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Summary
of Contents
PULSE TRACK
STOCK UPDATE
South East Asia Marine
Engineering & Construction
Cluster: Ugly
Duckling
Recommendation: Buy
Price target: Rs300
Current
market price: Rs206
Price target revised to Rs300
Result highlights
-
South East Asia Marine Engineering &
Construction (SEAMEC) has reported a robust growth of 124.6% in
its revenues to Rs61.6 crore for the fourth quarter of CY2006. The
revenue growth was largely contributed by the firming up of the
charter (day) rates and the incremental revenue from an additional
vessel (SEAMEC Princess) acquired recently.
-
The operating profit margin (OPM) at 49.3% was
lower than 65.1% reported in Q4CY2005 as the fourth vessel (SEAMEC
Princess) was operational only for a 25-day contract during the
quarter.
-
The earnings grew by 64.8% to Rs25.9 crore in
Q4CY2006, ahead of our expectations of around Rs19.2 crore.
-
On a full year basis, the revenue and earnings
have grown at a healthy rate of 93.6% and 202.4% to Rs159.3 crore
and Rs58.7 crore respectively. The OPM improved significantly to
44.5% (up from 33.2% in CY2005) in spite of the one-time expense
of Rs8 incurred on mobilisation and repairs of its recently
acquired vessel in Q3CY2006.
-
We have revised the estimates for CY2007 to
factor in the appreciation of the rupee, better than expected
charter (day) rates and delay in the conversion of the newly
acquired vessel into a multi service vessel (MSV). The new vessel,
SEAMEC Princess, is expected to be operational for around 200 days
in CY2007 (as compared with around 300 days anticipated by us
earlier). Consequently, the revenue and earnings estimates for
CY2007 are being revised downward by 5% and 16.3% respectively.
The estimates for CY2008 have also been introduced in this note.
-
At the current market price
the stock is trading at 8.4x CY2007 and 5.8x CY2008 estimated
earnings. We continue to maintain our Buy call on the stock with a
revised price target of Rs300 (8.5x rolling four quarter
earnings).
SECTOR UPDATE
Banking
CRR hike—negative for banks
The Reserve
Bank of India (RBI) has surprised the market by hiking the cash
reserve ratio (CRR) by another 50 basis points to 6% from 5.5% at
present. The CRR is a percentage of the net demand and time
liabilities (NDTL; read deposits) that the banks need to maintain in
the form of cash balance with the apex bank. The hike would be
implemented in two stages. The CRR would be first hiked by 25 basis
points to 5.75% on February 17, 2007. One more hike of 25 basis
points would be effected on March 3, 2007 which will take the CRR to
6%. The latest round of hikes is expected to absorb Rs14,000 crore
of liquidity from the banking system. This would be in addition to
the Rs13,500 crore already sucked in by the 50-basis-point increase
announced in December 2006.
MUTUAL FUNDS:
WHAT'S IN—WHAT'S OUT
Fund Analysis: February
2007
An analysis has been undertaken on equity and
mid-cap funds' portfolios, indicating the favourite picks of fund
managers for the month of January 2007. Equity funds comprise of all
diversified, index, sector and tax planning funds, whereas mid-cap
funds include a universe of 18 funds such as Reliance Growth,
Franklin India Prima Fund, HDFC Capital Builder, Birla Mid-cap Fund
etc. |
