Multi Baggers

Bombay Burmah Trading Corp

Company background:

The Bombay Burmah Trading Corp. Ltd. (BBTCL), a part of the prestigious “WADIA Group” is one of the oldest companies of Pre-independence era, still flourishing with its core values, ethics and competency in trade. It is the second oldest publicly quoted company with an annual turnover of 45 million dollars. Post its immense success in the teak business, the company has diversified its interests in Tea, Coffee, Dental Products and Formica Laminates. BBTCL include investments in marquee companies like Britannia Industries Limited (BIL) and Bombay Dyeing and Mfg Co.

Investment Rationale:

Huge Value unlocking from Quoted & Un-quoted Investments: BBTCL through its Mauritius arm, Leila Lands has acquired 100% of Britannia Brand from Singapore based Danone Asia. Leila Lands` indirect shareholding in Britannia Industries, increasing from 25.48% to 50.96%. With this acquisition, Britannia Brand has now become an indirect subsidiary of BBTCL and its arm, Leila Lands. As a result of which the Quoted Investment Portfolio of BBTCL increased by Rs 2465 crore.

Considering the Direct & Indirect Quoted Investment Portfolio of BBTL, we arrive at the Intrinsic Value of Rs 2098/share of BBTL. Assuming a Holding Company Discount Rate of 50%, we arrive at a fair value of Rs. 1049/Share which against a CMP of Rs 424/share, BBTCL looks highly attractive investment opportunity.

Strong Brand & Diversified business model: BBTCL’s group of eight estates are situated in the district of 'Kodagu' (Coorg) in Karnataka State covering an area of approximately 4,105 sq.kms of which 2,822 hectares under tea produce 8 million kgs of Tea p.a. BBTCL holds the distinction of being amongst most eminent and reputed manufacturers and exporters of naturally grown “ Organic Tea”.

BBTCL also manufactures high quality Laminates under the brand name SUNMICA the name needs no introduction, In India it has become synonymous with top quality Laminates. On top of the product quality, SUNMICA has penetrated every nook and corner of the country. Indo Java Rubber Planting & Trading Company, wholly owned subsidiary of BBTC, undertakes plantation and processing of Rubber for which the company has nearly 1385 Hectares of good quality Rubber Plantations.

Venturing in Realty: BBTCL is pursuing Real Estate Development of its Properties at Kanjur Marg, Mumbai and Coimbatore. These assets have been converted into stock-in trade and all necessary permissions for development of the properties have been received, We expect the company to unlock huge value by encashing the strong demand from the Realty Sector.

Price outlook:

BBTCL at a CMP of Rs 424/share, is available at a fraction of its fair investment value considering its quoted & unquoted investment portfolio. We apply an aggressive holding company discount of 70% on BBTCL’s intrinsic value of Rs 2098/share, valuing the stock at Rs 629/share (exclusive of its core business valuations) and recommend our Investors a strong buy with a 12-month price target of Rs 629/share, an upside potential of 48%.

Financials:

Source: Company, KRChoksey Research

Disclaimer:

This publication has been prepared solely for information purpose and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed to be reliable, investors are advised to satisfy themselves before making any investments. Kisan Ratilal Choksey Shares & Sec Pvt Ltd., does not bear any responsibility for the authentication of the information contained in the reports and consequently, is not liable for any decisions taken based on the same. Further, KRC Research Reports only provide information updates and analysis. All opinion for buying and selling are available to investors when they are registered clients of KRC Investment Advisory Services. As per SEBI requirements it is stated that, Kisan Ratilal Choksey Shares & Sec Pvt Ltd., and/or individuals thereof may have positions in securities referred herein and may make purchases or sale thereof while this report is in circulation.