Sungold Media and Entertainment Ltd. (SMEL) – (erstwhile known as Shree Krishna Holiday Homes and Farms Ltd.).
Earlier the Company was engaged in the business of marketing, development and maintenance of Farm Houses, Holidays Resorts, and Housing Society etc.
Pursuant to the change of object, it is currently engaged in the media and entertainment services.
Business
Now SMEL provides a complete solution for branding of clients business. It is doing graphics design, web site design, Video Editing, Digital Marketing, Photography, Videography, Mobile App Development, Celebrity Management and distribution services.
Company designs and develops optimal solutions that maximize its clients brand image. Currently SMEL has some ongoing projects i.e. www.liveupdates.co.in, www.entertainment365.in, www.gujaratdevelopment.com.
Issue
To achieve the benefit of listings, SMEL is coming out with a maiden IPO as offer for sale of 1350000 equity shares of Rs. 10 each at par to mobilize Rs. 1.35 crore.
Issue opens for subscription on 09.08.18 and will close on 14.08.18.
Minimum application is to be made for 10000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME.
Issue constitutes 27% of the post issue paid up capital of the company. Issue is solely lead managed by Finshore Management Services Ltd. and Satellite Corporate Services Pvt. Ltd. is the registrar to the issue.
Most of the equity is issued at par except few shares at a price of Rs. 25 per share in February 2004 and 1095020 shares at Rs. 13.10 per share in March 2014. It has also issued bonus shares in the ratio of 1.428 shares for every 10 shares held in February 2013.
Average cost of acquisition of shares by promoters is Rs. 10.00 and Rs. 10.36 per share. This being offer for sale, post issue paid up capital remains same at Rs. 5 crore.
Performance
On performance front, for last three fiscals, SMEL has reported revenue/net profits of Rs. 0.35 cr. / Rs. 0.06 cr. (FY15), Rs. 0.56 cr. / Rs. 0.09 cr. (FY16), Rs. 0.60 cr. / Rs. 0.05 cr. (FY17). For the 11 months period ended on 28.02.18 of FY18 it has posted net profit of Rs. 0.03 cr. on revenue of Rs. 0.45 cr.
For last three fiscals, it has posted an average EPS of Rs. 0.16 and an average RoNW of 1.39$. Issue is priced at a P/BV of 0.90 on the basis of its NAV of Rs. 11.16 as on 28.02.18.
If we attribute latest earnings on the post issue equity then asking price is at a P/E of around 1515 against industry composite of 27. Thus even though issue is at par, it is turning costly affair.
Peer comparison
As per offer documents, it has shown Balaji Tele, Cineline India and Eros Intl. as its listed peers that are not at all comparable with this company’s business model.
They are currently trading at a P/E of around NA, 14 and 5 as on 03.08.18. Thus this segment is lacking investors’ fancy.
On merchant banker’s front, this is the 2nd mandate from its stable. Only 1 listing that took place so far opened at a premium of 0.02% on the day of listing.
Investment Strategy
Even though issue is at par, highly competitive business model coupled with legging financial performance is making it a costly bet. There is no harm in giving this issue a miss.
