Consolidation mode…
Garware Offshore Ltd (Garware Offshore) currently operates a fleet of
12 vessels, which consists of seven AHTS vessels, four PSVs and one
construction barge. The fleet is a combination of small and mid-sized
vessels, which provide stable revenues for the company. Garware
Offshore acquired two vessels in Q2FY10. The company has on order
one platform support vessel, which is under construction and is
expected to join the fleet by the end of FY11. It has a reasonably good
revenue visibility as 71% of its fleet is deployed on long-term charter
contract, which ensures higher utilisation level for its fleet.
Operating performance to recover after a dip in FY11
Except one platform support vessel, which is expected to join by the end
of FY11, it is through with its fleet expansion programme. This would
imply that topline and bottomline growth for the next couple of years
would be muted. Further, the company is also slightly more leveraged
with a debt-equity ratio of 1.9, which would compel it to consolidate its
position over the next two years. After a small dip in net profit in FY11, it
is expected to recover significantly in FY12.
Valuation
We have valued Garware Offshore on multiple valuation parameters and
recommend BUY on the stock with a price target of | 139.
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