A company’s face value per share is split into small units of stock during the stock split. Whereas in the bonus share issue, additional shares are allotted to existing stockholders based on the number of shares owned by a shareholder during bonus shares. Stock split improves liquidity by dividing a share into smaller sizes whereas bonus share issue is intended to distribute gains of accumulated earnings without paying cash to the shareholders. In the bonus issue, the face value of an equity share remains the same, however, it changes in case of a stock split. We have come across two instances when a company has declared a bonus issue and another has announced a stock split.
1. JBM Auto Ltd (NS: JBMA )
JBM Auto Limited designs large-size press tools, jigs, and fixtures. The company renders services from designing to testing and after-sales maintenance. The company has informed the stock exchange that its board will meet on December 8 to consider a stock split proposal on its equity shares having a face value of Rs 5 each.
JBM has posted healthy second-quarter results. Its revenue grew 45% to Rs 752.72 crore in the second quarter ended September 30, 2021, compared to Rs 517.35 crore in Q2FY2021. The company’s net profit soared 23% to Rs 25.30 crore in the second quarter from Rs 20.49 crore in the corresponding quarter of fiscal 2021. Looking at yesteryear’s revenue growth, we observe that its 3-year and 5-year revenue CAGR remained at an impressive 37% and 28% respectively. JBM’s net profit CAGR during the same period stood at 18% and 17% respectively. The company’s return on equity CAGR for 3-year and 5-year periods was 12% and 13% respectively. While promoters’ holding remained unchanged in September 2021 quarter, FIIs have marginally raised their stake in the company.
The scrip appears attractive based on key technical indicators such as RSI, MACD, and 10-day/20-day/50-day/100-day/200-day EMA. The scrip has returned 264.1% in a year, 237.4% in year-to-date, 114.2% in six months, 64% in a month, and 4.1% in five days.
2. Panchsheel Organics Ltd (BO: PANO )
Panchsheel Organics Ltd is a small cap company that manufactures pharmaceuticals. The company produces bulk drugs, bittering agents, phytochemicals, and herbal products. On October 17, the company approved bonus share issue in the ratio of 1:1 i.e., one fully paid-up share for every one fully paid-up equity shares held.
In the quarter ended September 30, the company’s total income from operations marginally declined to Rs ~15 crores from Rs 15.44 crore in Q2FY2021. Its net profit too slightly declined to Rs 1.62 crore from Rs 1.65 crore in the September 2020 quarter. The company’s revenue CAGR for last three years remained at 5% whereas its net profit CAGR stood at 11% during the same time frame. Return on equity CAGR was 14% for a 5-year period. Its operating cashflows exhibit a steady rising trend over the last three fiscal years. At 68.2%, the promoters’ equity remained unchanged over the last ten quarters.
The company’s stock ran 173.1% in a year, 117% in year-to-date, 99.1% in six months, and 13.2% in a month. Barring MACD, the scrip appears good based on RSI and 10-day/20-day/30-day/50-day/100-day/200-day EMA.
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