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L owe r r e v e n u e , h i g h e r i n t e r es t c o s t d e n t p r o f i t s…
Great Offshore (GOL) reported a dismal performance, which was below
our estimates on both the revenue as well as profitability front. On a QoQ
basis, revenues reported an 14% decline to | 187.2 crore (I-direct
estimate: | 234.5 crore) while net profit declined by 88.2% to | 6.5 crore
(I-direct estimate: | 18.1 crore). GOL’s EBITDA margin dipped 891 bps on
a QoQ basis to 39.5% and EBITDA declined by 30%. GOL’s debt has been
spiralling and increased from | 2343 crore in FY10 to | 3218.45 in FY11.
Lower EBITDA generation and higher interest cost (interest cost as
percentage of EBITDA is up from 32% in Q1FY12 to 60% in Q2FY12)
along with absence of extraordinary income have led to a severe decline
in net profit.
ƒ Fleet status
During Q2FY12, GOL sold three vessels namely, Malaviya six, Malaviya
12 and Malaviya 34 reducing the fleet size to 44 vessels consisting of two
drilling units, 26 offshore support vessels, three marine construction
assets, a floating dry dock and 12 harbour tugs. A drilling rig and a PSV
are on order and are expected to join the fleet by December 2012.
ƒ Earnings revision
We have revised our earnings estimates for GOL to factor in the impact of
a) lower-than-expected performance in H1FY12, b) reduction in fleet size
c) change in exchange rate assumptions for FY12E and FY13E and d)
some other minor changes. We have revised downward our earning
estimate for FY12E by 42% to | 21.9 and FY13E earning estimate by 43%
to | 22.4.
V a l u a t i o n
At the CMP of | 116, the stock is trading at 5.2x FY13E EPS of | 22.4 and
0.33x FY13E book value of | 348. GOL’s profitability has been driven by
exceptional income in FY11 (| 58 crore) and H1FY12 (| 48 crore), which is
a serious cause for concern as majority of the operating profits have been
eaten out by interest and depreciation costs. We have valued the stock at
0.35x (Q1FY12 0.65x) FY13E book value to arrive at a price target of | 122.
We have downgraded the rating from BUY to HOLD.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
L owe r r e v e n u e , h i g h e r i n t e r es t c o s t d e n t p r o f i t s…
Great Offshore (GOL) reported a dismal performance, which was below
our estimates on both the revenue as well as profitability front. On a QoQ
basis, revenues reported an 14% decline to | 187.2 crore (I-direct
estimate: | 234.5 crore) while net profit declined by 88.2% to | 6.5 crore
(I-direct estimate: | 18.1 crore). GOL’s EBITDA margin dipped 891 bps on
a QoQ basis to 39.5% and EBITDA declined by 30%. GOL’s debt has been
spiralling and increased from | 2343 crore in FY10 to | 3218.45 in FY11.
Lower EBITDA generation and higher interest cost (interest cost as
percentage of EBITDA is up from 32% in Q1FY12 to 60% in Q2FY12)
along with absence of extraordinary income have led to a severe decline
in net profit.
ƒ Fleet status
During Q2FY12, GOL sold three vessels namely, Malaviya six, Malaviya
12 and Malaviya 34 reducing the fleet size to 44 vessels consisting of two
drilling units, 26 offshore support vessels, three marine construction
assets, a floating dry dock and 12 harbour tugs. A drilling rig and a PSV
are on order and are expected to join the fleet by December 2012.
ƒ Earnings revision
We have revised our earnings estimates for GOL to factor in the impact of
a) lower-than-expected performance in H1FY12, b) reduction in fleet size
c) change in exchange rate assumptions for FY12E and FY13E and d)
some other minor changes. We have revised downward our earning
estimate for FY12E by 42% to | 21.9 and FY13E earning estimate by 43%
to | 22.4.
V a l u a t i o n
At the CMP of | 116, the stock is trading at 5.2x FY13E EPS of | 22.4 and
0.33x FY13E book value of | 348. GOL’s profitability has been driven by
exceptional income in FY11 (| 58 crore) and H1FY12 (| 48 crore), which is
a serious cause for concern as majority of the operating profits have been
eaten out by interest and depreciation costs. We have valued the stock at
0.35x (Q1FY12 0.65x) FY13E book value to arrive at a price target of | 122.
We have downgraded the rating from BUY to HOLD.
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