Well markets have been boring off-late, But we have some hot news for all King Porinju fans.
Porinju Veliyath today from open market purchased 65,000 shares of Tera Software Ltd from BSE at 72.91.
Tera Software started in 1994 is into providing E-Governance solutions, System Integration & Networking, Software Dev. Consultancy and other IT services.
For Fy 2015, Tera reported revenue of 91 crores, net profit of 3.62 crores and annualized EPS of 2.74.
The stock is trading at 28 times its FY 15 EPS.
The big deal here is that on 2nd November 2015, Tera on BSE announced the following :-
Tera Software Ltd has informed BSE that the Company got the award of work of Rs. 320.88 crores for Implementation and Management of Aerial Optical Fiber Grid to establish wide optical fiber network infrastructure in the state of Andhra Pradesh from INCAP (Infrastructure Corporation of Andhra Pradesh Ltd).
This work is a part of Digital India programme and an initiative by Andhra Pradesh State to provide internet, Video and Telephone services across the 80 million households.
The detailed announcement highlights the Scope Of Work which says :-
a) Optimization of routes designed based on GIS survey.
b) Laying of optical fiber cable in 22,500 kilometers over a period of 9 months.
c) Creation of 2,449 points of presence (PoP) with the networking equipment and configure to deliver the Internet, video & telephone services at the State, Distric and Mandal levels.
d) Setting up of Networking Operating Center (NOC) at central location.
e) Implementing OSS and BSS software: Setting up Cable TV headend.
f) Maintenance of fiber network for one year after going live.
While the company had topline of only 91 crores this contract is valued at 320 crores.
And if we assume that the revenue gets recognized by FY17 that will result in 320+80 odd crore normal topline which means 400 crores top line even as the company is currently trading under 100 crores market cap.
If we assume a 5% bottom-line on 400 crore top-line the net profit would be at 20 crores and the EPS will be at 15.98.
If we have a fair 25 times rating for Tera on its FY17 expected EPS the stock price comes around 400 bucks.
I hope i have explained the logic behind Porinju sir’s investment and I sincerely hope i am right in my calculations, If i am wrong kindly pardon me i am no genius like sir!