EquityChamp wrote:Pursuant to the amalgamation with Bartleet Finance, Orient Finance has shown clear signs of growth both in asset base and profitability. The company recorded an income of Rs741mn for Q1 of FY 16/17 with PAT of 73 mn.
The company is seen recording an interest yield of around 20% on its loan portfolio for the last couple of quarters which can be termed as bit below the industry average which is around 22% at the moment. Though the interest yield is somewhat below the industry the company has managed to record a loan book growth of 2.6% during quarter ending Jan-Mar 2016 with a further growth of 4.8% during the quarter ending Apr-Jun 2016.
Based on the current trend we can project their earnings as tabulated below. The earnings of 2015/16 were boosted by one off differed tax reversal hence a decline of earnings YoY is not a surprise though the core business operation growth looks promising.
Accordingly the estimated EPS for 16/17 will be Rs2.25. With the current market price of Rs16.50 the stock is trading at a PE of 7.3x and PBV of 1x based on forecasted earnings.
Rs mn 14/15 15/16 16/17F Income 1,363 2,363 3,394 PBT 4 296 397 PAT 4 607 333
The company doesn't declare any dividend for the last three years owing to low profitability. However with improved performance there is a possibility that shareholders may receive a dividend around Rs1.30 for the FY 16/17.
According to shareholders' list close to 145mn shares of issued capital is with top 5 shareholders and therefore this stock is very illiquid too. Aided by this illiquidity and with another bit of increased aggression in business operations with a view to increase the interest yield would turnout this company to be an absolute profitable venture within a two to three years time similar to Union Bank.
Finally my conclusion is if an investor wants to participate to a future winning business and with an holding capacity of one to two years then Orient Finance will be an ideal investment vessel with lower risk threshold. Holding 5000 to 10000 shares will not be in vain for a mid term investor.
Is it good time to collect BFN at this price EC ? Please advice