considered reasoning on this particular issue. And look at the paradox (or even the the absurdity)-no mutual fund or institutional investor would ‘normally‘ look at investing in a company with a low market capitalisation of 450 crore odd. Yet the same lot would view the same company positively and maybe scramble to invest if the market cap were to be around 2000 crore with no material change in the numbers. How does one find a solution to that mode of thinking and break that mould? I’m sure there must be exceptions to that general rule. But who will have the ‘smarts’ to catapult BCG into that sphere of visibility? Some serious and savvy guidance needed by the management.

    #7565
    sateanna
    Registered Boarder

    Yes Saul, u are right. We also entered as retail investors, didn’t have a clue about the company when we entered in this. Over a period of time started to understand, analysed, attended conference calls and now its almost like we will hold it for life. From the concall its very evident that LOC is going to be the game changer. SKR mentioned 25-30% increase in business with immediate effect after the LOC is in place. Market has no choice but to take notice of the growth of the company. By the time the LOC is in place issues like Axis Bank, Pledged shares, Daum issue will take care of themselves. Till such time operators will continue to have a field day and we have to live with it. Patience is the key, we have been patient for so many years, just a few months before BCG starts to blossom. 2020 has been a pain year for everyone, but for us BCG investors its going to be the beginning of a prosperous journey.

    #7566
    Saul Goodman
    Registered Boarder

    @odysee and @sateanna, for the company to gain recognition, new investors should buy shares, but the management is focused more on old investors. Part of the reason why stock is not gaining attention is because of the way the management communicates with the market.

    Take recent asset impairment for example, they told us that they have impaired assets worth Rs.800 cr, which is not a small amount and any prudent CEO would’ve given the explanation right away but what Mr Reddy did was he waited 5 days or more to give an explanation. These mistakes are done by new CEOs. In this day and age, nobody has the patience to read company’s presentations, almost everyone will be focused on results. Right away after the results if they sent that presentation then everything would’ve been different now.

    The presentation was very good and informative, but didn’t have much effect later on. So, while dealing with markets, the CEO must understand that “prevention is better than cure”. For small cap stocks, market is very sensitive towards them.

    Many IDs on mmb and Twitter prey on news like that, they’ll try to create so much negativity on that in the short term and new investors get influenced by that. You can see many people talking only about few negative things like Axis case, daum, Oak selling. If there are 10 positive points and only 1 negative point then those ids will focus only on that 1 negative item (even if it’s not significant) and new investors want everything in their investments to be perfect, they think that companies should not have a single negative thing and those investors will start selling.

    So, all these won’t happen if there’s stability in prices and the management should focus on that. Like I’ve mentioned in a separate post, clearing axis debt, daum, are only triggers for the rally but for the rally to sustain without reversing, retail investors’ involvement should be less. Most of them focus on short term gains so we can never expect retail investors to take proper judgement.

    Suppose if the stock goes from 10 to 20 because Axis debt is closed, the price won’t be stable at 20 because of retail involvement, they’ll always try to book profit and that will make the price to come back to 10. But if less shares are with retail investors, the price won’t fall all the way to 10, it’ll be in 17-20 range.(This is not predicting prices or anything, it’s just an example)

    #7567
    Saul Goodman
    Registered Boarder

    Recently the management is taking very good decisions, they are trying to focus on growth again and also not rushing to clear old issues, which shows maturity. I’m sure the market will recognise this. It’s also good to know that the CEO calling investors as family.

    #7575
    VALUEBUYER001
    Registered Boarder

    Dear Saul Goodman Ji nice examples of retailers booking profit analogy #7566 thanks it is quite lucid and interesting

    #7582
    Saul Goodman
    Registered Boarder

    Thank you @VALUEBUYER001. The retail investors I mention in my posts are not the investors in this forum. I talk about the naive (retail) investors who don’t do enough research on the company and they always rely on others while taking decisions on investments.

    You can see that many new investors buy shares when its going up and once the shares starts to fall they come to boards like mmb and they ask others what to do with their shares. This happens with all the companies not just BCG, but the problem is that the board dedicated to BCG on mmb is full of operators and ex investors. They always give false and negative information about BCG and that makes new investors to sell the shares.

    So these new investors become ex investors and they start to spread negative information because they don’t want others to make money from the stock that they have sold at a loss. This cycle repeats and influences the stock price in a big way.

    The problem with mmb is that they delete the useful messages. It’s obvious that the new/random investors will have negative views on the company/stock after visiting mmb.

    Since BCG has so many retail investors, the stock price is not stable. After resolving all the issues, they should bring in stable investors or they should buyback shares. They can’t do it right away because they have to resolve the outstanding issues first.

    3+
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