Emkay Global Financial Services has recommended hold rating on Garware Offshore with a target of Rs 147, in its August 19, 2010 research report.
"Garware Offshore Services (GOSL)'s consolidated revenue for the quarter at Rs 485 million (our est Rs 541 million) declined 14.9% on account of partially idle status of two bareboat charter vessels (in the Singapore subsidiary) and absence of revenue from PSV Everest which the company sold in Q3FY10. Though we are building in earnings CAGR of ~20% CAGR over FY10-12E for GOSL (assuming current idle vessels to operate on spot market), the current revenue backlog of USD 55 million (just 1X its FY10 revenues) does not provide us comfort on earnings visibility. Further at the end of quarter, debt on GOSL balance sheet stands at ~ Rs 4.5 billion and its networth (adjusted for forex hedge reserves) stands at Rs 2.6 billion, translating into D/E ratio of 1.9 X, which will further increase to 2.2X by the end of the year. Consequently we believe that the current valuation of 7.3X FY11 earnings & 8.62 X FY11 EBIDTA capture positives of earnings growth. We maintain our HOLD rating on the stock with target of Rs 147," says Emkay Global Financial Services.
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