Mercator Lines :: Centrum Technical Recommendations

IMPORTANT RESISTANCE LEVEL : 22.5
TARGET : 31/42
VIEW CHANGES BELOW : 16
TIMEFRAME : 4 months / 18 months
Mercator Lines had recently broken out above 16 on the weekly charts which is where its 55 week moving average was
trading at. The Scrip is trading in a clear uptrend with a trading and investment point of view as its moving average setup
that was previously in a bearish setup has also now started indicating signs of revival with the 21 week EMA crossing over
55 EMA. Any move down in this scrip now can be bought into with an investment point of view and a fresh uptrend in the
scrip may be triggered once the scrip moves beyond 22.5 which is where a trading resistance is present.

Technical 7th Oct: Everest Industries, Tata Chemicals, Himachal Futuristic, Mercator Lines, Hexaware, GSK Consumer, TVS Motor:: Business Line

Technical: Everest Industries, Tata Chemicals, Himachal Futuristic, Mercator Lines, Hexaware, GSK Consumer, TVS Motor:: Business Line

MERCATOR : BUY TARGET PRICE: RS.34 :: Kotak Sec

MERCATOR LIMITED
PRICE: RS.21 RECOMMENDATION: BUY
TARGET PRICE: RS.34 FY12E P/E: 8.3X
We recently interacted with the management of Mercator to get an update
on the latest developments in the business areas of Mercator Limited. The
stock has fallen 52% in the last one year despite efforts of the company to
diversify the business of the company as a hedge against the poor
performing shipping segment. Company currently has diversified into
mining and has 3 mines in Indonesia with an estimated reserve of 75 mn
tonnes. It also has a Floating and Production Unit (FPU) and two oil blocks
in Cambay basin in Gujarat in the offshore sector. We believe the coal and
the offshore segment would drive the top line and profitability in FY13E
with contribution of coal (mining and trading) increasing from 47% in FY11
to 62% in FY13E. We also expect the IPO of Oorja Holding (mining business)
to come by FY14E after the business has achieved some scale and would be
value accretive. Management indicated that the shipping segment would
continue to go through a bad phase atleast for the next 3 to 4 quarters. We
believe the fall in stock price, strong performance of the coal and offshore
segment and IPO of Oorja holding offers an attractive opportunity for
investors to participate in the story which also has the backing of the value
of shipping assets.
We re- iterate BUY on the stock with a target price of Rs 34 for the stock.
Our target price is based on SOTP value of the different segments:
Shipping= Rs 19: Mining = Rs 12 and Offshore = Rs 3. Downside risk to our
call includes: 1) Further deterioration of the shipping market, 2) Fall in coal
prices and crude price and 3) High leverage.

Hold Mercator Lines (Target : Rs 34:: ICICI Securities, pdf link

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http://content.icicidirect.com/mailimages/ICICIdirect_MercatorLines_Q3FY12.pdf


C o a l   v o l u m e s   s p u r t …
Mercator Lines (MLL) reported an above estimate performance on both
the revenue and profitability front. On a QoQ basis, revenues spurted by
41% to | 1100 crore (I-direct estimate: | 830.3 crore) while net profit
increased by 250% to | 23.4 crore (I-direct estimate: | 10.8 crore). The
EBITDA margin declined QoQ by 320 bps to 15.5% (I-direct estimate:
18.1%) but EBITDA increased by 17% to | 170 crore on account of higher
revenues. The rise in revenues has been primarily driven by higher coal
volumes. MLL ramped up its coal trading volume during Q3FY12 and sold
1.9 million tonnes (MT) compared to 2.43 MT for H1FY12. Higher traded
volumes during the quarter have led to lower EBITDA margin. Though
interest and depreciation rose QoQ by 13% and 15% to | 54 crore and
| 103 crore, respectively, MLL was able  to  report  a  250%  increase  in  net
profit owing to an exchange gain of | 13.64 crore. Despite the continued
underperformance of the shipping business, MLL is relatively better
placed to ride the volatility due to  a major shift in the business model
towards the coal mining and trading business. We expect the contribution
to revenues from the coal segment to increase from 49% in FY11 to 57%
in FY13E reducing the impact of volatility in revenues due to uncertainty
in the shipping segment.
Fleet status
During Q3FY12, MLL acquired a dredger in November 2011. With this
addition, Mercator now operates 18 dry bulk carriers, eight tankers,
seven dredgers and one MOPU and one FSO.
V a l u a t i o n
Considering the significant ramp up in coal trading volumes (low margin
business), we have revised downward our FY12E and FY13E EBITDA
margin estimate from 19.2% and 18.5% to 17.0% and 16.5%,
respectively. Consequently, we  have revised downward our EPS
estimates for FY12E and FY13E by 18.6% and 18.7%, respectively. At the
CMP of | 32, the stock is trading at 6.9x FY13E EPS of | 4.6 and 0.3x
FY13E book value of | 97. We have valued the stock at 0.35x FY13E book
value to arrive at a price target of | 34. We recommend a HOLD rating on
the stock. Existing investors can also hold the stock.

PDF link- Jaiprakash Associates, Unity Infraprojects, Mercator Lines:: Kotak Sec,

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http://www.kotaksecurities.com/pdf/dmb/MorningInsight15022012.pdf



JAIPRAKASH ASSOCIATES LTD
RECOMMENDATION: ACCUMULATE
TARGET  PRICE:  RS.89
FY13E P/E: 21.7X


UNITY  INFRAPROJECTS
RECOMMENDATION: BUY
TARGET  PRICE:  RS.70
FY13E P/E: 3.3X


MERCATOR LIMITED
RECOMMENDATION: BUY
TARGET  PRICE:  RS.40
FY13E P/E: 9.1X

buy MERCATOR LINES LTD (MLL) TARGET PRICE: RS.38 :: Kotak Sec

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MERCATOR LINES LTD (MLL)
PRICE: RS.24 RECOMMENDATION: BUY
TARGET PRICE: RS.38 FY13E P/E: 15.7X
Subdued Operational performance
MLL reported weak operational performance in the quarter with revenues
growing 16% YoY but declining 2% QoQ to Rs 7.8 bn. The coal segment
(mining and trading) reported revenues of Rs 4.3 bn growing more than
50% YoY but declining 9% QoQ. The operating margins for the coal
segment declined to 8.17% (vs. 7.10% YoY and 9.41% QoQ). In the shipping
segment, the Singapore subsidiary reported PAT of USD 1.7 mn (falling 70%
YoY) while the Indian shipping business reported loss of Rs 295 mn. The
bulk shipping segment continues to be weak and expected to remain weak
for the next 2 calendar years. We believe the IPO of Oorja Holdings (100%
coal subsidiary), which was earlier expected by end of FY12E to now come
only in FY13E. We are reducing the target price to reflect the fall in shipping
asset prices by 5 to 10 % in the last 3 months and postponement of IPO of
Oorja Holding. We reiterate Buy with a reduced TP of Rs 38 for the stock.

Buy Mercator Lines; Target : Rs 34:: ICICI Securities

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C o a l   v o l u m e s   t o   i n c r e a s e   i n   H 2 F Y 1 2 …
Mercator Lines (MLL) reported a below estimate performance on both
revenue and profitability front. On a QoQ basis, revenues reported a 2%
decline to | 781.2 crore (I-direct estimate: | 834.1 crore) while net profit
declined 55% to | 6.7 crore (I-direct estimate: | 25.8 crore). MLL’s EBITDA
margin declined QoQ by 20 bps to  18.7% (I-direct estimate: 20.3%).
MLL’s revenues have been lower than our estimate owing to higher dry
docking of vessels, weak freight rate scenario across vessel categories
and lower revenue from coal segment due to monsoon. MLL has ramped
up its coal trading/mining and for  H1FY12 it contributed 58% of the
revenues compared to 40% in H1FY11. The contribution to the revenues
from dry bulk and tankers has come down from 31% and 19% in H1FY11
to 22% and 10% in H1FY12. Despite continued underperformance of the
shipping business, MLL is well placed to ride the volatility due to a major
shift in the business model towards coal mining and trading business. We
expect contribution to revenues from the coal segment to increase from
49% in FY11 to 56% in FY13E reducing the impact of volatility in
revenues due to uncertainty in the shipping segment.
ƒ Fleet status
During Q2FY12, MLL acquired a cutter suction dredger and subsequent
to the end of the quarter it has acquired another TSHD dredger. With this
addition, Mercator now operates 18 dry bulk carriers, eight tankers, six
dredgers and one MOPU and one FSO.

V a l u a t i o n
Considering the significant ramp up in coal trading volumes (low margin
business), we have revised downward our FY12E and FY13E EBITDA
margin estimate from 21.5%  and 20.1% to 19.2% and 18.5%,
respectively. Consequently, we  have revised downward our EPS
estimates for FY12E and FY13E by  28% and 27%, respectively. At the
CMP of | 22, the stock is trading at 4.0x FY13E EPS of | 5.5 and 0.23x
FY13E book value of | 97. We have  valued the stock at 0.35x (Q1FY12:
0.4x) FY13E book value to arrive at a price target of | 34. We recommend
a BUY rating on the stock

Buy MERCATOR LINES LTD-- TARGET PRICE: RS.48 ::Kotak Sec,

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MERCATOR LINES LTD
PRICE: RS.27 RECOMMENDATION: BUY
TARGET PRICE: RS.48 FY12E P/E: 8.7X
Listing of Oorja Holding (coal business) providing some momentum
to the stock, however IPO may get delayed
Mercator Lines Ltd - a shipping company - has diversified into coal mining
business in a big way to hedge the company against the cyclical shipping
business. We estimate coal (mining + trading) to almost contribute 60% of
the revenue for the company by FY13E. Now MLL is looking forward to get
the shipping business listed in Singapore in the next 2 quarters. We believe
the listing of the coal business (under Oorja holding) would be value
accretive for MLL. However, due to poor market conditions, the listing of
Oorja holding may get deferred to the next financial year (FY13E) which can
be a dampener for the company which is already struggling with poor
shipping business.
Company to make announcement of an acquisition of new mine
The company had acquired a Greenfield mine in Batua (Kalimanthan) with a proven
reserve of 30 mn tonnes, formal announcement of which would be out in next few
days. This mine would start commercial production from Q4FY12. Our current estimates
factor this new acquisition.
Coal business to play a significant role
In FY11, coal mining and trading constituted more than ~45% of the top line and
around ~50% of the PBT. Going forward MLL would primarily concentrate on the
coal business which would act as a hedge for the company against the cyclical shipping
business.
Coal business - Performance of Oorja Holding Pvt Limited (OHPL)
MLL's coal business is under its 100 % subsidiary OHPL. This company acquired coal
mines in Indonesia and Mozambique in 2007. In Indonesia, OHPL owns 100% in
two mines in Petangis (proven reserve of 15 mn tonnes) and 50% in mines in
Kalimantan (proven reserve of 30 mn tonnes). Coal business picked up significantly
in FY11. The coal mining and trading business generated revenue of Rs 13.4 bn and
EBIT ~ Rs 1 bn in FY11

Stock strategy: Bharti Airtel at crucial level:; Mercator Lines negative: Business Line,

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Bharti Airtel (Rs 400): The stock is ruling near major resistance of Rs 415. A conclusive close above Rs 415 would change the long-term outlook positive for the stock.

The next resistance appears at Rs 436. The stock finds immediate support at Rs 372 and the crucial one at Rs 344.

F&O pointers: Bharti Airtel futures witnessed unwinding of long positions on Friday along with falling share price.

This indicates profit booking as the stock had a sharp run-up in recent times. Option trading, however, indicates a cautious signal with mild positive bias as accumulation of open interest in put option is much higher.

Strategy: Consider going long on Bharti Airtel September futures with a tight stop-loss at Rs 372 (spot price on a closing day basis) for an initial target of Rs 436.

Shift the stop-loss to Rs 415 if Bharti Airtel moves past Rs 415. Market lot of Bharti Airtel is 1,000.

Alternatively, traders can consider writing 360 September put, which closed around Rs 1.90 on Friday. Maximum profit in the strategy is the premium collected (i.e. R 1.9 * 1,000 market lot); loss, on other hand, could be unlimited if Bharti Airtel declines sharply.

Besides, writing option involves margin commitments. So this strategy is for traders who can afford to bear those risks. Hold this position for at least two weeks.

Traders willing to take a higher risk can even consider writing 380 September put on Bharti Airtrel that ended at Rs 4.65 on Friday.

Mercator Lines (Rs 25.7): The long-term and short-term outlook remains negative for Mercator Lines. The stock now finds a major resistance at Rs 37.5 and the immediate one at Rs 31.5.

Only a conclusive close above Rs 47 would negate the negative outlook on the stock.

One more close below Rs 25 would trigger a fresh downfall for the stock. In that event Mercator Lines could dip below its all-time low of Rs 21.

F&O pointers: Mercator Lines added fresh short positions on Friday. Options are not that active.

Strategy: Traders can consider going short on Mercator Lines with a stop-loss at Rs 31.5 for an initial target of Rs 25. Market lot is 8,000 units per contracts, so traders with high risk appetite can consider this.

Follow-up: Last week, we had advised traders to go short on NTPC and Unitech.

The stop-loss would have triggered for Unitech, while NTPC is still in-the-money.

Traders can continue to hold on to NTPC for a recommended target. We had also advised traders to write 180 call on NTPC. Traders can book full profit on this,

Buy Mercator Lines; Target : Rs 40 ::ICICI Securities

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RATING...............................................................................................................Unchanged
C o a l   s e g m e n t   t o   d r i v e   g r o w t h…
Mercator Lines Ltd (MLL) reported an improved QoQ performance with a
net profit of | 14 crore in Q1FY12 against a loss of | 67 crore in Q4FY11.
The results were in line with our expectation with MLL reporting revenue
of | 799 crore against our expectation of | 802 crore. MLL had incurred a
loss in Q4FY11 on account of loss on sale of jack-up rig. In the absence of
any extraordinary loss, MLL reported a net profit of | 14 crore, which was
lower than our expectation of | 21 crore. The lower than expected
bottomline was mainly on account of lower EBITDA margin for Q1FY12,
which stood at 18.9%, against our  expectation of 20.1%. Going ahead,
the company plans to ramp up the coal trading/mining business and
increase its presence in the dredging business. MLL increased its
presence in Indonesia by adding another mine to its existing two mines.
Production from the new mine is expected to start in Q4FY12 and is
expected to operate at a peak capacity of 3 MTPA. Despite continued
underperformance of the shipping business, MLL is well placed to ride
the volatility due to a major shift in the business model towards the coal
mining and trading business. We expect the contribution to revenues
from the coal segment to increase from 49% in FY11 to 62% in FY13E
reducing the impact of volatility in revenues due to uncertainty in the
shipping segment.
ƒ Improved operating performance
MLL reported a 2.4% QoQ rise in topline at | 799.2 crore in Q1FY12. The
EBITDA and EBITDA margin both reported an increase to | 151.3 crore
and 18.9%, respectively. Improvement in EBITDA and absence of
extraordinary loss has enabled MLL to report a profit of | 14.7 crore in
Q1FY12 as against a loss of | 67.9 crore in Q4FY11.
V a l u a t i o n
At the CMP of | 25, the stock is trading at 3.3x FY13E EPS of | 8.2 and
0.25x FY13E book value of | 100. We have valued the stock at 0.4x FY13E
book value to arrive at a price target of | 40 and recommend a  BUY
rating. Existing investors can also purchase additional shares of MLL.

Buy Mercator Lines; Target :Rs46:: ICICI Securities,

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Mercator Lines:: Value buy…
MLL reported a subdued Q3FY11 performance as the company posted a
marginal net profit. The surge in revenue was solely attributable to the
coal division, which contributed more than 50% to the topline while the
tanker division reported a dismal set of numbers. Going ahead, the
contribution of the coal division to the topline is expected to be higher
as MLL scales up coal trading and mining activities. However, as coal
trading is a low margin business, the overall operating margin for the
company is expected to remain modest, going ahead. Subsequent to
the end of the quarter the company contracted to sell its jack up rig.
With this sale the company has completely exited the offshore business
and intends to focus and scale up its floating production and storage
business. The company operates a diversified fleet of 30 vessels, which
along with long-term contracts provides a hedge against the volatile
shipping business. With the recent price correction, the stock is trading
at 0.39x its FY12 book value of | 103 and offering a value buying
opportunity for investors.

Shipping / Offshore / Railways: Q3 FY2011 Earnings Preview: Dolat Capital

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Shipping / Offshore / Railways
• The volumes continue to remain subdued on dry bulk led by decline in steel production and inventory pileup in China.
While the freight rates have recovered, we believe that a stronger pick up in volumes of key raw commodities materials
like coal and iron ore shall be required to sustain an uptick. Further, decline in Chinese imports and rising fleet supply
have kept the rate realisations muted during Q3FY11. The current dry bulk rates for capsize are ranging from USD
25000‐30,000 per day
• The ongoing colder winter and concomitant demand for heating oil has been a key support to tanker rates during
Q3FY11. However large US inventories of crude and distillates could cap the possibility of strong upside movement of
oil
• The Baltic Dry Index closed at 1373, implying a decline of 44% for the period Oct‐Dec 23, 2010. Baltic Dirty Tanker Index
(BDTI) increased by 55% to 1062 points for the same period. Likewise the Baltic Clean Tanker Index (BCTI) increase by
23% to 767
• Utilisation levels and vessel charter rates are expected to remain firm in Q3FY11 on account of pick‐up in
exploration/drilling spend backed by firm crude oil prices

Mercator Lines Limited: Gathering Steam - BUY: Antique

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Results highlights
􀂄 Consolidated revenues at INR6.72bn, registered a YoY and a QoQ rise of 65.2% and
12.1%, respectively. Revenues were 21% higher than our estimates mainly due to sharp
upsurge (over our estimates of INR2bn) from coal mining and trading.
􀂄 Revenues from ‘coal mining & trading’ and ‘shipping & offshore’ rose 344% YoY (20%
QoQ) and 15.7% YoY (7.2% QoQ) to INR2.7bn and INR3.9bn, respectively.
􀂄 EBIDTA increased by 34.6% YoY (QoQ decline of 4.8%) to INR1.8bn, in line with our
estimates of INR1.8bn. However, EBIDTA margins declined by 637bps to 28.2% during
the quarter mainly due to higher contribution from low margin coal business (40.1% in
2QFY11 compared to 15.2% in 2QFY10) and in-chartering of vessels.
􀂄 Hire charges increased 127.7% YoY to INR844m. However, margins in coal business
improved from nil to ~7% QoQ.
􀂄 MLL reported profit of INR572m in 2QFY11 translating into EPS of INR2.4 compared to
loss of INR194m in 2QFY10. PAT was higher than estimated INR411m.
􀂄 Standalone revenue increased by 32.9% YoY to INR1.7bn and reported profit of
INR61.5m in 2QFY11 compared to loss of INR439.7m in 2QFY10. MLL (Singapore)
reported growth of 20.7% YoY to USD42.3m in 2QFY11, while net profit remained
stable at USD9.9m.

Techcheck Daily Shipping the flavour, Mercator the stock:: Emkay

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Techcheck Daily

Shipping the flavour, Mercator the stock

n     Chart of the Day: Mercator Lines, the stock looks extremely good long term, the breakout looks very convincing with the first month contract clocking highest volume since Jan 2009

n     Other shipping stocks like Great Eastern, ABG and Bharti Shipyard also look good for short term

n     Nifty 6000-6150 to remain the trading range, momentum signatures though suggest weakness, a short term dip to 5800-5830 cannot be ruled out yet

n     Nifty the medium term uptrend remains intact, target 6500, hence any short term dip can be used for buying

n     Volumes too confirm medium term strength

n     Stocks with positive short term view

n     Mercator, HBL, LIC, IIFL, ICICI Bank, Reliance, Infosys, Andhra Bank

n     Stocks with negative short term view:

n     Exide, Sesa Goa, BHEL, BOI, BOB, Axis

ICICI Sec: Buy Mercator Lines: Re-rating candidate… Target Rs 63

Mercator Lines: Re-rating candidate…
In the last few years, Mercator Lines (MLL) has not only reported a
steady growth in its core business but has also diversified into related
areas. This has not only enabled MLL to scale up its business
significantly but has also reduced the exposure to the volatile shipping
business. MLL operates dry bulk carriers, crude and product carriers,
offshore jack-up rig and dredgers. The company also owns and operates
coal mines in Indonesia. In addition, it also carries out significant
quantity of coal trading. MLL is also entering into new business areas
such as floating production cum storage unit, which would get
operational in FY11. It is well placed to ride the volatility of the shipping
business on account of inherent advantages such as diversified revenue
stream, presence across segments, long-term charter contracts,
comfortable debt-equity ratio and strong management capability. MLL
would be the most likely outperformer among shipping stocks in case of
an upturn in the shipping cycle. The stock is trading at half its FY10 BV
of | 97 and is a likely re-rating candidate.
Diversified operations to insulate MLL from volatile shipping business
FY11 is likely to be a very volatile year for the company as earnings are
likely to be volatile on account of wide fluctuations in freight rates. A
majority of dry bulk revenues is derived from long-term contracts, which
insulate the company from volatile freight rates. However, its tanker fleet
is deployed on medium-term contracts ranging from 6-12 months. This
can drag down the performance as crude and product carrier rates have
been extremely subdued. However, the company is ramping up its coal
trading and mining activities, which would result in an improvement in
the topline and bottomline in FY12.
Valuation
We have valued MLL on a P/BV and P/E multiple basis to arrive at a price
target of | 63 and recommend BUY rating on the stock.