Transcorp International Ltd- Exchange your Money with It...

Transcorp international ltd belongs to TCI group (Transport corporation of india) which is one of india’s largest logistics company, transporting almost 2.5% of Indian GDP. Transcorp is into Money exchange, inward remittance, tour and travel, real estate and taxi hire business. Money exchange and inward remittance forms the major chunk of the business.  I am also holding Thomas cook from 100/- which is also into same business but with much larger scale.

Tourism sector is going to witness huge growth in india due to inherent geographical and cultural dividend. Development of infrastructure will provide the necessary nutrition for the growth. Same is the case for inward remittance business which deals with remittance of money into india from our NRI brothers. Both these are under the strict control of Govt and RBI and the company has to follow strict compliances and audits. Hence entry barriers to this business are fairly high.

At CMP of 42/- Transcorp is available at a market cap of around 20 cr. But in 2010 it revalued its land holdings to 26 crore which were acquired at the cost of 3 crore and then it transfer this real estate holdings into a separate subsidiary company created for this purpose named Transcorp estate private ltd. I cant get much information regarding its real estate business at present, but we can assume that the same land will be valued around 30 cr now.

It is also having a cash holding of around 8 cr as per latest results. It is also having shares of leading companies like TCS, RIL, Axis bank, Biocon etc at a cost of Rs. 26 lac but I have done the calculations and market value of these is around 1.5 cr at today’s prices of these shares. We add all these and we get 30+8+1.5=39.5 around 40 cr which is double of current market price.

Company currently earns around 3 cr yearly net profit, its net worth is around 40 cr which makes return on equity of only 7.5%. The same point was mentioned in one study also but there is one catch-its networth of 40 cr is inclusive of revaluation reserve of around 23 cr which leaves real equity of around 17 cr and that makes ROE to 20% which is good. Even if I give this 3 cr a PE valuation of 10…it will make total valuation of the company to 40+30=70 cr which is more than thrice the current market valuation.

Although I feel the scope for EPS growth is huge due to scalability of its business which can grow exponentially with the growth of Indian economy. It has also created another subsidiary with the name of Ritco tours and Travels which caters to tour and travel sector. It was created by it to focus on this growing sector…although it currently derives turnover of around 8-10 cr but It is profitable. I can’t get much details about its real estate and travel business but creation of subsidiaries points towards something big on the part of management.

It is a consistent dividend player and yield at current market price is 2%. Corporate governance standards are fairly high as company has given detailed information regarding its subsidiaries in its annual reports.

Good buy at Cmp of 42/- 

Update 13/05/2016: Transcorp has approved the splitting of shares from FV of 10 to FV of 2. So with this, the recommended price as on 12/12/14 becomes 8/-

(Views are personal and should not be taken as a recommendation for buy or sell a stock. Stock markets are inherently risky so kindly do your Due Diligence before investing)