Can Fin Homes >> Multibagger Analysis

In this article we would like to evaluate the Multibagger Potential of Can Fin Homes Ltd.  The primary attraction is this Branded Institution is quoting below Book Value.

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About: CFHL was promoted in 1987, the "International Year for Shelter for the Homeless" by Canara Bank in association with reputed financial institutions including HDFC and UTI. Now NHB is also an important equity holder in CFHL.

Website: http://www.canfinhomes.com/

Let us start the job:

Warren Buffett Checklist

History of Consistently Increasing Sales, Earnings & Cash Flow image
Durable Competitive Advantage Company provides attractive interest rates, but bigger player exists in the arena, the solid growth in housing loans remains the core potential for our company.  The recent management restructuring had paved 30% growth in EPS compared with the 10% growth for past 10 years. image
Future Growth Drivers India’s home loan market is growing in rate of 30%. image
Conservative Debt (long term debt < 3 Net Profit) No.  The total liabilities is around 300 crores & latest Net Profit is 55 crores, so the formula does not match.  But eventually Banks & Financing companies have high debt ratios. image
Return on Equity must be Above Average Company is providing ROE around 14%, which is slightly lower than our 15% expectation. image
Low CAPEX required to maintain current operations Yes. image
Management is holding / buying the stock Yes. Promoter holding is around 40%. image
Price is Under Valued (< intrinsic value) Stock is quoting 30% discount to Book Value. image
Stock Price is consolidating Almost consolidating with down from 52wh. image

Additional Futurecaps Checklist

PE, PB Ratio PE around 5, PB around 0.7 which are really attractive. image
Cash Flow Positive Negative Net Cash Flow, but Operating Cash Flow is positive. image
Paying Dividends, Tax Yes. image
EPS Growth Rate 10% to 20%, but the Trailing year should show higher rates. image
Expected Gain in 10 Years Considering EPS growth around 20%, the stock price should double every 4-5 years.  For a 10 year period this could yield 4 times returns & a PE Peak around 12 should yield total of 8-10 times returns. image
Power of Brand Branding attracts more sales, more profit margins!  Company have the trust & fame of CANARA BANK! image
Corporate Governance, Reputation of Leaders Company consistently behave well on corporate governance norms. image

Additional Points

The current past year results are yet to declare, it shown above 30% growth in Net Profit & yield higher EPS resulting in lower PE.  We expect the new PE Ratio around 3-4.  

Declaration

Considering the under-valuation, growth rate, brand name, we declare Can Fin Homes as a potential multibagger.

Allocation

Although it is a B Group stock, but being large cap we recommend the regular 5-10% allocation of your total yearly stock corpus.

Disclaimer

Futurecaps recommends 20 to 25 multibaggers per year, We expect a 25% to 50% allocation of your savings in equity. The stocks recommended here are gone through Analysts of several years experience in stock market. Although they were successful in predicting future multibaggers, the overall stock market is a risky game.  Filtering quality stocks from the total of 4000 companies should reduce the total risks.  The past performance of the company might not sustain in future, but through proper diversification we are sure about multibagger-returns in the total portfolio.  We recommend the reader to put his/her own thoughts, invest wisely taking responsibility by themselves.

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