FirstCall Research gives buy on Neo Corp International.

Firstcall Research comes up with a report giving a buy call on NCIL. Here is the link http://www.moneycontrol.com/news/recommendations/buy-neo-corp-targetrs-64-firstcall-research_2670021.html

Accounting tweaks

COOKIE JAR ACCOUNTING 

Source : Investopedia

A disingenuous accounting practice in which periods of good financial results are used to create reserves that shore up profits in lean years. “Cookie jar accounting” is used by a company to smooth out volatility in its financial results, thus giving investors the misleading impression that it is consistently meeting earnings targets. This reliable earnings performance is generally rewarded by investors, who assign the company a premium valuation. Regulators frown on the practice since it misrepresents a company’s performance, which may be very different in reality from what it purports to be.

 

The term may be derived from the fact that a company which employs this practice dips into the “cookie jar” of reserves whenever it feels like it. But the company may have to pay a steep price if it is caught with its hand in the proverbial cookie jar.

One-time charges and special items are a couple of areas where a company can manipulate numbers to create cookie jar reserves. Potential investors should therefore scrutinize these numbers carefully before committing investment capital to the stock.

One of the best-known cases of cookie jar accounting in recent years was that of computer giant Dell, which in July 2010 agreed to pay a $100 million penalty to the Securities and Exchange Commission (SEC) to settle SEC allegations that it used cookie jar reserves. The SEC maintained that Dell would have missed analysts’ earnings estimates in every quarter between 2002 and 2006 had it not dipped into these reserves to cover shortfalls in its operating results. The cookie jar reserves were created through undisclosed payments that Dell received from chip giant Intel in return for agreeing to use Intel’s CPU chips exclusively in its computers. (Intel made these payments to Dell to lock out rival chipmaker Advanced Micro Devices from Dell computers.)

 

The SEC also said that Dell did not disclose to investors that it was drawing on these reserves. The Intel payments made up a huge chunk of Dell’s profits, accounting for as much as 72% of its quarterly operating income at the peak. Dell’s quarterly profits fell significantly in 2007 after it ended the arrangement with Intel. The SEC alleged that while Dell said the decline in profitability was due to an aggressive product-pricing strategy and higher component prices, the real reason was that it was no longer receiving the payments from Intel.

Neo Corp International results update.

  Neo Corp International Ltd (NCIL) suggested on the blog on the 26^th March 2015 Click here for the link came out with its financial results on 1^st June 2015. Following is the summary of the results :                           

Particulars	FY 14-15 Q4	FY 13-14 Q4	% change
Sales	Rs 1357 Cr	Rs 984 Cr	38%
Net profit	Rs 45 Cr	Rs 30 Cr	50%
EPS	11.83	7.89	50%

 

  

As we can see above Neo has had another great year of 40% topline growth. Neo witnessed a 50% growth in bottomline after posting an increase in sales by 40%. This is a very hot sector which has a very huge untapped potential in the world especially India. Neo Corp is well equipped and ready to cater to the increasing demands for technical textiles. NCIL is apparently available at approx. 40% of the book value and trading at a PE which is 1/10^th of the industry PE. It has a long way to go northwards, stay invested.

Happy investing.

10 mistakes that can derail your financial life and ways to avoid them.

To err is human. But some mistakes can completely derail your financial life. In fact, managing your finances and making smart money decisions can be a challenge and it is inevitable that mistakes will be made.

However, "sometimes even a single financial mistake may be detrimental to your financial goals. In fact, for so many aspects of financial planning, there is no going back, at least without some sort of penalty", according to Harminder Garg, a certified financial planner for Financial Planning Standards Board India.

Let's take a look at some of these mistakes and ways to avoid them:

Mistake #1: Having No Financial Plan

Too many people put financial planning on the backburner until they get older, when panic starts to set in. But having no financial plan or putting off financial planning may be the biggest mistake of all.

"People generally only seek the services of an accountant, for example, when they need to file tax returns. Financial planning is something you can put off easily as there is no requirement for instant gratification - unlike if you have a pain in your body. However, just as putting off visits to a doctor can lead to huge complications, so can delaying an annual check-up with a financial planner.

Therefore, if you want to adequately save for your family and your future or simply retire rich, you first need to get your financial house in order and that can be done only through proper financial planning.

"Financial planning requires thinking through and setting of lifetime financial goals which enable one to determine the appropriate asset allocation required for oneself and one's family. If this asset allocation is followed in a disciplined manner, goals can be achieved without the uncertainties of the market," Lovaii Navlakhi, MD & Chief Financial Planner of the Bangalore-based International Money Matters, says.

Therefore, figure out where you are, where you want to be and put in place a realistic plan for getting there.

Mistake #2: Not Starting Early In Life

Even if some people want to plan for their future, they generally think they need not plan early. Depending upon their individual time frame, thus, they do not like planning for more than three weeks or three months or, rarely, three years in advance.

"Let's imagine that we are kicking off from the centre in a football match. We need to score a goal more than the other team to win. You can't hope that you will defend your goal for 89 minutes and then attack in the last minute and score the winning goal," Navlakhi says.

It is just like planning funds for retirement about a year before the actual retirement date, or even taking a life insurance policy a month before one's death, according to Navlakhi. Having a goal and starting early to meet that goal are absolute musts.

Mistake #3: Not Investing Slowly & Systematically

The problem for many people is that they live month to month and don't develop healthy saving habits until they are in their thirties or forties.

"Contributions to a savings plan should be recognized as the first of your necessary monthly expenses, so that money saved will never be thought of as money that can be spent. Even if you start saving in small amounts now, you can always increase in the future," Navlakhi says. 

 Mistake #4: Putting All Eggs In One Basket

Another common mistake is non-diversification of portfolio. In this case, a major part of the portfolio is invested in a single or same type of financial instrument which increases risks, resulting in high losses/profits.

"Individuals should, therefore, diversify their portfolio, i.e. all your money should not be invested in the same asset class. Investment portfolios should be diversified in accordance to one's risk appetite," Garg says.

There are two primary reasons to diversify your portfolio - one is to take maximum advantage of the market conditions, and the other is to protect yourself against downturns. The basic concept is to divide your investments among asset classes where returns are inversely proportional to each other.

Mistake #5: Having Unrealistic Expectations

There's nothing wrong with hoping for the 'best' from your investments, but you could be heading for trouble if your financial goals are based on unrealistic assumptions.

For instance, lots of stocks have generated more than 50 per cent returns during the bull run in recent years. However, it doesn't mean you should always expect the same kind of return from the stock markets. Similarly, if your property prices more than doubled during 2004-07, it doesn't mean you should expect at least 30 per cent annual return from real estate in the future. The bursting of stock market bubbles is a case in point.

Therefore, when renowned investor Warren Buffett says earning more than 12 per cent in a stock is pure dumb luck and you laugh at it, you're surely in for trouble!

Mistake #6: Not Sticking To The Budget

You are more likely to face financial problems if you have been extravagant in your expenses. However, in a bid to tide over the current crisis and also avoid such crises in the future, you need to adhere to some financial discipline -- making abudget  and sticking to it is one of them. However, to do that it is important to keep track of your spends on a day to day basis to ensure your money is going to the right places. If you are already in the habit of making budgets, then you can also readjust your budget to suit your aims.

Always remember that a rupee saved is a rupee earned. Therefore, stick to discretionary budgets so you can handle the uncertainty in non-discretionary expenses.

Mistake #7: Having No Rainy Day Fund

The need for having an emergency fund, particularly keeping some cash at home or in a bank account, has always been emphasised by investment planners.

"Even standard financial principles suggest that you should keep aside cash to cover three to six months of living expenses, which would also be able to cover most emergency expenses," Garg says.

In real life, however, very few people see the importance of keeping an emergency fund in their portfolio. Forget those who can't afford it. It's true even for those who heavily invest in stocks, real estate and other assets - and sometimes pay heavily for their mistake.

 Mistake #8: Not Having Adequate Cover

It is pretty evident that an economic recession , a pay cut or higher interest rates on loans would all have much less of a negative impact on your family's financial future than the death of the bread winner of the family. However, few people realize the importance of having sufficient risk cover as most people look at insurance as a no-return investment. Also, as the financial needs of individuals have evolved over time, there is heightened importance of risk protection combined with wealth creation.

"Insurance products can help provide an important protective shield around one's financial goals and retirement savings. They also help in effectively managing a diversity of risks and allows one to enter their retirement years with more confidence," Atul Surana, CFP at Catalyst Financial Planning, says.

Mistake #9: Counting on Tomorrow's Income

Counting on tomorrow'sincome to spend today is a big mistake which has already been proved by the current crisis. In fact, until the financial meltdown hit us, the spending levels of individuals, especially in the 25-35-year age group, have been almost equal to their income, if not more.

"With easily available loans and credit cards, they were tempted to indulge even without being able to afford the expense. Now with pay cuts and job losses, they are facing the worse. However, even if you keep your job now, the prevalence of pay cuts makes it clear that you can't count on an ever-expanding paycheck to make up for your spending," Navlakhi says.

Therefore, you should avoid counting on tomorrow's income as far as possible.

Mistake #10: Being Guided By Fear & Greed

Many investors have been losing money, particularly in stock markets, due to their inability to control fear and greed. In a bull market, for instance, the lure of quick wealth is difficult to resist. Greed augments when investors hear stories of fabulous returns being made in the stock market in a short period of time.

"This leads them to speculate, buy shares of unknown companies or create heavy positions in the futures segment without really understanding the risks involved," Ashish Kapur, CEO, Invest Shoppe India, says.

Instead of creating wealth, such investors, thus, burn their fingers the moment market sentiment reverses. In a bear market, on the other hand, investors panic and sell their shares at rock bottom prices, thus losing money again.

Difference between Revenue and Cash flow.

Revenue is the money a company takes in from conducting its regular business operations. Cash flow refers to available cash on hand and may include other sources in addition to revenue from sales of goods and services. Both revenue and cash flow are used as indicators to help investors or analysts evaluate the financial health of a company, but revenue provides a measure of effectiveness in sales and marketing, whereas cash flow is more of a liquidity or money management indicator.

In accrual accounting, revenue is reported at the time a sales transaction takes place and may not necessarily represent cash in hand. Revenue eventually impacts cash flow figures but does not automatically have an immediate effect on them. Cash flow tracks actual cash in hand, cash that may not actually be collected until months after revenue is recorded in the company's financial ledgers.

Cash flow includes operational sales revenues and monetary sources beyond merely sales revenues. Companies often generate or obtain cash in a variety of ways that lie outside the conduct of their main business. These extra sources of money that figure into the calculation of cash flow, but are not normally considered part of operational revenue, include such things as financing and investing. Licensing agreements are another source of cash, one that may be included as ordinary revenue. The critical importance of cash flow lies in the ability for a company to remain functional; it must always have sufficient cash to meet short-term financial obligations.

Revenue should also be understood as a one-way inflow of money into a company, while cash flow represents inflows and outflows of money. Therefore, unlike revenue, cash flow has the possibility of being a negative number or value.

How to get your unclaimed Dividend.

Dear Friends,
 
Every one of us must have some of our money stuck in unclaimed dividend for one or the other reason.
 
Website of IEPF has following link, wherein you can search for Unclaimed Dividend standing in your name along with details of Company Name, Folio No. and Unpaid Dividend Amount.
 
http://www.iepf.gov.in/IEPFWebProject/SearchInvestorAction.do?method=gotoSearchInvestor
 
Going forward, Companies Act proposes to claim even shares pertaining to Unclaimed Dividend, hence it is utmost important to do necessary paperwork and claim your rightful money, before it is too late
 
Regards.

Happy investing.

Stock Picking - Its importance.

When it comes to personal finance and the accumulation of wealth, few subjects are more talked about than stocks. It's easy to understand why: playing the stock market is thrilling. But on this financial roller-coaster ride, we all want to experience the ups without the downs.

In this tutorial, we examine some of the most popular strategies for finding good stocks (or at least avoiding bad ones). In other words, we'll explore the art of stock-picking - selecting stocks based on a certain set of criteria, with the aim of achieving a rate of return that is greater than the market's overall average.

Before exploring the vast world of stock-picking methodologies, we should address a few misconceptions. Many investors new to the stock-picking scene believe that there is some infallible strategy that, once followed, will guarantee success. There is no foolproof system for picking stocks! If you are reading this in search of a magic key to unlock instant wealth, I’m sorry, but i know of no such key.

This doesn't mean you can't expand your wealth through the stock market. It's just better to think of stock-picking as an art rather than a science. There are a few reasons for this:
1. So many factors affect a company's health that it is nearly impossible to construct a formula that will predict success. It is one thing to assemble data that you can work with, but quite another to determine which numbers are relevant.

2. A lot of information is intangible and cannot be measured. The quantifiable aspects of a company, such as profits, are easy enough to find. But how do you measure the qualitative factors, such as the company's staff, its competitive advantages, its reputation and so on? This combination of tangible and intangible aspects makes picking stocks a highly subjective, even intuitive process. 

3. Because of the human (often irrational) element inherent in the forces that move the stock market, stocks do not always do what you anticipate they'll do. Emotions can change quickly and unpredictably. And unfortunately, when confidence turns into fear, the stock market can be a dangerous place.

The bottom line is that there is no one way to pick stocks. Better to think of every stock strategy as nothing more than an application of a theory - a "best guess" of how to invest. And sometimes two seemingly opposed theories can be successful at the same time. Perhaps just as important as considering theory, is determining how well an investment strategy fits your personal outlook, time frame, risk tolerance and the amount of time you want to devote to investing and picking stocks.

At this point, you may be asking yourself why stock-picking is so important. Why worry so much about it? Why spend hours doing it? The answer is simple: wealth. If you become a good stock-picker, you can increase your personal wealth exponentially.There are several stocks which have multiplied 10x 20x 50x 100x over a period of time. Thus if one becomes a good stock picker then one can multiply their wealth and can give huge returns.

Ever heard someone say that a company has "strong fundamentals"? The phrase is so overused that it's become somewhat of a cliché. And analyst can refer to a company's fundamentals without actually saying anything meaningful. So here we define exactly what fundamentals are, how and why they are analyzed, and why fundamental analysis is often a great starting point to picking good companies.

The Theory 

Doing basic fundamental valuation is quite straightforward; all it takes is a little time and energy. The goal of analyzing a company's fundamentals is to find a stock's , a fancy term for what you believe a stock is really worth - as opposed to the value at which it is being traded in the marketplace. If the intrinsic value is more than the current share price, your analysis is showing that the stock is worth more than its price and that it makes sense to buy the stock. 

Although there are many different methods of finding the intrinsic value, the premise behind all the strategies is the same: a company is worth the sum of its discounted cash flows. In plain English, this means that a company is worth all of its future profits added together. And these future profits must be discounted to account for the time value of money, that is, the force by which the $1 you receive in a year's time is worth less than $1 you receive today. (For further reading, see Understanding the Time Value of Money). 

The idea behind intrinsic value equaling future profits makes sense if you think about how a business provides value for its owner(s). If you have a small business, its worth is the money you can take from the company year after year (not the growth of the stock). And you can take something out of the company only if you have something left over after you pay for supplies and salaries, reinvest in new equipment, and so on. A business is all about profits, plain old revenue minus expenses - the basis of intrinsic value.

Neo Corp International Ltd.

NEO CORP INTERNATIONAL LIMITED(NCIL) – BSE CODE-523820

NCIL is a Public Listed Company with an equity base of 38.02 million shares.

NCIL since its inception was dedicated towards making tailor made products under Packtech and now it has the status of one of the best and reliable suppliers in Packtech products internationally.

It has also entered two more segments of technical textiles namely Geotech and Agrotech.

It is listed only on BSE as of now. It was trading on NSE through Madhya Pradesh Stock Exchange (MPSE).MPSE is in the course of decognitiion hence NCIL permission to trade on NSE was withdrawn since 30^th January 2015. The company has filed an application for relisting and should be traded on NSE soon.

NCIL is also listed on Bourse de Luxembourg(Luxembourg Stock Exchange).

CHARTEREDINVESTOR PICK

Technical textile sector is one of the most innovative branch of the industry in the world, ranking as one of the five high tech sectors with the greatest potential for development. The success of technical textiles is primarily due to the creativity, innovation and versatility in  fibers, yarns and woven/ knitted/ nonwoven fabrics with applications spanning an enormous range of users. The ability of technical textiles to combine with each other and with others to create new functional products offer unlimited opportunities for growth.

Traditionally, North America and Europe have been the major markets for technical textiles in the past but in recent years, the sheer volume of demand from Asia Pacific has outpaced demand from North America and Europe. With better technology capabilities, ever increasing demand from different end user industries, technical textiles are expected have a huge market to cater to globally.

India’s export of technical textiles has grown from US$ 624.95 million during 2007-08 to US$ 1355.04 million in year 2012-13 with a CAGR of 17% indicates encouraging global demand for India’s technical textile products. Furthermore, the import of technical textiles has grown from US$ 835.82 million during 2007-08 to US$ 1434.97 million in year 2012-13 with a CAGR of 11% shows that Indian consumers have significant demand for technical textiles products.

These statistics highlight not only concerted domestic needs, but also India’s potential to address global demands, for technical textiles products. With advancing technology, higher integration with global markets and greater sensitization to market needs, the Indian technical textiles industry demonstrates significant potential, for the development of local industry and prospective entrepreneurs.

Technical textiles are an important part of the textile industry and its potential is still largely untapped in India.

NCIL MANAGEMENT:

Neo Corp is run by learned and highly experienced people from the related fields. Few of them are:

1.   Mr. Shrawan Kumar Patodi : Eminent Lawyer having vast experience in the field of low and 10 years of experience as export executive. Educational qualification - B. Com. M.A., LL.B. and D.H.B.

2.   Mr. Ladharam Patel : 40 years of experience in the manufacturing business.

3.   Mr. Rollande Coderre : An entrepreneur from Canada having experience in vast number of fields like packaging, construction, etc. Educational qualification - Degree in Business Administration and business accounts & finance

THE NUMBER GAME

Let us have a look at the financial results of past years.

Particulars	FY 2010-11	FY 2011-12	FY 2012-13	FY 2013-14	FY 2014-15(Trailing)
Sales	301.99	431.05	626.07	979.34	1307.57
Operating profit Margin	10.76%	11.36%	10.40%	9.91%	9.91%
Profit before interest and depreciation	36.02	55.72	71.49	101.80	128.92
Interest	14.78	22.23	27.43	42.28	54.11
Depreciation	2.72	4.45	6.28	9.67	13.12
Profit before Tax	18.53	29.05	37.77	49.85	61.69
Tax	2.62	7.84	8.81	19.95	21.74
Earnings for shareholders	15.92	21.21	21.13	30.01	39.95
EPS	10.27	5.61	5.59	7.94	10.52

The numbers speak a lot about its performance. The return on the capital employed in to company over a period of 3 years is above 16%. Also the cash flow has been improving. At current levels, NCIL is trading at 2.5 PE which is very much lower as compared to the industry PE of 22. Also the business has huge potential to grow. Trading at 60% of its book value provides huge ground for upmove.

CONTROL MEASURES:

The company has hired world class professionals for proper control over the business activities. This has helped to improve productivity, provide better services, reduced cost and increased returns especially on human capital. The company’s internal control systems are commensurate with the nature of its business and the size and complexity of its operations.

STRENGTHS:

·         NCIL products are of ISO quality standards and the BRC & Astho will enable NCIL to enter rich e markets.

·         Worldwide ever increasing demand.

·         It is also into business of Geotech and Packteck. Thus agricultural and infrastructural activities will give impetus to the growth.

·         It has a large domestic market which helps to spread the risk.

·         New acquisitions will add further to increase in proximity and develop new and better customer relations.

·         NCIL has the highest production capacity of technical textiles in India.

 
WEAKNESS:

·         The market is price sensitive and thus is susceptible to pricing pressure.

·       Competition from other countries.

With a view to take on the competitors in the global markets, NCIL has been increasing its business and developing client relations. It had its business spread across 20+ nations and has been serving 550+ clients.

It has 6 subsidies namely

1.   Europlast Ltd

2.   Sacos Indigo Pvt Ltd

3.   Netflex Infracon Ltd

4.   Polybase Ltd

5.   Polylogic International Pvt Ltd

6.   IPC Packaging Co Ltd

Europlast Ltd was incorporated in UK in 1988 and was engaged in sourcing and distribution technical textiles. The acquisition of Europlast was very crucial. Europlast Ltd was operating for over a decade and established itself as the leading player in its business in Europe. Acquisition of Europlast has proved to be very much advantageous in the form of better customer services, reduction of risk on account of credit sales and also reaching out to more clients.

In the previous financial year NCIL made a big strategic more by acquiring IPC Packaging Co Pvt Ltd. IPC was acquired in November 2014. IPC Packaging Co. Pvt Ltd is based in Bangalore, the IT hub of India for the past 6 years and leading manufacturer of PP / HDPE woven FIBC, Jumbo Bags, sacks, Tarpaulins, Box Bags, PE Liner etc.. IPC has a huge hi-tech production plant spread over 2.6 million sq ft which is located very close to the Industrial sector. IPC was and is being run by veterans with experience of over two decades. This acquisition puts NCIL at the top in its business with highest production capacity in india.

In addition to the technical textile business, Neo Corp also represents Indian Oil Corporation Ltd as Del Credre Associate cum stockiest for the state of Madhya Pradesh. There are two production lines of 300 KTA each for Polypropylene (PP) with Spheripol technology license from Basell, Italy. The product portfolio includes entire range of Homopolymers, Block Copolymers and Random Copolymers.

There is a dedicated HDPE plant of 300 KTA using Basell (Hostalen) slurry process. The product portfolio includes Unimodal as well as Bimodal HDPE grades for various application segments such as Film, Blow Moulding and Pressure Pipes.

The low petroleum prices will benefit to a great extent the company’s polymer business.

http://www.business-standard.com/content/b2b-plastics-polymers/india-china-driving-global-specialty-polymers-market-114100800842_1.html
 

AWARDS AND RECOGNITIONS:

·          Neo Corp enjoys the Star Export House status recognized by the Government of India for the Company’s excellent export performance.

·        It has a Trading House Certificate which is valid for a period of 5 years which ends in 2019. A trading house is an exporter, importer and also a trader that purchases and sells products for other businesses.

·        On 22^nd September 2014 its Inhouse R&D Units recognization was renewed upto 31^st March 2017.

·         NCIL is also a member of the Flexible Intermediate Bulk Container Association(FIBCA).

Some industry related links

http://www.business-standard.com/article/economy-policy/india-s-technical-textile-market-may-touch-32-billion-by-2023-study-114070400796_1.html

http://articles.economictimes.indiatimes.com/keyword/technical-textiles

All the above discussions depict Neo Corp has a huge potential for a great upmove and will prove its mettle in the coming times.

Disclosure: It is safe to assume that I have vested interest in Neo Corp International Ltd and my opinion may be biased. Viewers must consult their financial advisors before any investment.

Happy investing.