Ashiana is a perfect example of a good company caught in an extremely difficult external environment. The industry was facing a slowdown and COVID is going to give a death blow to many, given their balance sheet they will survive but as Investors best is to forget that you own stock for the next 2-3 years.
My highlights from the Annual report can be accessed here
PS – Evernote highlights are best viewed on a desktop
Portfolio Addition
My last year review of Ashiana housing can be read here where we concluded that
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Lets first look at how they did in Bhiwadi, sales improved by 60% clearly showing early sign of recovery. The management in conference call indicated that even though the inventory overhang in Bhiwadi is 9 to 10 years they have performed significantly well … Read the rest
How to Value Ashiana housing ?
Prof Bakshi has beautifully explained this in one of the comments on his blog, I am reproducing it below for you to read and think.
… Read the restThe approach I like is to take the pre-tax operating cash flows and then deduct (as you’ve mentioned) the amount of money that would needed to be spent from these cash flows, for the acquisition of land for future projects. Here, I would reduce only that part of land purchase cost which is in lieu of EAC. In capex terms that we are more familiar with, this would be analogous to maintenance capex i.e. the amount of capex a company needs to do to maintain its current unit volume and not to grow beyond that. So maintenance capex in manufacturing companies is analogous to the amount of money Ashiana needs to spend on land every year just to maintain the current level of EAC. That cost should be deducted from annual pre-tax operating cash flow. The resulting number would represent the amount of pre-tax owner earnings that the business generates without counting any growth. You can then estimate the present value of that owner earnings stream
Assessing and reviewing your portfolio is critical to be on top of your positions, While till today I have not found any structured way to go about it, What has helped me to think objectively is to focus on
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The next question is how often do you review ? 6 months, 12 months , 2 years ? Frankly there is no right answer – But I found 6-8 months is a good period to start with
Below is my simplistic review of two businesses in model portfolio – If would be foolish to buy … Read the rest