NESCO

MEET AND GREET-NESCO

Market Cap.: ₹ 3535 Cr

Current Price: ₹ 2520

Book Value: ₹ 585.34

P/E: 20.61

Dividend Yield: 0.34%

Face Value: ₹ 10

Promoter Holding - 68.17%

Low Float, Small Equity, Huge Reserves, Positive Cash Flows, Debt Free, Money Spinning Business Model with very less competition - A Blockbuster Recipe for Multibagger- Meet and Greet NESCO.

ABOUT

NESCO has an exhibition centre by the name Bombay Exhibition Centre, head quarter at Goregaon, Mumbai. The 5 lakh square feet Nesco complex, the registered office of the company, was set up in the year 1992, and it holds the distinction of being the largest exhibition centre in India, hosting over 500 national and international exhibitions, trade fairs and events.

PROS

1. The Company is into the business of building private IT Park and providing the space on license basis. It has constructed three commercial buildings. Building IV would be completed by June 2018. If the company completes the building as per the timeline then it will generate huge revenues and add to the top line and bottom line of the company.

2. Cash Rich with no Debt- Nesco has been  consistently generating operating cash flows of over Rs 100 crores since last 3 years. After Building IV comes into operation, we can see NESCO generating around 300 crores cash each year with no debt. This will strongly drive the valuations higher with further increase in reserves. 

3. Nesco Limited  operates in four segments:

IT Park

Bombay Convention & Exhibition Centre

The Industrial Capital Goods Division, Indabrator

Hospitality Division.

4. The company generates a whopping  OPM around 70%  which is improving by the quarters, not much companies can maintain such margins. The Monopoly Power of the exhibition business segment helps the company to enjoy such margins, with location advantage to airport and highways. The Company enjoys 70 acres of free land to its credit. 

5. In FY 2014, Nesco ventured into hospitality services which includes food courts with leading international and national food brands to cater to the growing demand of quality food services from Nesco IT Park and from their exhibition centre.

6. The net profits of NESCO have been increasing at 17% CAGR. A virtually debt free company, having investments of over Rs. 407 crores

7. Strong Business Model with great Revenue Visibility 

With more than 85% revenue coming from secured sources like rentals and exhibitions, NESCO almost holds a recession proof business model and provides unique visibility of revenue for many years to come. 

8. The company has decided to split the shares to FV 2 from FV 10, which will increase liquidity in this scrip. Franklin Templetion Mutual Fund bought 1lac shares at Rs 2385. This also provides confidence for long term investors to invest in NESCO.

Cons

1. Low Dividend Payout Ratio around 0.34%, primarily because they are debt free and invest the free cash in construction of new IT buildings.

2. Completion of construction and operation of Building IV, if delayed will make the process of growth a little slower.

Conclusion

With a muted March quarter, NESCO, is available at atractive valuations, keeping in mind the recent run up in Nifty and Markets. This is an attractive level for long term investors to add this scrip as a core portfolio stock and enjoy multibagger gains for lifetime.

BUY RANGE- (2300-2550)

TARGET- Potential 10x from CMP