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Well placed to ride the downturn…
Great Eastern Shipping Company (GE Shipping) reported a
disappointing performance due to weakness in the freight markets. This
led to both a drop in vessel operating days and also a contraction in
TCE for vessels. The company is scaling up its fleet from the present 49
vessels to 71 vessels in FY13. This would result in a rise in revenue
despite weakness in freight rates. The net asset value (NAV) declined
5.2% from | 382 per share in Q2FY11 to | 362 per share in Q3FY11.
However, the current market price of | 284 is 21.5% below the NAV.
Subsequent to the end of the quarter the company contracted to buy a
jack-up rig, which it had earlier in-chartered from Mercator Lines. As the
company would not incur charter hire expenses it would not only lead
to an improvement in the operating margin of the company but also
higher depreciation and interest costs. GE Shipping has also withdrawn
the IPO of its subsidiary company Greatship Ltd due to weakness in
freight markets along with weakness in equity markets.
Weak freight market results in disappointing Q3FY11 performance
GE Shipping reported a 12% QoQ drop in revenue in Q3FY11 at | 556.0
crore as against | 631.0 crore in Q2FY11. The drop in topline was due to
the combined effect of a drop in revenue days along with correction in
TCE for vessels. The company reported an average TCY of $18000 for
crude carriers, $15351 for product carriers and $20141 for dry bulk
carriers. Revenue days dropped from 3069 days in Q2FY11 to 2974 days
in Q3FY11. The company reported an EBITDA of | 203.5 crore in Q3FY11
as against | 259.2 crore in Q2FY11. The company posted a net profit of |
117.5 crore, which declined by 30.3% QoQ.
Valuation
At the CMP of | 284, the stock is trading at 6.8x FY12E EPS of | 41.7 and
0.66x FY12E book value of | 432. We have valued GE Shipping on P/BV
and P/E multiple basis to arrive at price target of | 298. We recommend
an ADD rating on the stock.
GE Shipping is scaling up its fleet from the present 49 vessels to 71
vessels in FY13, which would result in a rise in revenue despite weakness
in freight rates. The net asset value (NAV) declined by 5.2% from | 382
per share in Q2FY11 to | 362 per share in Q3FY11. However, the current
market price of | 284 is 21.5% below the NAV.
At the CMP of | 284, the stock is trading at 6.8x FY12E EPS of | 41.7 and
0.66x FY12E book value of | 432. We have valued GE Shipping on P/BV
and P/E multiple basis to arrive at a price target of | 298. We recommend
an ADD rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Well placed to ride the downturn…
Great Eastern Shipping Company (GE Shipping) reported a
disappointing performance due to weakness in the freight markets. This
led to both a drop in vessel operating days and also a contraction in
TCE for vessels. The company is scaling up its fleet from the present 49
vessels to 71 vessels in FY13. This would result in a rise in revenue
despite weakness in freight rates. The net asset value (NAV) declined
5.2% from | 382 per share in Q2FY11 to | 362 per share in Q3FY11.
However, the current market price of | 284 is 21.5% below the NAV.
Subsequent to the end of the quarter the company contracted to buy a
jack-up rig, which it had earlier in-chartered from Mercator Lines. As the
company would not incur charter hire expenses it would not only lead
to an improvement in the operating margin of the company but also
higher depreciation and interest costs. GE Shipping has also withdrawn
the IPO of its subsidiary company Greatship Ltd due to weakness in
freight markets along with weakness in equity markets.
Weak freight market results in disappointing Q3FY11 performance
GE Shipping reported a 12% QoQ drop in revenue in Q3FY11 at | 556.0
crore as against | 631.0 crore in Q2FY11. The drop in topline was due to
the combined effect of a drop in revenue days along with correction in
TCE for vessels. The company reported an average TCY of $18000 for
crude carriers, $15351 for product carriers and $20141 for dry bulk
carriers. Revenue days dropped from 3069 days in Q2FY11 to 2974 days
in Q3FY11. The company reported an EBITDA of | 203.5 crore in Q3FY11
as against | 259.2 crore in Q2FY11. The company posted a net profit of |
117.5 crore, which declined by 30.3% QoQ.
Valuation
At the CMP of | 284, the stock is trading at 6.8x FY12E EPS of | 41.7 and
0.66x FY12E book value of | 432. We have valued GE Shipping on P/BV
and P/E multiple basis to arrive at price target of | 298. We recommend
an ADD rating on the stock.
GE Shipping is scaling up its fleet from the present 49 vessels to 71
vessels in FY13, which would result in a rise in revenue despite weakness
in freight rates. The net asset value (NAV) declined by 5.2% from | 382
per share in Q2FY11 to | 362 per share in Q3FY11. However, the current
market price of | 284 is 21.5% below the NAV.
At the CMP of | 284, the stock is trading at 6.8x FY12E EPS of | 41.7 and
0.66x FY12E book value of | 432. We have valued GE Shipping on P/BV
and P/E multiple basis to arrive at a price target of | 298. We recommend
an ADD rating on the stock.
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