Calls review:Midfield Industries Ltd
Suggested sell price:397(5.12.2010)
Present price:41
Returns:88%
Link:http://www.arunthestocksguru.com/2010/12/midfield-industries-ltd-blind-sell.html
Scripscan:Midfield Industries Ltd
Code:533220
cmp:397
Story:Midfield provides packaging consumables like high tensile steel strapping in various dimensions and strengths, different seals for different applications, collated nails & corner boards being used for general and the end of line packaging of goods by varied industries.The company faces severe competition both from multi-nationals like ITW Signode, operating on a large scale in India and globally, as well as the fragmented unorganized players in India. It also enjoys very low pricing power. Also, the price-conscious industrial packaging industry has been witnessing increasing client preference for plastic strapping over metal.Midfield takes over 200 days to collect credit sales,compared to the industry average of 3 months.The cash conversion cycle remains a worry for the business going forward.The company’s client base is not diverse as the top 10 customers account for around 48% of their sales.Its revenues are significantly dependent on sale of steel strapping. No long-term contracts with customers add more woes.It would also be prudent to note that midfield's revenues are dependent upon meeting client specific requirements and largely on a case-to-case basis.Thus if there's a change in client's preference from metal to plastic strapping then it can get severely affected.In the past 5 fiscals, the company had reported negative operating cash flows for 3 times, which adds to the concern regarding availability of free cash flows.At present price of 397 its quoting at 35 times its forward earnings which is horrendously over expensive for a tiny company like midfield.To me the fair value should be less than 100rs.Altogether a blind sell
Present update:I know a few people aren't that happy on my calls review as they feel my timing was superb on all of them.Sensex moved hence everything moved.But that's not the case people as just like my buy suggestion I have penned a lot of sell suggestions too.Midfield has been a major nightmare for investors who have bought that company at such huge levels.As can be seen it has tanked by 88% from my suggested sell price.I thought at 70-75 it may stabelize a bit but pathetic market condition and lacklusture result by the company took the toll over it.At present levels, hoping against hope, its a hold but do sell whenever you get a good rally in it.
