STOCK WATCH

ABG Shipyard (80.00) is one of India’s largest private sector shipbuilding companies & established manufacturer and service provider of a variety of ships, including bulk carriers, interceptor boats, diving support vessels, anchor handling supply ships, dynamic positioning vessels, anchor handling tugs & other multipurpose vehicles. Till date it has delivered 104 ships and has further order book position of nearly Rs 10,000 cr to be executed in next 4~5 years. Few months back it bagged its first rig order from Essar Shipping. For the Dec’08 quarter, company has reported 80% rise in sales to Rs 489 cr but due to very high interest cost, PAT remained flat at Rs 46 cr. Although there is high probability of company witnessing huge order cancellation in short term because of slowing down of world economy, still the Indian ship building industry has a tremendous growth potential ahead. According to new international shipping norms, single-hull tankers have to be phased out by 2010 & ships that are over 25-year old have to be scrapped. Meanwhile, the ship-building activity has shifted from Europe to Asian countries like Korea, China and India due to cost and other factors. Notably, it is the first ship building company in private sector to actually receive the subsidy to the tune of Rs 19 cr from govt last year. It is estimated to clock a turnover of Rs 1400 cr and profit of Rs 150 cr i.e. EPS of Rs 29 on current equity of Rs 51 cr. Incidentally company hasn’t pledged any share as of now.

Investors shouldn’t sell Sunil Hitech (68.00) although it posted loss at the net level. Actually it recorded 90% growth in revenue to Rs 148 cr and 40% increase in profit to Rs 7 cr, but due to provisioning of notional loss in mutual fund investments to the tune of Rs 13 cr, it registered net loss of Rs 6 cr. Although company hasn’t bagged any major order of late, but it boast of having an massive order book position of Rs 1300 cr. Company specializes in niche segment of fabrication, erection & testing and commissioning of thermal power plants including doing individual works under balance of plant. It also undertakes projects in the transmission and distribution segments including commissioning of EHV lines for substations, errection of turbine generators etc. It has 125,000 TPA of steel fabrication capacity and 100,000 TPA of equipment installation capacity in power plants. Incidentally, company has an under leveraged balance sheet with a low debt equity ratio of 0.60x times and can raise more debt comfortably. It may end FY09 with a topline of Rs 525 cr and PAT of Rs 25 (excluding notional loss on investment). This translates into EPS of Rs 20 on current equity of Rs 12.30 cr. Secondly it has huge reserves to the tune of Rs 145 cr on small equity leading to a healthy book value of Rs 128. Aggressive traders can buy for short term gain.

For the Dec’08 quarter Madhucon Project (50.00) announced satisfactory result. Revenue grew by 15% to Rs 227 cr and NP increased marginally to Rs 14 cr. Accordingly for the first three quarters it recorded 40% growth in topline to Rs 710 cr and 20% rise in PAT to Rs 41.50 cr thereby posting an EPS of more than Rs 11 till date. Company is engaged in execution of infrastructure projects, such as construction of national highways, fly-overs, dams, tunnels, aquaducts, bridges, coal handling plants, railways projects, power projects, workshops, and residential cum commercial ventures. Company boast of having an order book of more than Rs 5000 cr. Few months ago it bagged a single EPC order of nearly Rs 1000 cr for setting up two thermal plant of 135 MW each in Andhra Pradesh. Besides it has entered into MOU with Jharkhand govt for setting up 1000 MW thermal power plant at total cost of Rs 4800 cr. It has also been awarded 2 hydel power project of 315 MW in Arunachal Pradesh. Moreover, company has a strong portfolio of BOT projects with four NHAI toll based road projects of 330 km. It has also diversified by operating one coal mine of 3200 hector in Indonesia and second coal mine of 19000 hector is in exploration stage. For FY09 company may report total revenue of Rs 950 cr and profit of Rs 45 cr leading to an EPS of Rs 12 on current equity of Rs 7.40 cr with face value as Rs 2/- per share. Although funding its massive projects will be a challenge for the company, still it seems a good bet at EV of less than Rs 400 cr.

Aban offshore (440.00) declared satisfactory result for the Dec’08 quarter. Its consolidated sales shot up 40% to Rs 837 cr whereas net profit quadrupled to Rs 256 cr on the back of higher other income (forex gain) of Rs Rs 162 cr. Notably it recorded an OPM of 56% and posted an EPS of Rs 68 for the single quarter. Effectively for the nine months ending Dec’08 it has recorded 75% rise in turnover to Rs 2410 cr and 800% jump in PAT to Rs 648 cr i.e. EPS of Rs 170 till date. Incidentally this includes other income to the tune of Rs 340 cr. Company is engaged in providing oil field services for offshore exploration and production of hydrocarbons in India and abroad. With 21 offshore assets it is among the top ten offshore drilling asset owners in the world. It possesses fifteen jack-up offshore drilling rigs, three drill ships, one floating production platform and a jack-up rig & drill ship each on bareboat charter. It is among the few global companies to facilitate oil exploration at water depths ranging from 250 ft to 7000 ft and drilling depths ranging between 20,000 ft and 30,000 ft. Having its footprint globally across 10 nation, company boast of serving leading global and domestic E&P companies such as ONGC, Shell Brunei, Shell Malaysia, Cairn Energy, Petronas Carigali, Exxon Mobil, Chevron, Hardy Exploration, Oriental Oil Dubai, ROC Oil China, and GSPC to name a few. Although company may witness a sharp fall in charter rate due to slowdown in E&P activities and lower demand, still may to do well with improved capacity utilization on the back of deployment of all its vessels. Despite being an over leveraged company, its worth a punt at current levels