Dear Readers,

In Dec’14 we came across a few inter promoter exchange of shares in Kokuyo Camlin (NSE – KOKUYOCAMLIN) at Rs. 80/- per share. Interestingly, at that point the stock was quoting at around 60/- per share. Considering the fact that Kokuyo Camlin has Japanese Promoters and there have been several de-listing attempts by companies with Japanese Promoters, we speculated on the expected de-listing of Kokuyo Camlin and recommended the opportunity to Alpha + / Alpha + and Model Portfolio members for Jan’15 at around Rs 62/- per share (CMP – 91.5)

Well, till now there hasn’t been any announcement by the promoters about any de-listing plans, however the recent surge in the stock price suggest that something might be on the cards.

Besides high quality stocks for long term wealth compounding, we keep recommending such Special situation opportunities to our Alpha + / Alpha + and Model Portfolio members as these are to a certain extent immune from regular market risks and volatility. Also, they act as temporary parking places for cash waiting to be invested in high-quality companies.

For those interested in participating in similar Special situation opportunities, we have produced below the detailed note on Kokuyo Camlin opportunity shared with Alpha + members on 31stDec’14.

Disclosure: Our Alpha + / Alpha + and Model Portfolio members are still holding the stock. I do not have personal investment in the stock.

Alpha Plus: Kokuyo Camlin Ltd (NSE -KOKUYOCMLN) – Speculation on expected de-listing

Dear Sir,

We would like to bring to your notice a Speculation cum expected Special situation opportunity on Kokuyo Camlin Ltd.

NSE Code – KOKUYOCMLN; BSE Code – 523207

NSE CMP – 62.10; BSE CMP – 62.10

Date: 31st Dec’14

Note: Please read the entire note, especially Risks/concerns section for an independent assessment of the risk reward ratio in this opportunity. In case you participate, we would suggest not more than 3% allocation of your overall portfolio value, though you are free to decide your portfolio allocation for the stock.

Kokuyo Camlin (NSE – KOKUYOCMLN) – Basic details

Kokuyo Camlin Ltd., formerly known as Camlin Ltd., is an Indian stationery company based in Mumbai, India. Camlin manufactures art materials, marker pens, fountain pens, inks, pencils, and other stationery products. Camlin is among the leading companies in producing artist materials including water colour, oil paints, pastels, acrylics, inks, pencils etc. for both artists and students.

In May 2011 Kokuyo and Camlin came together to create Kokuyo Camlin Limited and in subsequent months Kokuyo S&T Company limited, a wholly owned subsidiary of Kokuyo Company Limited acquired 50.74%stake in the company with a mix of preferential allotment of shares at Rs 85/-per share, purchase of shares from existing promoters at Rs 110/- per share and through mandatory open offer to public shareholders at Rs 110/- per share.

Including existing Indian promoters and the new promoters Kokuyo, at the end of Jun’13, promoters cumulatively held 63.95%stake in the company.

On 24th Jul’13, the company announced rights issue in the ratio of 14 shares for every 29 shares held by the shareholders at a price of Rs 33/- per share. At that time the stock was trading around 28-30 and therefore the rights issue was announced at a premium which discouraged public shareholders from participating and allowed Kokuyo to further increase its stake in the company to 65.77% by the end of Sep’13 and cumulative promoter holding to 74.98%.

Recently on 22nd Dec’14, Kokuyo S&T further acquired 3.49% stake from Indian promoters through off-market transaction at Rs. 80/- per share. With the same, Kokuyo S&T’s holding in the company has increased to 69.26% and the cumulative promoter holding stands at 74.99%.

Kokuyo S&T may come up with de-listing offer

We believe there’s high probability that Kokuyo S&T may soon come up with a de-listing offer for Kokuyo Camlin Ltd.

We derive our optimism from the following facts:

  1. In the last 18-24 months, several companies with Japanese Promoters have announced de-listing offers.
  2. Recently Panasonic Appliances India announced de-listing offer in Oct 2014 and before announcing the de-listing offer the Japanese promoters had carried out a similar off-market purchase of shares from Indian Promoters as described above for Kokuyo Camlin.
  3. When the company came up with rights issue in July2013, the shares were offered at a premium to the prevailing market price and allowed Kokuyo S&T to increase its holding in the company from 50.74% to65.77% without triggering an open offer. In general the rights issue is offered at discount to the prevailing market price, however we believe offering share sat premium could be a ploy to shore up further stake in the company.

We believe if the company does come up with de-listing offer then the stock price will shoot up to 80 +levels, while if the company doesn’t come up with de-listing offer in the next3-4 months then the stock can drift lower to 52-55 levels.

Risks/Concerns

In general we participate in de-listing opportunities after the same has already been announced; however in this case Kokuyo Camlin hasn’t announced any de-listing offer and we are only speculating based on the available facts. There may/may not be any de-listing offer and even if the de-listing offer is announced, there could be considerable delay in the announcement of the same resulting in opportunity cost for the investors.

As mentioned above, in case the de-listing offer is not announced in next 3-4 months the stock can drift lower to 52-55 levels.

Though Kokuyo Camlin is debt free on net-basis, the operating performance of the company has been poor and therefore there’s not much support in terms of fundamentals.

In case of any queries, feel free to drop a mail or call us.

 

Best Regards,

Ekansh Mittal

http://www.katalystwealth.com/

Ph.: 0512-6050062, Mob: +91-9818866676

Email: info@katalystwealth.com

Analyst Details

Name: EkanshMittal                    E-mail Id: ekansh@katalystwealth.com            Ph: +91 512 6050062

Analyst ownership of the stock: No

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