Accumulate Great Offshore; target of Rs 377: PLilladher

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Accumulate Great Offshore; target of Rs 377: PLilladher

Prabhudas Lilladher is bullish on Great Offshore and has recommended accumulate rating on the stock with a target of Rs 377 in its February 03, 2011 research report.

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Prabhudas Lilladher is bullish on Great Offshore and has recommended accumulate rating on the stock with a target of Rs 377 in its February 03, 2011 research report.

"Great Offshore's (GOFF's) revenues declined 18% on a YoY basis and 2% on a QoQ basis to Rs 1,978 million. This was largely on account of the two rigs which were chartered for a shorter period of time during the quarter as well as certain offshore vessels which were deployed in the spot market where rates were soft. However, the disappointment in revenues vis-a-vis our estimates was on account of lowerthan- expected marine construction income since certain milestones were not achieved within the quarter which led to lower booking of the same."

"EBITDA margins for the quarter stood at 38.6% as against 48% in Q3FY10 and 53.1% in Q2FY11. Margins suffered on account of large fixed costs on the two rigs which stood idle for most of the quarter. Besides, lower margins on the assets in the spot market also contributed to the decline. Repair & Maintenance expenses increased by 125% and 17% on a YoY and QoQ basis, respectively. With lower revenues, a sharp decline in EBITDA margins and increased depreciation on a larger asset base, the company's profits took a large beating and stood at a mere Rs 19m, decline of 96% and 93% on a YoY and QoQ basis, respectively."

"Both rigs, Kedarnath & Badrinath, have been deployed since December 2010. Kedarnath has been deployed on a 5-year charter with ONGC, while Badrinath has been deployed on a one well charter which is likely to end in March 2011. Further, it has also bagged a 3-year contract which shall commence in Q2FY12. Overall, the revenue visibility for Q4FY11 on a standalone basis stands at Rs 1,800m."

"On the back of weak revenues and EBITDA margins, we are lowering our PAT estimate for FY11 by 10%. The company's NAV (insured value) as on September 30, 2010 stands at Rs552/share. However, the company has not guided on its NAV as of December 31, 2010. We are reducing our target price on the stock from Rs 497 to Rs 377 based on 6.5x FY12 on account of the NAV of the company not being available as well as overall reduction in multiples. We are, however, maintaining 'Accumulate' rating on the stock," says Prabhudas Lilladher research report.

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To read the full report click on the attachment