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Yates' progression was flying yesterday during the double match day at @playMFL. Just wish my CB would work on things other than shooting! 😅
Huge shoutout to @Alexis_MFL for his daily progression e-mail notes. Be sure to check out MFL Assistant for helpful tools! #playMFL #MGFL
#Manappuram #MGFL #goldfinance
The David that couldn't become Goliath--- (Part 2)
Manappuram Finance Ltd
MCap: 18k | PE: 8.5x | 5 Yr PAT CAGR: 18%
Few people remember this but Manappuram went 15x between Jan 2009 and Dec 2010. Post that the gold prices crashed and the stock fell 80%.
This post is about the period starting 2015 when the company had recovered from the problems of asset quality. In Dec 2014, the company took a majority stake in a small MFI named Ashirvad Microfinance.
I read this as an indication that the worst is behind for the company. I observed the performance for two quarters and built the first position in Aug 2015. At that time the company had over 2000 branches and about 10000 employees. It looked too big for its market cap.
MCap: 1,700 crs | PB 0.5x | PE 7x
The stock witnessed good AUM growth and credit cost reduction resulting in PAT growing from Rs 355 crs in FY 16 to Rs 758 crs in FY 17.
As lucky as I could get, the stock rallied 4x over the next 1 year and topped at Rs 102 before being hit by demonetization.
Post Demonetization
The back was broken and anther round of asset quality issues sprung up. The turnaround for the company needed an extended time period. The stock crashed 40% from its life high till then. But I thought of looking at quarterly results to get more information before exiting my position.
Post correction
MCap 4000 crs | PB 1.2x | PE 8x
The AUM and PAT de-grew but the management comments during earnings call were positive. The company also added new lines of business like Housing Finance, Vehicle finance and Small business loans. It looked like a good strategic move.
The stock was delivering 18% ROE even post earnings de-growth. The valuation still around 1.5x PB and 11x PE. I decided to hold.
2018 NBFC Crises
The company was making a comeback from Demon before the ILFS insolvency resulted in loss of confidence in NBFC sector. The problem lied in builder loans but the Mutual Fund industry decided to stop lending to the whole NBFC sector. Manappuram also suffered and once again the stock fell 50%.
Mcap 5000 crs | PB 1.4x | PE 10x
Even then the Company managed to make a comeback and grew PAT from Rs 678 crs in FY 18 to Rs 1480 crs in FY 20.
Once Covid started I decided to sell the stock. I expected that there would be a new sector that would lead the next bull market.
Why couldn't it Re-Rate ?
Manappuram is one stock that disappointed the optimists and pessimists alike. It is a 10 bagger from 2015 but has witnessed negligible valuation re-rating despite starting from a low valuation (8x PE).
It tells me that valuation re-rating needs more than just good numbers. Three points come to my mind
1. TINA factor: The stock is the sole player the the sector, then the market pays higher valuation on scarcity. Example Zomato.
2. Narrative: If the stock is part of a theme which the market believes very strongly like retailing, renewable energy, EV etc. Stocks backed by narrative would re-rate before the numbers are delivered. Trent trades at 100x PE.
3. Last Man standing: There is an overall sector headwind and your stock is the strongest player. This case the valuation re-rates on account of expected market share gains by virtue of competitors exiting the market. Ex: Titan post demonetization, Bharti Airtel post Jio's entry.
Learnings
Manappuram had all the numbers PAT CAGR > 18%, ROE> 20%. Low leverage of 3x and a secured gold loan book. But Gruh finance had the narrative of Affordable Housing and of course HDFC backing which helped it trade at 18x PB. Manappuram couldn't manage 18x PE.
It is a good idea to hold till a stock re-rates. Re-rating is usually the biggest return generator.
Some stocks take longer than usual. But give yourself a time frame for a stock to re-rate, if it doesn't re-rate despite good numbers for say 3 years, it means the market is unlikely to re-rate in future too. Its then time to look for alternatives and replace the stock.
Disclosure: Own Analysis. No Recommendation.
Sabadou, mas o estagiário vai continuar com o #PalpiteDaMassa:
Quantos pontos de extra-point foram executados pelo nosso kicker no torneio #MGFL?
Continuação do #PalpiteDaMassa:
Quantos pontos Marcelo Mattos e Victor Vilaça têm juntos pela competição (Liga #MGFL) 👟🏈
A liga de todos os mineiros deseja um Feliz Natal 🎄
Que essa data seja marcada por muitos touchdowns !
#feliznatal #mgfl #AmericanFootball #mineiros #NFLBrasil
Ele tem 18 anos, é empreendedor, conquistou 76 jardas durante os jogos, é torcedor do Broncos e jogou pela primeira vez como titular no @galofamericano.
Bruno Patrus é o nome dele, o destaque dos novatos na liga de todos os mineiros.
📸 @joaoguilhermefoto #galofamericano #mgfl
Ele tem 23 anos, é BMX (Bicycle MotoCross), é Wide Receiver na equipe do @galofamericano, é líder em touchdowns e líder em jardas recebidas na MGFL Hinova.
Marcelo Mattos mais conhecido como "Pokemon" é o nome dele!
📸 @joaoguilhermefoto #galofamericano #mgfl #americanfootball
VIROU PASSEIO!!! MAIS UM TOUCHDOWN DO GALO FUTEBOL AMERICANO PRA CIMA DO CRUZEIRO!
33-03 NO PLACAR AGORA
#FABR #MGFL #HinovaBowl https://t.co/Mr6oJDoLBo
A paçoca, minha hamster, torcedora dos Hawks, acompanhando o MGFL.
#MGFL #FABR #HinovaBowl #Seahawks @12s
O GALO VAI AMASSANDO O CRUZEIRO COM O ATAQUE VERTICAL FUNCIONANDO MUITO BEM CONTRA A SECUNDÁRIA FRACA DO CRUZEIRO
27-03 AGORA PRO ALVINEGRO
#FABR #MGFL #HinovaBowl https://t.co/Mr6oJDGmZY
Ryan David pick-six! Galo 20-03. Ryan se torna o recordista de interceptações na história do Galo (5). Info de @danlacalle. Vale lembrar que Ryan veio recentemente do combine da NFL no México e no primeiro semestre quase jogou pela CFL. O LB é diferenciado! #MGFL
TOOOOOOOOOUCHDOWN DO GALO!!!
PICK SIX DO QB DO CRUZEIRO COMPLICANDO AINDA MAIS A VIDA DO TIME AZUL
GALO 20-03 CRUZEIRO
#FABR #MGFL #HinovaBowl https://t.co/Mr6oJDGmZY
O que faz o Cruzeiro ter chances no ataque, é a mobilidade do quarterback, Talon Rogash. Uma alternativa pro Galo pode ser um jogador de spy na defesa, ou seja, um defensor de olho só no quarterback adversário #MGFL
O Galo com menos de 10 snaps ofensivos, construiu a vantagem, na frente por 13-03 no segundo período. A habilidade atlética desse time do Galo é fora de série! O Cruzeiro até constrói ofensivamente, mas muito pouco comparado com o Galo #MGFL
O @GaloFAmericano está atropelando o Cruzeiro FA na final da Liga Mineira de Futebol Americano.
13x3 ao final do primeiro tempo.
@MgflLiga #MGFL
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