Value Pick - The Coming of Zicom

I first stumbled across this company (www.zicom.com) when I was surfing the net for home security solutions. And I was instantly hooked!

Well Worth Watching

This tiny concern has a lot going for it, investment-wise.

• It's in a niche sector and getting to a dominant status with growing brand recognition and appeal
• A slew of products and partnerships catering to the security needs of organizations
• An impresive and growing client list
• A recent product cum service offering targeted towards home users, priced attractively on a monthly payment model
• Improving financials - better margins, better ROCE / RONW, fairly low debt (rising, but that is to be expected with a growing company)

I believe it has ample room to grow given the focus and attention that Indian corporations are now giving to security.

I also expect the home user offering to be simply lapped up by the well-to-do. At a couple of thousand a month, even I can afford it and it comes with the 'cool' factor that's likely to appeal to the upwardly-mobile, urban male. Wait for a few years and watch the home security market explode!

A Tad Over-Priced

It's difficult to price this company, just as it is with all small-caps. There isn't a sufficiently long track record to base one's opinions on unlike with, say, an ITC. However, we can take a guess.

Today's price (even after the Sensex fall yesterday) is about Rs. 150, which implies a PE ratio of 22.5, approximately in line with historical earnings growth. This is a little too high for my liking, though the good news is that quarter-on-quarter growth seems to be over 30% and RONW is nice and healthy.

Ideally, I'd have liked to buy the stock at Rs. 125-130, though I must confess that when I first saw it at that level I wanted it below Rs. 100! Just shows you what we value investors are like - never happy!

I expect Zicom to reach at least Rs. 165 around April next year. Hence, in my opinion, it is an OK buy at Rs. 150 and a great deal at Rs. 125. Hold it for longer and the story should get better once the company attains some scale and gets noticed by the fund houses.

So set your limit orders, sit back and enjoy.

Current Market Price: Rs. 150