I have been recommending a (Purely) Long Term Investment in Zicom Electronic Security Systems Ltd. since November'2013, when the share price was trading in the under Rs.70 range. Following are the links to the posts I have made on this company in the last 18 months:
1. Platinum available at the price of Silver - 8th November'2013.
2. Zicom Electronic Security Systems Ltd - Steady progress continues - 15th Aug'2014.
3. Zicom Electronic Security Systems Ltd. - Valuations have finally started moving !!! - 14th November'2014.
3. Zicom Electronic Security Systems Ltd. - Valuations have finally started moving !!! - 14th November'2014.
In each of these previous reports, I have been highlighting that Zicom is best suited only for patient Long Term Investors. On the business front it has been growing at a steady but healthy pace. At the end of Dec'14, it's T-T-M Total Income stood at Rs.1085 crores, EBITDA at Rs.135 crores and Net Profit at Rs.46.3 crores. It's EPS stood at Rs.26.30/-. During the March'2015 quarter, Zicom has issued a total of 26 lakh warrants to Promoters & Dubash family (related to Godrej family), which carry a conversion price of Rs.160/- per share. Once these warrants get converted into normal Equity shares, the corresponsing EPS will get diluted by about 15-16%, but it will also boost the company's Book Value substantially. And the extra capital will help reduce the company's dependence on Borrowed money for Working Capital or CAPEX needs. Banks too will be more co-operative as Dubash family is now part of the large shareholders of Zicom.
After spending a few months in the Rs.100-120/- zone, Zicom's stock had rallied to hit a new high of around Rs.190/- in Jan-Feb'15 period. But the stock has now seen a healthy correction to levels of around Rs.140/- and I think is again an excellent opportunity for Long Term Investors to buy shares of this company, with atleast a 2-3 years view. I am expecting Zicom to grow at over 15% Y-o-Y comfortably over the next 2-3 years and hence I strongly believe that the stock can continue to get re-rated upwards towards a P/E ratio of closer to 10 during this period. At the current price of Rs.140/-, it trades at just about 5-6 times it's T-T-M EPS. Over the next 2-3 years, the stock can easily double or more. The only problem being the stock does have the tendency to test it's investor's patience for considerable amounts of time. Ideally one should buy the stock & not watch the prices on weekly or monthly basis. Just monitor it's Quarterly results to ensure that the performance is decent and sit tight. The returns will come. Just remember to buy in small quantities at a time. The trading volumes in this scrip are generally very low.
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