September 10, 2008
ULJK Securities has recommended an accumulate rating on Great Offshore with a target of Rs 664.
September 9, 2008 research report:
Sales are expected to grow at a CAGR of 32% and profit is expected to grow by 21% over FY08‐FY10E as contracts are expected to be done at higher day rates.
Its EPS is seen at Rs 59.6 in FY09E and at Rs 80.4 in FY10E.
At a CMP of Rs 543, the stock trades at a P/E of 9x & 6.6x its FY09E & FY10E earnings respectively.
It is trading at EV/EBITDA multiples of 6.5x F2009 and 4.9x F2010.
Based on the DCF methodology, we arrive at a share price of Rs 664. We recommend an accumulate rating on the stock with a target of Rs 664.
Great Offshore is a prominent integrated offshore oilfield services provider offering a broad spectrum of services to upstream oil and gas producers to carry out offshore exploration and production activities. The company has a total fleet size of 40 vessels. This includes two offshore drilling rigs. It has offshore marine logistics, 26 offshore support vehicles and 11 port terminal support tugs and a construction barge. In the marine engineering and projects space, it has two assets.
Great Offshore is de‐risking its business model with marine engineering and construction projects. The company has forayed into port management and single point mooring operations by acquiring, KEI‐ RSOS Maritime Ltd. The acquisition is EPS accretive adding over 10% to its FY09. It allots its vessels on a charter basis, which gives a significant revenue visibility.
The company will also see its high yield drilling rigs getting fully operational in FY 2008‐09. The day rates are expected to be firm and there will be re‐pricing in the case of a few mature and modern OSVs during the latter part of the year. It has doubled its income from Rs 3915 million in FY06 to Rs 8193 million in FY08. It has a capex plan of USD 230 million over the next two years, which will result in an increase in it revenues and will be reflected in its future earnings. Its balance sheet is unleveraged.
