View it and analyse

Updated: Apr 29 2007, 07:49am hrs
Facilitated information bombardment, considering the potential it possesses, has become a leitmotif in our lives. Whether you are shopping at a mall or you are at a railway station or at a sports event, information in terms of advertisements, news ticklers and messages, is being delivered in a fraction of a second. The platform used for such information dissemination, the light emitting diode (LED) displays, have a limited but immediate- recall-value presence and are still growing to create an all-pervaded presence. So is the case with the companies, which are into the development, and production of such video displays. A case in point is the Andhra Pradesh-based MIC Electronics.

The company has been present in the media (primarily LED business), communications and electronics (prime focus telecommunications) business for nearly two decades. In order to expand its reach and business, MIC Electronics has entered the capital market with an offering of 51,00,000 shares at a price band of Rs 129-150. The company intends to put up a capital of around Rs 65-76 crore.

Plans

The company intends to use around Rs 14.9 crore in setting up an additional facility to manufacture LED boards. Also it will use around Rs 15.05 crore in manufacturing LED video display systems, which will be deployed on a rental basis. To develop products (this includes 3D stereoscopic displays) and market them in overseas and domestic markets, the company plans to use around Rs 15.7 crore of the total issue size.

Proposition

With the mushrooming of malls and the wide acceptance of mall culture along with news-based information dissemination and advertisements at various prime locations, the LED screen display business has the potential to flourish. Also, the retail-based activities can be milked to their fullest. MIC Electronics can cash in on this unexplored domain to the hilt.

Investonomics

It must be noted that the LED display business, in India particularly, is still to see maturity and wide acceptance. The reason being, only a few companies are involved in the business and availability of other economical options. A case in the point is the outdoor vinyl hoardings, which are relatively cheaper than the LED display systems. The company is heavily dependent on Nichia Corp as it sources around 90% of the raw material used in a LED display from the company and this calls for immediate attention.

Valuations

On the basis of post-issue fully diluted (annualised) equity, the company quotes a P/E of around 17(x) times and 20(x) times at the lower and upper price band. A relative picture of the company' standing in the market cannot be reached because of a dearth of listed companies involved in the same business. The company intends to derive maximum revenues from the LED display system business. Hence, a lot depends on its ability to promote and communicate its LED brand and make the most of the booming retail space and display-screen needed activities. Considering the nascent stage of the LED display system business in India, the company will have to compete with local outdoor display screen players.