I would have gambled on this one, but the market isn't right for speculating in IPOs.
The IPO has been priced steeply and nothing has been left on the table for the investors.
Even if the stock manages to list at a premium, I doubt the stock will go anywhere in the medium-term.
I expect it to fall to or below the IPO price, just like Career Point has done.
The subscription would be huge so allotment would be difficult, even for full application it may go for lottery. One can gamble for one lot, only issue is that the money will be blocked.
Career Point doubled the money on listing, so for those who apply and dump were rewarded
I am bullish on the sector it is operating in. In metros there is a visible demand for day care and pre-school. Current concept of nuclear families, coupled with the fact that the new mommies and dadies are loaded with mullah and won't backtrack on splurging it on their kids, this sector has good future.
Usually ipo of stocks operating in sun shine sectors which yet doesn't have established organized players has yielded huge returns on debut. E.g Cox and Kings, Career Point, Jubiliant Foodworks(Dominos) etc. also Suzlon, Educomp.
But Talwalkar gave moderate returns, VaTech Wabug tanked quickly.
1. Can somebody from Mumbai comment on what is the image of this "tree house school" in public ?
2. I don't know about the financials of this company, experts like Alchemist and man4urheart can comment. PE of 40 plus is not a concern when there is a herd running after a small pie, what do you say, apply and dump as usual?
3. One concern is current volatility in the market, what are your views?
Last edited by Atiker : 12th August 2011 at 12:31 AM.
Our auditors for the respective financial years have highlighted the following matters of emphasis in relation to the financial statements for Fiscal 2010, 2009 and 2008:
Fiscal 2010
Significant delays had been observed in depositing income tax with the appropriate authorities in large number of cases. No undisputed amounts payable in respect thereof were outstanding at the year-end for a period of more than six months from the date they became payable.
Quote:
Fiscal 2008
Delays in few case of deposit of undisputed material statutory dues including provident fund, investor education and protection fund, employees' state insurance, income-tax, sales-tax, wealth-tax, service-tax, custom duty, excise duty and cess, as applicable, with the appropriate authorities during the period, were observed.
That's not a good sign.
The company doesn't seem to be serious about paying taxes on time.
2. I don't know about the financials of this company, experts like Alchemist and man4urheart can comment. PE of 40 plus is not a concern when there is a herd running after a small pie, what do you say, apply and dump as usual?
Based on FY 2010 earnings, the PE is over 100.
Unless there is exceptionally high demand, I think it is best to skip this IPO.
and made my mind to better gamble with GTL type shares rather than risking capital here. As I already have bitten badly by Acropetal technologies post-ipo.
Also as someone asked I have never seen these schools in Mumbai. May be they open only where the niche public exists.
The address number 18 is just around my place hardly 5 minutes walk.And i still can't recall this address. Will check now once i start my dentist visit in coming days near the place.
Though you are right Alchemist that people do pay money to get admissions but i still feel it's not too feasible model in downturn.
Because if we say about higher education and its cost being too high still we get finance from banks as after the course the person starts paying the loan.I don't see loans being disperse for pre-schools.Also, I feel one feels the pinch harder and also there is not exponential growth of people every year for getting admissions .Also the staff are paid handsomely and it's not only the school which make huge profit.
But still this stock looks much like Jubilant Foodworks and Lovable Lingerie structure. Might enjoy too much air if they starts new schools in new areas and places and continue but somehow I look it as Ponzi model.
I just had a look at this company. It has 224 branches, where each branch produce sales of 17 Lakhs and profit of 4 lakhs.
They have NPM of 23%.
They plan to add 6 new branches this year! you can estimate the increase of profit an sales from our per branch estimate!
I was wondering anybody interested in doing this business can actually take their franchise. They need 1000 square feet of space. In a city like thane outskirts of mumbai, this kind of franchise will require a capital investment of around 1 to1.5 crores, earning a profit of 4 Lakhs. So franchise is actually not that profitable game!
As per warren Buffet technique I am using to estimate till now for all other scripts I have analyzed puts the value of this share at 45 Rs using 9% as discount rate
Book value of this share simply assets minus liabilities = 32 Rs!
At price of 125, it is trading 4 times book value and around 4 times it's estimated business Value.
Tree House Education and Accessories IPO
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