If we look at the Trailing-Twelve-Month (TTM) numbers of Zicom Electronic Security Systems Ltd for the last many quarters, the company's growth seems to be going as per a scripted story. With every passing quarter, Zicom's TTM Total Income figure goes up by about Rs.50 crores. And Zicom will be breaking the Rs.1000 crores level at the end of Q2 of this fiscal. This is a big milestone for the company & I am sure that it will not stop here.
The biggest contributor to Zicom's consolidated Total Income is it's Dubai based subsidiary Unisafe Fire Protection Specialists at 45% & contributes 60 to 65% of the Net Profit. Zicom's standalone India business contributes about 35% of Total Income & 20% of the Net Profit. The Qatar based subsidiary (Phoenix International) contributes most of the rest. Zicom's newest baby Zicom SAAS, which was born just a few years ago, is growing rapidly at over 100% Y-o-Y. But it's contribution at the moment is just about 2-3% of Total Income & less than 2% of Net Profit. Zicom SAAS will continue to grow at a fast pace & in another 2-3 years time, it's contribution will become over 10% of the company's Total Income & Net Profit. The importance of Zicom SAAS is that most of it's revenues are recurring in nature & it's profitability, which is currently low, but will increase with increase in scale.
Zicom's India entity, it's subsidiaries in Dubai & Qatar, are growing at a steady pace of about 18-20% Y-o-Y currently. With increasing scale, the growth rates may moderate some what to levels of about 12-15% in the next 4-6 quarters. The younger & smaller subsidiaries like Zicom SAAS will continue to post much faster growth rates. Zicom's consolidated numbers, which are currently growing at about 28-30% Y-o-Y, I am expecting the growth rates to gradually come down to levels closer to 20%. I might be on the conservative side, but I think that a steady & sustainable growth rate of 15-20% is much better to manage when a company reaches a decent size. Anything more will be a bonus. But this growth rate can be achieved without straining it's resources too much or getting into a large debt.
Now coming to the valuation part. Zicom's EPS currently stands at about Rs.24.50/-, which means at the current price of Rs.105/-, Zicom's share is trading at just about 4.3 times, which I think is very very cheap. Atleast the share price has started moving. It was stuck in the under Rs.70 range for quite a long time. I think that if Zicom continues to post growth rates of atleast 15% or higher consistantly in the coming quarters, then we will see the valuations improve considerably over a period of time. For FY'15, we can expect to see Zicom's EPS to reach a level of Rs.28-29/-. Even at a conservative fair valuation of 8-10 times, it's fair price comes to about Rs.230 to 280 range. I am expecting Zicom's share price to bridge this huge gap to quite an extent over the next 3-4 quarters.
The biggest contributor to Zicom's consolidated Total Income is it's Dubai based subsidiary Unisafe Fire Protection Specialists at 45% & contributes 60 to 65% of the Net Profit. Zicom's standalone India business contributes about 35% of Total Income & 20% of the Net Profit. The Qatar based subsidiary (Phoenix International) contributes most of the rest. Zicom's newest baby Zicom SAAS, which was born just a few years ago, is growing rapidly at over 100% Y-o-Y. But it's contribution at the moment is just about 2-3% of Total Income & less than 2% of Net Profit. Zicom SAAS will continue to grow at a fast pace & in another 2-3 years time, it's contribution will become over 10% of the company's Total Income & Net Profit. The importance of Zicom SAAS is that most of it's revenues are recurring in nature & it's profitability, which is currently low, but will increase with increase in scale.
Now coming to the valuation part. Zicom's EPS currently stands at about Rs.24.50/-, which means at the current price of Rs.105/-, Zicom's share is trading at just about 4.3 times, which I think is very very cheap. Atleast the share price has started moving. It was stuck in the under Rs.70 range for quite a long time. I think that if Zicom continues to post growth rates of atleast 15% or higher consistantly in the coming quarters, then we will see the valuations improve considerably over a period of time. For FY'15, we can expect to see Zicom's EPS to reach a level of Rs.28-29/-. Even at a conservative fair valuation of 8-10 times, it's fair price comes to about Rs.230 to 280 range. I am expecting Zicom's share price to bridge this huge gap to quite an extent over the next 3-4 quarters.
Happy Investing!!!
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