Tuesday, May 24, 2011

Smartlink – trading buy - 32% dividend yield

Smartlink – trading buy -32% dividend yield
Recently many small /mid cap firms sold their core businesses at a good premium but without offering open offer / sharing the gains with the public shareholders. I.e merely exploiting a loophole to avoid open offer to public shareholders. Most of them these kind of fishy deals can be flagged off by key risk factors such as low promoter shareholding and promoter interest in other non related businesses such as real estate.
Same thing happened with Smartlink when it sold its networking product Digilink for Rs. 500 crores to French firm Schneider Electric India.Details here. Schneider has been gobbling many Indian products.It recently bought another listed indian firm in the same space APW President
Smartlink has finally taken a step that will reduce the doubts of critics to a certain extent by declaring a dividend of 32 Rs per share. Or Rs 96 crores. As it was always debt free , even after this it still has ~ 400 crores in cash vs cmp of 100 per share or market cap of 301 crores at cmp.Today it closed up +20% to 100. All time high. At cmp dividend yield is 32%!
As mentioned earlier , key risk factor to spot shady management is to see their share holding. Since Mar`10, promoter holding has increased from 64% to 67%.And clearly this was bullish.
In last 6 months , Smartlink is up 82% vs Sensex down -11%. Chart here
Trading buy  with trailing stop loss of 5-7%
Fundamental related buy - MRO-TEK is also a listed firm in the same space. debt free, cheap but earnings has been negative. Other firm in similar space APW President was also acquired recently.

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