CHI INVESTMENT LTD. (Bse/Nse, Rs. 56/-):
Investment Rationale: Scrip is trading at 81% discount to its valuation of only quoted investments.
CHI was originally incorporated as a Public Ltd. Company and took over the Investment Undertaking of CEAT, pursuant to a scheme of arrangement. CHI is holding a varied investment portfolio consisting of both listed and unlisted companies which are in diversified sectors like power supply, technology, power transmission, plantation, entertainment etc.
CHI derives its entire income from dividends received from these companies. For Q1, company has PAT of 2.60 crs. on Equity of 11.46 crs. Dividend income is tax free. Details of its quoted investments are as under:
QUOTED INVESTMENTS:
Company Name No. of Shares Market Value (Rs., Cr.)
-------------------------- ----------------------
CESC 20, 56, 794. 74.00
CFL Capital 38, 37, 500. 1.30
Harrisons Malayalam 7, 28, 150. 7.70
KEC International 41, 42, 519. 205.00
Phillips Carbon 19, 03, 114. 28.00
RPG Cables 40, 705, 180. 4.20
RPG Life Sciences 41, 145, 244. 4.20
Saregama India 20, 592.325. 21.00
Zensar Technologies 483, 870, 550. 50.00
Market value of above quoted investments is approx. Rs. 396 crs.. It works out to Rs. 314/- per share.
Details of unlisted securities is as under:
UNQUOTED INVESTMENTS:
Company Name No. of Shares
------------------------- ----------------------
Adapt Investments 16,200.
Adorn Investments 17,000.
Bombay Mercantile Co-op.
Bank Ltd. 1,666.
Basic Telephone Services 2.
Brabourne Investments 1,52,000.
Brentwood Investments 6, 68,000. (Rs. 100/- each).
Chattarpati Investments 2, 69, 000. (Rs. 100/- each).
Consolidated Investments 35, 90, 000.
Eastern Aviation & Inds. 5, 00, 000.
Hilltop Holdings India 3, 54, 654.
Jubilee Investment & Inds. 44, 692.
Off Shore India 38, 90, 000.
RPG Communications
Holdings 66, 35, 000.
SICOM 1, 27, 500.
Spencer & Co. 4, 74, 200.
TheGreater Bombay
Coop. Bank 10.
The Thane Janata
Sahakari Bank 10.
Trade Apartments 27, 45, 000.
Yield Investments 43, 45, 000.
B N Elias & Co. 2, 87, 500. (Rs. 100/- each).
Jubilee Investment & Inds. 1, 75, 000. (Rs. 100/- each).
Trikaya Goods Services 5, 00, 000. (Rs. 100/- each).
It is not possible to give valuations to above unlisted securities although investments in companies like Spencer, Sicom should command very high valuations.
Recommendation:
Market value per share is Rs. 314/- whereas CMP is just Rs. 58/-. Thus, scrip is available at 81% discount. Normally, 50% discount is given to the value of investments. In view of same, CHI appears grossly underpriced at present. Further, market value of its quoted investments is likely to grow further in view of:
A) Due to boom in Tea/Rubber Industry, Harrison Malayalam should report better performance.
B) KEC International: Has huge order backlog.
C) Even other companies like RPG Life Science is expected to do better.
If, 50% discount is given to investments of CHI, its share price works out to Rs. 157/-.
Our Price Target:
1) Rs. 80/- in just 1-2 months.
2) Rs. 100-120 in 6 months.
Buying strongly recommended.
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