Home » World News » TBZ IPO: Investors should wait and watch, says Fairwealth Securities

TBZ IPO: Investors should wait and watch, says Fairwealth Securities

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 540 other followers

Tweet!

Error: Twitter did not respond. Please wait a few minutes and refresh this page.

NEW DELHI: Tribhovandas Bhimji Zaveri Ltd (TBZ) plans to raise Rs 2,100 million through 16.7 million shares to fund its expansion plans of establishing new showrooms across the country and to meet its working capital requirements.

The company is into the retail jewellery business which is dominated by the unorganized market controlling 90% of the market share. In the organized market, TBZ has peers like Gitanjali Gems and Tanishq by Titan, the latter being the largest branded jewellery retailer in India.

Key Positives:

The company recorded a robust 40% growth in its top line while earnings have grown at 75% CAGR over FY08-11. Further, the company has already achieved a turnover of Rs 11,185 million in the first nine months which translates into a 25% annualized growth for FY12E.

The company’s operating margins have also improved over the years to 9.2% in 9MFY12 from 5.4% in FY08 primarily due to the increase in the share of diamond jewellery and rising gold prices. TBZ has 14 showrooms out of which 11 are large format stores with an area of ~3000 sq ft.

Concerns:

Volume growth in case of gold jewellery seems to be a major concern for the company due to the rising and volatile gold prices. Company registered mere 8% growth in gold jewellery volumes as against 26% in diamond jewellery.

Further annualizing the 9 months volumes for the company we expect the company might actually deliver a volume degrowth in case of gold jewellery while a lesser 12%-13% growth in diamond jewellery volumes. TBZs plans to quadruple its showrooms to 57 from current 14 by FY15 would involve huge capex spending which might lower the return ratios as well as impact the operating margins.

TBZ inventory turnover ratio has seen a downward trend falling from 3.1 times in FY10 to 2.8 in FY11 and further to 2.2in 9MFY12. Another risk with TBZ as compared to Titan is that the inventory of gold itself is subject to greater price fluctuations as compared to the latter which buys gold on lease rather than outright purchase.

Recommendation:

At the upper band of the price band, TBZ is valued at 12.5x of its 9MFY12 annualized EPS of Rs.10.06. Company which has peers like Titan and Gitanjali gems which although fall in the same sector aren’t strictly comparable due to their size and reach.

Titan Industries is currently trading at 35x while Gitanjali Gems is trading at 6x its FY12 earnings.

We believe investors would be better off to wait and watch as to how the company actually delivers on its expansion plans, relook at the factors and then take a call on the stock from a longer term horizon.

Having said this, investors with a higher risk appetite can certainly look at the stock at the IPO price.

Advertisements

6 Comments

  1. […] #split {}#single {}#splitalign {margin-left: auto; margin-right: auto;}#singlealign {margin-left: auto; margin-right: auto;}#splittitlebox {text-align: center;}#singletitlebox {text-align: center;}.linkboxtext {line-height: 1.4em;}.linkboxcontainer {padding: 7px 7px 7px 7px;background-color:#eeeeee;border-color:#000000;border-width:0px; border-style:solid;}.linkboxdisplay {padding: 7px 7px 7px 7px;}.linkboxdisplay td {text-align: center;}.linkboxdisplay a:link {text-decoration: none;}.linkboxdisplay a:hover {text-decoration: underline;} function opensplitdropdown() { document.getElementById('splittablelinks').style.display = ''; document.getElementById('splitmouse').style.display = 'none'; var titleincell = document.getElementById('titleincell').value; if (titleincell == 'yes') {document.getElementById('splittitletext').style.display = 'none';} } function closesplitdropdown() { document.getElementById('splittablelinks').style.display = 'none'; document.getElementById('splitmouse').style.display = ''; var titleincell = document.getElementById('titleincell').value; if (titleincell == 'yes') {document.getElementById('splittitletext').style.display = '';} } European stock markets on Thursday early rebound in banks and resources stocks led the gainsList of some of the best stock market trading & investing booksBanking and pharmaceutical stocks boost European shares closed 0.5 percent higherMaruti Suzuki to launch “The Dzire 3.99 Compact Sedan” next monthMaruti Suzuki India renames old Dzire as ‘Swift Dzire Tour’Bargain hunters help Britain's FTSE recoup lossesBargain hunting to support European shares closed up 1 percentTBZ IPO: Investors should wait and watch, says Fairwealth Securities […]

  2. maui lodging says:

    in traffic and improve overall page optimization..in

    this article i’m going to share a few excellent resources which you can use to find high quality free pictures for your blog.where to find free pictures for blogsstock xchng – stock exchange provides a wide range of creative textures and

  3. have needed the money and resources to

    start and maintain them all. in order to manage a large number of blogs and keep them all updated and promoted, tasks have to be outsourced, which means the blogger is paying other people to do work. not everybody has enough

  4. Popcorntime says:

    order to determine how my characters may

    have looked or felt while speaking. if i can cut out a line of awkward description simply by using “sarcastically” or “sardonically,” i’ll do it. if some critic wants to call me sloppy for it, hell, i’ll gladly keep joanne company.

  5. concrete recommendation of which avenue is deemed

    to be best at that moment.evaluation reportshere the technical author will examine the outcome of a particular project and make a determination as to the benefits and return on investment. often called assessment reports, they are a key part of the

  6. you.once you have written for a few

    of the sites you should probably pick 2 or 3 that you want to commit to on a regular basis. there are a couple of reasons for this. the main reason is that you’ll be able to get more money but

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: