 See no effect of fall in freight on shipping cos: KarvyPublished on Mon, Nov 10, 2008 at 16:04 | Source : CNBC-TV18 Updated at Mon, Nov 10, 2008 at 17:47 6562 Investors following Varun Shipping. Share this News with them.
The Baltic freight index has fallen from 11,000 to 800 levels. So, how are Indian companies faring? Vikram Suryavanshi of Karvy Stock said the impact on index shipping stocks will not be that severe because they are diversified players and a lot them have diversified into the offshore space in the last two years. Here is a verbatim transcript of the exclusive interview with Vikram Suryavanshi on CNBC-TV18. Also watch the accompanying video. Q: How are you looking at the shipping stocks? Do you have a sell on all of them, which are the ones that might yet outperform? A: We have seen the much faster decline in indices as well as the timing is very fast and the stocks have also corrected a lot. The severe impact for the index shipping stocks will not be as high as the benchmark index has declined, because they are quite diversified player and lot of shipping stocks have diversified into offshore space in last two years, where things are much better. Again in the tanker segment, we have not seen much decline. In fact, they are still making reasonable money on tanker side. If you look at the level, it is around USD 42,000 per day, where breakeven total cost is around USD 30,000 per day. Things are very bad in dry bulk, but this year almost 20% exposure is in dry bulk. Meanwhile, GE Shipping is around 25%. Secondly, their balance sheet is much stronger to withstand this fall for another six months or two years timeframe, because they are sitting on good amount of cash. Thirdly, we have write off refusal where we have cargo support from the domestic government and we are carrying around only 15% of domestic cargo. Our country has huge domestic cargo to support shipping industry. So things are not that bad for the Indian shipping stocks. Even the valuations have come down to attractive levels and in fact it does become a good entry point, but investors need to be quite patient to get significant returns maybe - around six months to one year. Q: What are you recommending as a buy right now and what are the targets on those stocks? A: In this time, we select a diversify player like Varun Shipping , which does not have any exposure in dry bulk segment and 85% tonnage is on LPG. We have seen reasonably good rates, plus offshore space is quite attractive and dividend yield of more than 11%. Even diversified player like GE Shipping is recommended as of now.
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