SEAMEC Ltd - Rs 48.00

South East Asia Marine Engineering & Construction (SEAMEC) is a 75% subsidiary of Coflexip Stena Offshore Mauritius Ltd which in turn is owned by Technip S.A of France, the largest oilfield engineering, construction and service group in Europe. SEAMEC operates multi-purpose support vessels (MSV) for diving and provides underwater/subsea engineering and construction, maintenance, inspection of under-water structures, rescue-operations and fire-fighting and other support services for offshore oil/gas installations located in India or abroad. Hence it is a pure play of charter hiring of MSVs, which are more specialized vessels than Offshore Supply Vessels (OSV) as they are equipped with Dynamic Positioning (DP) system and can go underwater for repair & maintenances of underwater pipelines. Notably, there are just about 30-35 MSVs operating in the world and Technip is the undisputed leader with 17 of them. In India, SEAMEC is a leader with 4 out of 6 vessels whereas the balance two are with ONGC. To conclude, SEAMEC specializes in vessel management, marine management, dive support, fire fighting, subsea construction, ROV support, pipelaying, rescue operations, logistics, mooring & de-mooring, cranage etc.

Earlier, SEAMEC owned three vessels viz., Seamec-I with 1700 DWT, Seamec-II with 2100 DWT, Seamec-III with 2100 DWT. In June 2006 it acquired a cable lay vessel named Seamec Princess (Ex Oceanic Princess) from M/S James Fisher Logistics Ltd. Post acquisition vessel was modified to DP-II Diving Support Vessel at Dubai dry-dock and put on charter with effect from 1st March 2008. This vessel is quite huge and technically more advanced compared to the existing three vessels. The current status of deployment of all the vessels is as follows:

SEAMEC-I - Hired out to M/s Dolphin Offshore Enterprises (India) Ltd
@ US$ 23,425 per day until 10th March 2010

SEAMEC-II - Hired out to Rana Diving Marine Contactors, Italy
@ US$ 95,000 per day until 30th April 2009

SEAMEC III - Hired out to Condux SA de CV, Mexico
@ US$ 59,000 per day until 3rd August 2009

PRINCESS - Hired out to M/s. Workboat International FZCO, Dubai
@ US$ 68,333 per day until 12th June 2009

From the above charter rates it can be concluded that company has still not felt the heat of recession or slowdown as all its vessels are given out at lucrative rates. So the key to company’s performance will be charter rates at which it will enter the future contracts. Due to the drastic fall in crude oil prices, the oil exploration and production activities have come down sharply and accordingly the rental charges for oil rigs, support vessels and other ancillary services also dropped due to fall in demand. To worsen the situation, most of the developed countries went into recession and liquidity crises also hit the world simultaneously. SEAMEC also faced some payment delays / early cancellation of contract etc with couple of its international customer but everything is settled now. Incidentally earlier, due to dry docking, minor accidents, repair etc some or the other vessel of the company was always out of work. But in the last quarter all its four vessels were deployed full time leading to the bumper performance by the company.

Most importantly, no vessel is planned for dry dock in the current fiscal and barring unforeseen circumstance like cancellations, accidents etc all the vessels are expected to be continuously employed. Even if company charters out it vessels at 30% lower rate, still it will do reasonably well. Earlier company was planning to acquire one more vessel but looking at the current scenario it has been dropped. It was also contemplating to bid for exploration and pipe laying engineering contracts on its own but again it has been put to back burner. Interestingly, despite being in a capital-intensive industry, this MNC is a debt free company. To comply with the listing agreement, foreign promoters have last quarter only brought down their stake to 75% from above 78%. It seems majority of promoter selling was taken over by Sundaram Mutual Fund. Financially, with a rocking performance for the last Dec’08 quarter company was able to end CY08 on quite a buoyant note. Total revenue increased by whopping 60% to Rs 269 cr whereas PAT improved by 30% to Rs 47 cr leading to an EPS of Rs 14 on the equity of Rs 33.90 cr. With huge reserves of Rs 275 cr and gross block of Rs 375 cr this debt free company is trading extremely cheap at an EV of Rs 175 cr. For year ending Dec 2009, it is roughly estimated to clock a turnover of Rs 325 cr and PAT of Rs 65 cr i.e. EPS of Rs 19 on current equity. Investors are recommended to buy at current levels, as share price can double within a year. However, it’s a non dividend paying company despite of making handsome profits.

Click here to download Report (PDF)