02 – Once a darling, now an evil

The second part of Series “Once a darling, now an evil”. This series is based on the companies which were once upon a time darling of the market and now, it has wiped out the majority of all those gains. I am trying to put some of the number-crunching facts by which we have identified ongoing issues in the companies and have saved our wealth.

I am starting this part with one of the agro commodity trading company which has an all-time high price of Rs.5500 and now last traded price at Rs.1.60. and high of Rs.506 and Rs.364 in the year 2008 and 2010.

KGNI 01

What a wonderful company!!!! Look at the fixed assets turnover…

But some interesting data…

KGNI 02

Another interesting data….

KGNI 03

Without a payable and without keeping an inventory, the company has achieved a huge turnover. But only receivables are there….

KGNI 04

(Data of FY07-08) This looks something susceptible…. ~10%+ advances of sales… and that reach to ~71% in FY10. Majority of the companies were investment and finance companies.

One other company which involve in the construction activities, which has an all-time high price of Rs.540 and now last traded price at Rs.0.30.

Sancia Global 01

We can see that the company is into the construction business but the company does not have to keep any of the inventories.

Sancia Global 02

Also, debtor days are growing and CFO is negative though the company has reported net profit. Working capital is responsible for negative CFO.

Sancia Global 03

Advances recoverable is ~45% of balance sheet size in FY2010 and ~43% in FY2009. Also, the company has a contingent liability of ~Rs.725 cr which is ~96% of the entire balance sheet size, 2.27x of sales and 319x of net profit in FY10.

Disclosure – Companies mentioned in the article are just for an example & educational purpose. It is not a buy/sell/ hold recommendation. 

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