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Shipping/Offshore/Shipbuilding
�� Dry bulk rates decline while tanker rates remain stable in Q4FY11
The Baltic Dry Index average for Q4FY11 at 1365 was 42.3% lower
than in Q3FY11. Dry bulk freight rates declined and bottomed out in
the first half of the quarter due to floods in Australia but recovered
partially in the second half on re-opening of ports and also on
account of revival of Chinese iron ore imports. The Baltic Dirty Index
average for Q4FY11 at 829 was 2.3% lower than in Q3FY11 while
the Baltic Clean Index average for Q4FY11 at 699 was 2.1% higher
than Q3FY11. Crude and product carrier rates were volatile during
the quarter as they declined at the start of the quarter due to a
decline in heating oil demand from the US and Europe. However,
escalation of the MENA crisis led to a recovery in rates due to
increased stocking of crude and refined products.
�� Q4FY11E performance (QoQ basis)
The performance of shipping companies is expected to be subdued
due to weak dry bulk freight rates combined with a rise in bunker
cost. Performance of shipbuilding companies is expected to be
better with a pick-up in execution while performance of offshore
companies in our coverage is expected to be exceedingly good due
to rise in utilisation levels.
�� Top Picks - Mercator Lines and Great Offshore
Mercator Lines (MLL) operates a diversified fleet of 30 vessels
including dry bulk, tankers, dredgers and floating production cum
storage unit along with coal mines in Indonesia. MLL is well placed
to ride the volatility of the shipping business due to a diversified
revenue stream and long-term charter contracts. MLL is trading at
0.37x FY12 P/BV of | 103 and offers a value buying opportunity.
Great Offshore (GOL) operates a diversified fleet of 47 vessels
including drilling rigs and offshore support vessels. We expect a
significant improvement in the operating performance and the EPS
in FY12 is expected to be higher by 114% at | 62.7 as compared to |
29.3 in FY11 due to the deployment of its drilling rigs on long-term
contracts. GOL is trading at 0.74x FY12 P/BV of | 383 and also offers
value buying opportunity.
Company specific view
Company Remarks
Aban
Offshore
We expect revenue to increase on Q-o-Q basis as its assets ABAN 2, ABAN 7 and
ABAN ABRAHAM would be deployed on contract for the entire Q4FY11. We expect
the company to report significant rise in PAT in Q4FY11 in the absence of extraordinary
loss.
ABG
Shipyard
Topline is expected to rise by 5.7% on the back of rise in order execution. Operating
margin is likely to decline marginally to 24.4% in Q4FY11. The company is expected
to report marginal rise in PAT on Q-o-Q basis to | 59.3 crore.
Bharati
Shipyard
We expect 10% rise in topline while the operating margin is expected to decline
from 26.8% in Q3FY11 to 24.4% in Q4FY11. Net profit in Q4FY11 is likely to decline
by 13.6% to | 20.0 crore.
Essar
Shipping
Revenue from ocean transport, surface transport and oilfield services is expected to
decline while revenue from port is expected to rise resulting in net 4.2% decline in
topline. Oilfield services business is expected to be a drag on the earnings on
account of under utilisation of its semi submersible rig.
GE Shipping Revenue is expected to rise by 4.4% QoQ on account of rise in product carrier rates.
Despite rise in bunker costs, we expect recovery in operating margin to 40.4% on
account of decline in dry docking expenses. We expect sharp decline in PAT to |
67.4 crore in Q4FY11 in the absence of extraordinary gains.
Global
Offshore
Revenue is expected to decline on QoQ basis by 10.6% to | 51.6 crore along with
drop in EBITDA to | 23.6 crore in Q4FY11. PAT is likely to drop to | 11.9 crore in the
current quarter as against | 15.3 crore in Q3FY11.
Great
Offshore
Revenue is expected to rise significantly on a QoQ basis in Q4FY11 to | 274.7 crore
as its three drilling rigs have been deployed for the full quarter. EBITDA and
operating margin are expected to rise along with a significant improvement in PAT
to | 35.9 crore in Q4FY11 as against | 1.8 crore in Q3FY11
Mercator
Lines
Revenue is expected to improve marginally by 1.8% to ~ | 791.7 crore in Q4FY11
on account of rise in coal trading activity. EBITDA and PAT are both expected to be
marginally higher at | 148.0 crore and | 4.7 crore respectively in Q4FY11.
Pipavav
Shipyard
Revenue is expected to rise by 9.0% to ~ | 276.9 crore in Q4FY11 as execution
gains pace. EBITDA and PAT are expected to be higher at | 25.9 crore and | 7.7
crore respectively in Q4FY11.
SCI Topline is expected to contract by 2.0% in Q4FY11 to | 871.1 crore on account of
weakness in dry bulk freight rates. We expect 23.5% QoQ decline in bottomline to |
94.1 crore in Q4FY11 mainly due to the absence of extraordinary income as there
was no reported sale of vessels in Q4FY11.
SEAMEC Topline is expected to rise by 44.9% in Q4FY11 to | 35.8 crore on account of
deployment of SEAMEC Princess and SEAMEC II in Q4FY11. We expect the
company to report an operating profit of | 6.7 crore and a PAT of | 2.9 crore in
Q4FY11 after four consecutive quarters of loss.
Varun
Shipping
Revenue is expected to deline to | 111.1 crore in Q4FY11 after the sale of its two
AHTS vessels i.e. Subhiksha and Sudaksha in Q3FY11. In case of any asset sale
transaction in Q4FY11, the net loss for the quarter could decline.
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Shipping/Offshore/Shipbuilding
�� Dry bulk rates decline while tanker rates remain stable in Q4FY11
The Baltic Dry Index average for Q4FY11 at 1365 was 42.3% lower
than in Q3FY11. Dry bulk freight rates declined and bottomed out in
the first half of the quarter due to floods in Australia but recovered
partially in the second half on re-opening of ports and also on
account of revival of Chinese iron ore imports. The Baltic Dirty Index
average for Q4FY11 at 829 was 2.3% lower than in Q3FY11 while
the Baltic Clean Index average for Q4FY11 at 699 was 2.1% higher
than Q3FY11. Crude and product carrier rates were volatile during
the quarter as they declined at the start of the quarter due to a
decline in heating oil demand from the US and Europe. However,
escalation of the MENA crisis led to a recovery in rates due to
increased stocking of crude and refined products.
�� Q4FY11E performance (QoQ basis)
The performance of shipping companies is expected to be subdued
due to weak dry bulk freight rates combined with a rise in bunker
cost. Performance of shipbuilding companies is expected to be
better with a pick-up in execution while performance of offshore
companies in our coverage is expected to be exceedingly good due
to rise in utilisation levels.
�� Top Picks - Mercator Lines and Great Offshore
Mercator Lines (MLL) operates a diversified fleet of 30 vessels
including dry bulk, tankers, dredgers and floating production cum
storage unit along with coal mines in Indonesia. MLL is well placed
to ride the volatility of the shipping business due to a diversified
revenue stream and long-term charter contracts. MLL is trading at
0.37x FY12 P/BV of | 103 and offers a value buying opportunity.
Great Offshore (GOL) operates a diversified fleet of 47 vessels
including drilling rigs and offshore support vessels. We expect a
significant improvement in the operating performance and the EPS
in FY12 is expected to be higher by 114% at | 62.7 as compared to |
29.3 in FY11 due to the deployment of its drilling rigs on long-term
contracts. GOL is trading at 0.74x FY12 P/BV of | 383 and also offers
value buying opportunity.
Company specific view
Company Remarks
Aban
Offshore
We expect revenue to increase on Q-o-Q basis as its assets ABAN 2, ABAN 7 and
ABAN ABRAHAM would be deployed on contract for the entire Q4FY11. We expect
the company to report significant rise in PAT in Q4FY11 in the absence of extraordinary
loss.
ABG
Shipyard
Topline is expected to rise by 5.7% on the back of rise in order execution. Operating
margin is likely to decline marginally to 24.4% in Q4FY11. The company is expected
to report marginal rise in PAT on Q-o-Q basis to | 59.3 crore.
Bharati
Shipyard
We expect 10% rise in topline while the operating margin is expected to decline
from 26.8% in Q3FY11 to 24.4% in Q4FY11. Net profit in Q4FY11 is likely to decline
by 13.6% to | 20.0 crore.
Essar
Shipping
Revenue from ocean transport, surface transport and oilfield services is expected to
decline while revenue from port is expected to rise resulting in net 4.2% decline in
topline. Oilfield services business is expected to be a drag on the earnings on
account of under utilisation of its semi submersible rig.
GE Shipping Revenue is expected to rise by 4.4% QoQ on account of rise in product carrier rates.
Despite rise in bunker costs, we expect recovery in operating margin to 40.4% on
account of decline in dry docking expenses. We expect sharp decline in PAT to |
67.4 crore in Q4FY11 in the absence of extraordinary gains.
Global
Offshore
Revenue is expected to decline on QoQ basis by 10.6% to | 51.6 crore along with
drop in EBITDA to | 23.6 crore in Q4FY11. PAT is likely to drop to | 11.9 crore in the
current quarter as against | 15.3 crore in Q3FY11.
Great
Offshore
Revenue is expected to rise significantly on a QoQ basis in Q4FY11 to | 274.7 crore
as its three drilling rigs have been deployed for the full quarter. EBITDA and
operating margin are expected to rise along with a significant improvement in PAT
to | 35.9 crore in Q4FY11 as against | 1.8 crore in Q3FY11
Mercator
Lines
Revenue is expected to improve marginally by 1.8% to ~ | 791.7 crore in Q4FY11
on account of rise in coal trading activity. EBITDA and PAT are both expected to be
marginally higher at | 148.0 crore and | 4.7 crore respectively in Q4FY11.
Pipavav
Shipyard
Revenue is expected to rise by 9.0% to ~ | 276.9 crore in Q4FY11 as execution
gains pace. EBITDA and PAT are expected to be higher at | 25.9 crore and | 7.7
crore respectively in Q4FY11.
SCI Topline is expected to contract by 2.0% in Q4FY11 to | 871.1 crore on account of
weakness in dry bulk freight rates. We expect 23.5% QoQ decline in bottomline to |
94.1 crore in Q4FY11 mainly due to the absence of extraordinary income as there
was no reported sale of vessels in Q4FY11.
SEAMEC Topline is expected to rise by 44.9% in Q4FY11 to | 35.8 crore on account of
deployment of SEAMEC Princess and SEAMEC II in Q4FY11. We expect the
company to report an operating profit of | 6.7 crore and a PAT of | 2.9 crore in
Q4FY11 after four consecutive quarters of loss.
Varun
Shipping
Revenue is expected to deline to | 111.1 crore in Q4FY11 after the sale of its two
AHTS vessels i.e. Subhiksha and Sudaksha in Q3FY11. In case of any asset sale
transaction in Q4FY11, the net loss for the quarter could decline.
Source: Company, ICICIdirect.com Research
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