Hold Garware Offshore: India Capital Markets

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Hold Garware Offshore: India Capital Markets

India Capital Markets has recommended hold rating on Garware Offshore with a target of Rs 146, in its August 17, 2010 research report.

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India Capital Markets has recommended hold rating on Garware Offshore Services with a target of Rs 146, in its August 17, 2010 research report.

"Garware Offshore Services Ltd (GOSL) reported a decline in consolidated revenues in Q1FY11 by 14.9% YoY and 15.3% sequentially to Rs 485 million. This decline was mainly due to loss of revenues from sale of a vessel (PSV 'Everest' in Jan '10) and two vessels under subsidiary remained idle for almost two months during the quarter. Decline in revenues were also led by lower day rates in spot markets (PSV - Poorna & Mahananda). EBIDTA margins on YoY sharply declined during the quarter mainly due to higher operating costs and lower utilizations of assets."

"During the quarter, some oversupply of vessels in the market has led to fall in day rates in spot market & under utilization of vessels which positioned GOSL in stiff competitive environment. Despite improving oil prices and larger capex plans of E&P companies, "day rates" have not witnessed the relevant upside as large number of offshore support vessels (OSVs) are on supply stream over next two years. We expect there is limited upside in the stock as we have concerns over under utilization of assets (lower usage days) in coming quarters. At CMP of Rs 133 stock trades at 7.2x on FY11E EPS of Rs 18.4. We recommend HOLD rating on the stock with a target price of Rs 146," says India Capital Markets research report.
 
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