Thursday, December 28, 2006
Mahindra & Mahindra Financial climbs up
At 3:06 pm, Mahindra & Mahindra Financial Services is quoting at Rs 268.80, up Rs 13.05, or 5.10%. It has touched an intraday high of Rs 270.90 and an intraday low of Rs 252.
It is trading with volumes of 57,893 shares. Yesterday the share closed down 0.04% at Rs 255.75.
EIH has resistance at Rs 117
Technical analyst, Rajat K Bose is of the view that East India Hotels has a resistance at Rs 117.
“East India Hotels did pretty well yesterday. Infact I have a feeling that East India Hotel is headed upwards in the short term, my target is something like Rs 123. If one wants to take a position here then put a stop loss of Rs 104 or Rs 103 and take a long position, expect something like Rs 123. In between, Rs 117 would be a resistance level.”
Buy XL Telecom at lower levels
Ambareesh Baliga of Karvy Stock Broking is of the view that one can buy XL Telecom at lower levels.
"The management of XL Telecom is saying if one is looking at Rs 18 EPS for FY07 it makes a decent buy at lower levels, it has already fallen below the issue price. If it falls more from here one can take a try."
Deccan Aviation can test Rs 148-153 in short term
Technical analyst, Rajat K Bose is of the opinion that Deccan Aviation could test Rs 148 to Rs 153 resistance levels in the short term.
“Deccan Aviation has shown a very positive technical set up. So chances are that atleast Rs 148 to Rs 153 resistance levels could well be tested in the short term.”
Hold Indiabulls with stoploss of Rs 640
Rahul Mohindar of Viratechindia is of the view that one can hold on Indiabulls Financial Services with stoploss of Rs 640.
"Indiabulls we had called for a target for Rs 660-670, which has very much been achieved and if stays past Rs 670 which was identified as resistance earlier on then one would look at further rally to Rs 710-720 levels. That is not too much from here so it doesn’t call for a fresh buy but if one is already invested into the stock then hold on with a Rs 640 stoploss. We are presently neutral on Century Textiles and Industries and haven’t taken a fresh call on that."
Worst is over for most of the sugar companies
Sajiv Dhawan of JV Capital Services is of the view that worst should be over from most of the sugar companies, so from that perspective enter the Bajaj Hindustan .
“Sugar is a sector, which is been talked about, it continues to disappoint for the last few months. If you are looking at fresh perspective now after the results well then the downside is probably limited the worst should be over of the sugar companies. But its one of the sector which time and time again has failed is sustain any levels, its not convincing the markets that the sector is going to perform and the results are going to start turning around.”
He further added, “So if you are a low risk investor then probably stay away from if you can take a bit of higher risk then maybe you could average out not really a strategy I normally condone but I think the worst should be over from most of these sugar companies, so from that perspective enter the Bajaj Hindustan. But still, as a whole sugar is not going to be a sector where will be aggressively invest in right now.”
McLeod Russel can add another 12-15%
Rahul Mohindar of Viratechindia is of the view that McLeod Russel can add another 12-15% in the short term.
"We do track McLeod Russel and the interesting thing with this stock is the previous lows at Rs 88, is where the stock took a nice bounce up couple of days back and one should hold on to the stock with a Rs 94 stoploss. I think the stock would comfortably move another 12-15% in the short-term but we don’t really see a long-term trigger coming in here. I would trade these counters more on the shorter term."
RNRL has target of Rs 29
Rahul Mohindar of Viratechindia is of the view that Reliance Natural Resources , RNRL has target of Rs 29.
"We have a price target on RNRL of Rs 29. There is some resistance towards Rs 26 but that seems to be short-term resistance. One could still go and buy this stock, or hold on to it and get a good return in short to medium-term.
Reliance Petroleum good long term play
Amarjeet Singh of Mangal Keshav Securities is of the opinion that Reliance Petroleum is a good long term stock.
“Reliance Petroleum has been moving in band of Rs 60-70. Until and unless it crosses Rs 70-71 with good volumes, it continues to move in sideways pattern. It is a good defensive stock; downside risk is less. It is a good long term stock.”
Enter ESS DEE Aluminium with 6-12 month time frame
Sajiv Dhawan of JV Capital Services is of the view that if one enter in ESS DEE Aluminium with six-twelve month time frame then he/she will get reasonable gains.
“ESS DEE Aluminium is not an IPO which from our side we saw much interest or response to but it has reasonably got listing on the first day. I think there will be some interest after the next 2-3 days. It takes time for these stocks to settle down especially when they don’t open with such a good cap on the upside. From the valuation’s perspective it’s reasonable, so it still got a good bit of headroom from that perspective. Next few days it might have to be on a higher risk side because there could be a bit of volatility."
He further added, "You could see the stock moving in sharp swings here and there. But if you got 6 months to 1-year timeframe then by all means enter at the current levels or if it does correct I think you will get reasonable gains. But there is not a lot of information from my, to offer on this particular stock position at the current time.”
Invest in Ansal; Mohindar
Rahul Mohindar of Viratechindia is of the view that one can invest in Ansal Properties.
"We like some of the realty stocks and we like specifically Ansal Properties, I think above Rs 960, it would give us a major breakout, which could even take the stock into new highs. So one can invest in it."
Jayshree Tea will do well for next few days
Sajiv Dhawan of JV Capital Services feels that Jayshree Tea will do well for next few days.
“Momentum has certainly come back today compare to sugar it’s obviously a much better sector, its not struggling as much. But I think Jayashree Tea going to be a market performer probably form current levels, Jayashree Tea is obviously in the export and plantation business, it has got some diversified products as well. It’s a part of a big group, BK Birla Group. So nothing wrong intrinsically with the stock, valuations are okay and the fact that the sector as a whole has done very well today."
He further added, "I think it will probably go well for this stock in the next few days. But if they do start to run up very sharply then a bit of profit taking is probably warranted and any aggressive position again I would not take until the results are out."
Media companies has good growth ahead
Neeraj Divan of Quantum Securities is of the view that media companies has good growth ahead.
"We are very positive on Media companies like Zee Entertainment Enterprises , New Delhi Television Ltd , NDTV or Television Eighteen , TV18. We feel there is a lot of potential for a media as whole because globally the companies are quite expensive. Our companies are not so expensive, so we feel TV18 is listed at good value and there is a good buying seen in the counter yesterday and going ahead also we see good growth for these kind of companies.
Price target: Rs250
Current market target: Rs202
GDL to operate Conware CFS
Gateway Distriparks Ltd (GDL) has won an operations and management (O&M) contract for the Conware container freight station (CFS) from the Punjab state government. The duration of the contract is 15 years. GDL will make an upfront payment of Rs35 crore and play an annual fee of Rs10 crore with an escalation clause of 5% on the same. The Conware CFS achieved a throughput of 55,662TEU and EBITDA of Rs13.8 crore in FY2006; the same translates into an EBITDA/TEU of Rs2,500.
State Bank of India
Cluster: Apple Green
Price target: Rs1,380
Current market target: Rs1,236
PLR hike to improve margins
- SBI hikes PLR by 50 basis points: State Bank of India (SBI), the country's largest bank, has announced a 50-basis-point hike in its prime lending rate (PLR) to 11.5% effective from December 27, 2006.
- SBI had hiked deposit rates by 25-75 basis points: SBI had earlier announced a hike in its term deposit rates by 25-75 basis points effective from December 11, 2006.
- PLR hike to improve NIM: SBI's net interest margin (NIM) is expected to improve by five basis points on an annualised basis, considering the net effect of the 50-basis-point hike in the PLR and the increase of 25 to 75 basis points in the deposit rates.
- CRR hike to be a drag on the bank's profitability: The cash reserve ratio (CRR) balances of banks have stopped earning interest post-June 2006. Also the impact of this on market liquidity will push the cost of funds higher for the banks. Both the factors are a drag on SBI's profitability.
- An 8.5% equity dilution factored in: We have factored in an 8.5% equity dilution (based on the current equity of Rs526.3 crore) in our valuation for the FY2008E numbers.
- We maintain Buy on SBI: We have valued SBI at 1.4x FY2008E consolidated book value of Rs955 plus another Rs57 per share for its life insurance subsidiary. At the current market price of Rs1,236 the stock is quoting at 12x its FY2008E earnings per share (EPS), 5.7x FY2008E pre-provision profit (PPP), 1.7x FY2008E stand-alone book value and 1.3x FY2008E consolidated book value. We maintain our Buy recommendation on the stock with the price target of Rs1,380.
FII Gross purchases Rs 923 Cr Gross Sellers Rs 1291 Cr Net Sellers Rs 368
Cr. MF Gross Purchases Rs 716 Cr Gross Sellers Rs 323 Cr Net buyers Rs 391 Cr.
FIIs have been seller and that could dampen the market sentiment.
FNO expiry saw good start but profit booking creeped in soon as movement in the indices was restricted within a narrow range. Investors remained cautious on the back of FNO expiry as the session passed indices felt the selling pressure as market ended down in red. There was support from the Asian Indices as they ended their day in Green while the European Indices are trading in Red. Global cues were mixed as Asian surged to end in green while Europe is trading in red. Large caps like Cipla, Reliance, SBI witnessed selling pressure but ZEE, Hero Honda were in favour. Selective Midcaps too traded up with good volumes.
Sensex ended down by 13 points at 13846.34. Weighing on the Sensex are losses in Cipla (253.25,-2 percent), RIL (1276.65,-1 percent), SBI (1236.05,-1 percent), TISCO (476.5,-1 percent) and Dr Reddys (799.55,-1 percent). Losses are restricted by gains in HDFC Bk (1079,+2 percent), Hero Honda (759.15,+2 percent), Guj Ambuja (143.55,+1 percent), TCS (1208.65,+1 percent) and ITC (177.65,+1 percent). topnew.gif (1104 bytes)
Zee Tele Films demerged its cable undertaking into Wire & Wireless India Limited (WWIL) and the regional and news broadcasting undertaking into Zee News Limited (ZNL). The company will also demerge its Direct Consumer business undertaking (primarily DTH business) into ASC Enterprises Ltd, to be renamed Dish TV India Ltd. While WWIL and ZNL would be listed on the stock exchanges by January 10, Dish TV India is likely to be available for trading from the end of January. DTH services of Zee reduced prices by 49% to Rs 1500 for installation and also reduced the monthly subscription rates too. We are positive on Zee and the stock traded up in this volatile market.
The UB Group has earmarked $500 mn to $1 bn for an overseas acquisition as part of its strategy to boost global and domestic spirit sales. The UB Group is gradually including premium vodka brands in its product portfolio. Wine is another niche segment it is eyeing as a growth driver. We are in talks with Australian and South African wine companies to import a range of premium wine. UB group is also keen to set up a manufacturing facility in eastern India. The Wine and Beer story remains intact and exciting. We have a postiive view here.
Technically Speaking: Sensex witnessed volatility on the back of expiry. Sensex trade in the range of 13941 to 14021 levels. However, Declines maneged to outnumber Advances. Market Turnover stood good at Rs3966 cr.
Good performance for the day. DTP had calls by Adonis on VoltAmp and Divis Lab which delivered fantastic gains. Delivery Delights by wow Adonis was geat with Sun Tv and Hinduja TMT both the calls worked good which were booked partially.
We spoke to Mr. Parvez Umrigar, Managing Director of Gammon Infrastructure Projects Ltd (GIPL) to seek clarification on the recent order issued by the Securities and Exchange Board of India (SEBI). The following are the key take-aways:
Gammon India and Mr. Abhijit Rajan are not allowed to sell shares of GIPL for a period of three years from the date of allotment in the public issue of GIPL. There are however, no restrictions on GIPL to raise money from the market. The IPO of GIPL, as stated by Mr. Umrigar, is on track as per schedule. GIPL is a debt free company with a networth of around Rs2.5bn. It can leverage if it wants but plans to strengthen its networth further before raising any more debt. Plans for GIPL are unaffected by the SEBI
Gammon India Ltd (GIL) and Mr. Abhijit Rajan cannot access the capital market directly or indirectly for one year from date of the order. Mr. Umrigar mentioned that GIL is comfortably placed with a networth of over Rs10bn and negligible net debt/equity ratio. The management of GIL has an internal target of not raising money through equity issuance till March 2009, which means that the company will not be constrained financially, by the SEBI verdict.
Mr. Umrigar also said that even if GIL de cides on raising money (which it has no plans for currently), it could do so by borrowing from banks or through the private equity route.
The working of GIL is unaffected and the management maintains its target of 35% turnover growth conservatively and stretch target of 50% during FY06-08.
GIL plans to become a US$1bn company during FY09. The company plans on contesting the SEBI order.
We had recommended a BUY on GIL in our construction sector report dated October 18, 2006 (India Under ‘Construction’) at Rs385 with a target price of Rs454. Our target price was achieved and the stock hit a high of Rs487 on December 05, 2006. The last 13 trading sessions have seen a sharp fall and with the declaration of the SEBI order, the GIL stock has predictably taken a beating this morning - down 7.7%, CMP Rs379 (December 22,
We believe that this fall presents an opportunity for long term investors to enter a leader in the construction space with a long track record, order book/FY06 sales of 6.7x and high
expected growth rate in topline. The stock trades at a P/E of 24.3x FY07E and 16.5x FY08E EPS, adjusted for value of BOT investments. We recommend a BUY and our revised target price of Rs476 represents an upside of 25.6% in one year.
After posting gains of over 100 points in the first half, the market steadily declined from its early highs and wilted under selling pressure at close. The market, however, was extremely buoyant in early trades as the Sensex after opening 33 points above its last close at 13893 surpassed 13900 to touch an intra-day high of 13960. While selective selling pared gains by mid-noon trades, the Sensex eventually slipped below in late noon trades on extended correction and touched the day's low of 13820. The Sensex finally ended with a small loss of 13 points at 13846, while the Nifty virtually ended flat at 3971.
The market breadth was negative. Of the 2,707 stocks traded on the BSE, 1,392 stocks declined, 1,248 stocks declined and 67 stocks ended unchanged. The sectoral indices displayed mixed trend on the BSE.
Dragging the market from higher levels Cipla tumbled 2.43% at Rs253. Reliance dropped 1.25% at Rs1,277, SBI shed 1.18% at Rs1,236 and Tata Steel lost 1% at Rs477. Dr Reddy’s, NTPC, BHEL, Reliance Energy, L&T, Bajaj Auto, Ranbaxy, Satyam Computers and Maruti were down around 1% each. HDFC Bank, however, bucked the downtrend and advanced 2.09% at Rs1,079. Hero Honda gained 1.98% at Rs759, Gujarat Ambuja soared 1.20% at Rs144 and TCS gained 1.12% at Rs1,209 respectively.
Select health care stocks witnessed selling pressure. Sterling Biotech dropped 3.05% at Rs191, Novartis lost 2.45% at Rs357, Cipla declined 2.43% at Rs253, Matrix Labs moved down by 2.38% at Rs207 and Torrent Pharmaceuticals was down 2.32% at Rs204.
Over 27.61 lakh shares of Reliance Communication traded on the BSE followed by HCL Techno (21.17 lakh shares), Sterling Biotech (16.17 lakh shares), Reliance (13.20 lakh shares), Century Textiles (11.44 lakh shares ) and Parsvnath (10.68 lakh shares).
The market witnessed a bout of volatility towards the close of the trading session on account of expiry of December 2006 derivatives contracts.
The 30-shares BSE Sensex settled 13.35 points lower at 13,846.34. It had opened on a firm note at 13893.29 and surged to a high of 13,960.39 by minutes of commencement of trade. It touched an intra-day low of 13819.77 in late afternoon session.
The S&P CNX Nifty rose 4.10 points to 3978.35. It had surged to a high of 3997.35 in early trades. It also touched a low of 3961.95.
The market breadth was negative with 1234 shares advancing on BSE as compared to 1375 shares that declined. 73 shares were unchanged.
The total turnover on BSE amounted to Rs 3966 crore as compared to Rs 3664 crore on Wednesday (27 December)
Among the Sensex pack, 16 declined while the rest advanced.
Drug maker Cipla was the top loser, down 2.77% to Rs 252.35 on 1.43 lakh shares. It has slipped from high of Rs 260.45.
SBI (down 1.27% to Rs 1235), Dr Reddy’s (down 1.13% to Rs 798.40) and Tata Steel (down 1.05% to Rs 476.25) followed.
Reliance Communications was down 0.41% to Rs 473 on high volumes of 27.48 lakh shares. it had touched a high of Rs 485. The company is reported to be interested in bidding for rival Hutchison Essar. Anil Ambani will address a press conference at 16:00 IST on Thursday amidst raging speculation that he will announce his firm's next move in the battle for Hutch-Essar.
Index heavyweight Reliance Industries (RIL) was down 0.78% to Rs 1282.80 on 13.19 lakh shares. The company is reportedly planning to invest Rs 5,000 crore for gasification of lignite in south Gujarat. The project will be a joint venture between (RIL) and Gujarat Mineral Development Corporation (GMDC). The private sector oil refiner is said to be negotiating with GMDC and scouting for lignite reserves in south Gujarat.
HDFC Bank was the top gainer, up 2% to Rs 1078 after its ADR gained 3% to $73.89 on Wednesday on the NYSE.
Hero Honda (up 1.83% to Rs 758), TCS (up 1.73% to Rs 1216) and ITC (up 1.47% to Rs 179) were the other gainers.
Tech Mahindra was the top traded counter on BSE with total turnover of Rs 317.61 crore followed by Indiabulls Financial Services (Rs 217.64 crore) and Reliance Industries (Rs 169.64 crore).
HCL Technologies gained 2.21% to Rs 633.90 on total volume of 21.17 lakh shares after a block deal of 5 lakh shares was struck on the counter on BSE at Rs 619 per share.
Indiabulls Financial Services advanced 5.18% to Rs 673.95 on high volumes of 32.72 lakh shares as buying continued, a day ahead of the last trading date for shareholder eligibility to get the shares of the real estate firm. The stock had spurted 9.4% to Rs 590.30 on 21 December on high volume of 56.9 lakh shares on BSE after the company announced 9 January 2007 as record date for its demerged real estate business, now brought under Indiabulls Real Estate (IREL). The stock enters no-delivery period on BSE from 2 January 2007 to 8 January 2007, for the purpose of the demerger of the real estate business.
The Nikkei share average ended flat on Thursday as Nippon Steel Corp. and its peers drew buyers, while Canon Inc. and other recent gainers fell on concern that their prices may have advanced too quickly. The Nikkei was up 0.01%, or 1.66 points, at 17,224.81.
Oil prices firmed above $60 on Thursday after losing $3 over the last four sessions on mild U.S. weather, with dealers looking ahead to weekly oil data expected to show a drop in crude and a rise in heating fuel stocks. U.S. light crude futures gained 13 cents at $60.47 a barrel after touching a one-month low of $60.25 a barrel on Wednesday. Brent crude rose 8 cents to $60.60.
The Dow Jones industrial average jumped 102.94 points, or 0.83%, to end at a record 12,510.57. The Standard & Poor's 500 Index advanced 9.94 points, or 0.70%, to finish at 1,426.84, while, The Nasdaq Composite Index climbed 17.71 points, or 0.73%, to close at 2,431.22.
Mutual Funds were net buyers of Rs 336 crore in equity on 26 December
In House :
Markets to remain range bound with positive Bias , roll over very good and
Nifty at a resistance at 3997 & 4020 with support at 3952 & 3934 levels
Buy : Bharti s/l 629 intraday
Sell : Bhel below 2309 target 2260 intraday
Buy : Subex target 710 s/l 629 intraday
Buy : SCI & Satyam in F&O
Buy : 3I medium to long term buy in the range of 175 & 180 levels s/l of
Buy : Prime Focus medium to long term buy in the range of 300 to 320
Out House :
Sensex at a resistance of 13919 & 13978 levels with support at 13786 &
13678 levels .
Maintain strict stop loss as markets to be very choppy & volatile ahead of
F&O Expiry & Long Week End .
Buy : RIL & RComm
Buy : SesaGoa , Aban , TechM , GEOffShore & Divis
Buy : M&M & Maruti
Buy : Tcs , satyam & Infy
Buy : ONGC & IciciBank
Buy : IBulls , Gitanjali , EKC , Voltam & ACe
Buy : Bharti & HLL at dips
Dark Horse : IBulls , GDL , Voltam , ACE , TV18 , RComm , EKC & Divis
Bullet for the Day : SBIn & ONGC with stop loss
Buy in F&O : CenturyTextile , Grasim & HDFC of jan future
On Dec 26 2006, FIIs were net sellers of stocks to the tune of Rs 153 crore (purchases worth Rs2076.80crore and sales of Rs2229.70 crore) while domestic mutual funds were net buyers of stocks to the tune of Rs336.36 crore (purchases worth Rs697.54 crore and sales of Rs361.18 crore).
Buy Riddhi Siddhi Gluco Biols with a stop loss of Rs 200 for a target of Rs 270
Buy Era Constructions with a stop loss of Rs 425 for a target of Rs 540
Buy Sesa Goa below Rs 1395 with stop loss of Rs 1375. This is a day-trading recommendation.
Buy Reliance Communication below Rs 476 with stop loss of Rs 471. This is a day-trading recommendation.
Rajat K Bose
Buy Era Construction with a stop loss below Rs 462 for a target of Rs 504 – 515
Buy Syndicate Bank with a stop loss below Rs 72 for a target of Rs 79.75
The market outlook for Thursday remains bright as bulls are expected to call the shots on the domestic bourses, some profit-taking notwithstanding. The US market ended upbeat, with the Dow ending at a record high over 12,500. If cues from stocks across Asia is anything to go by, the Indian market is predicted to continue its good work.
Barring Japan’s Nikkei, which had slipped 0.27% into the red, key indices in Shanghai, Hong Kong, Singapore, South Korea and Taiwan were trading higher between 0.26 - 0.70% at 9:26 am IST.
The Dow Jones industrial average jumped 102.94 points, or 0.83%, to end at a record 12,510.57. The Standard & Poor's 500 Index advanced 9.94 points, or 0.70%, to finish at 1,426.84, while, The Nasdaq Composite Index climbed 17.71 points, or 0.73%, to close at 2,431.22.
On Wednesday (27 December 2006), The BSE Sensex gained 151.35 points (1.1%), to close at13,859.69. The NSE Nifty ended the day at 3,974.25, 33.75 points (0.9%) higher. Short covering in the derivatives segment before the expiry of the December futures contracts, have boosted the indices. The futures contracts are scheduled to expire today, and may infect the trade with volatility.Higher traded volumes on Wednesday compared with that of the previous session (Tuesday), a marginally positive market-breadth for NSE and BSE put together (1,849:1,698) and a positive capitalization of the breadth (Rs 6,359 cr : Rs 4,045 cr) are indicative of a bullish future
Following overnight gains in the US market and firm Asian indices in opening trades, the market is likely to trade in positive territory on the back of firm buying in frontline stocks. While the Nifty could test the 4000 level on the upside, the Sensex has a likely resistance at 13910 and support at 13740.
US indices on Wednesday rallied sharply, with the Dow Jones closing firm above the level at 12511, up 103 points, while the Nasdaq moving up by 18 points to close at 2431.
Rediff ended weak out of 11 floats trading on the US bourses. Tata Motors gained 4.83% followed by MTNL advanced 3.51%, Satyam moved up 3.21% and HDFC Bank up by 3.03%. While, ICICI Bank, Wipro, Dr Reddy's, and Infosys gained over 1-2% each. Patni Computers however gained marginally.
In the crude oil front, the Nymex light crude oil for February series lost 76 cents to close at $60.34 per barrel. The Comex gold for february delivery gained $3.40 to settle at $630.30 respectively.
Angel Broking has maintained buy rating on Gujarat Mineral; with a target of Rs 480
Angel Broking has maintained buy rating on Cadila Healthcare; with a target of Rs 430
Emkay Research has kept buy ratingy on SREI Infra; with a target of Rs 70
Emkay Research has kept buy rating on Global Vectra; with a target of Rs 334
Prabhudas Lilladher has maintained outperformer rating on Marico
Prabhudas Lilladher has maintained market performer rating on Tata Motors
Sharekhan has kept buy rating on Alphageo; with a target of Rs 214
Only India''s Integrated Player in the Domestic Offshore segment Target 849
In its report Dated 19th December, 2006 Batlivala and Karani (B&K) has recommend Buy on Unlisted Great Offshore Ltd with Implied Price Rs 680 and a Target Price of Rs 849.
Batlivala & Karani (B&K) makes us aware that Great Offshore Ltd was division of the erstwhile Great Eastern Shipping Co Ltd. Which commenced operations in 1983. The Company''s domain of activities encompass exploratory drilling, marine construction and offshore support services to upstream oil and gas produces to carryout offshore exploration and production activities. The company also provides towing services to the various ports and terminals in the country through a fleet of tugs which it owns and operates.
B & K mentions that Great offshore Ltd (Great Off) is the India''s largest integrated provider of offshore services. With the energy security being India''s the primary concern and increasing focus of E&P particularly offshore exploration B & K expects Great Offshore Ltd to be the key beneficiary of rising E&P spend of state owned ONGC as well as private E&P players in India.
B & K throws light that rising E&P in India by ONGC and other Players in the offshore segment; tight demand- supply scenario both in offshore support vessel segment and cabotage laws conducive to the Indian players makes Great Offshore Ltd an attractive investment proposition in the Indian offshore services industry. B & K mentions that Globally, the demand for rigs floater (semis and Drill ships) and Jack up is expected to remain tight. For the floaters, the outlook remains extremely positive for the contractors, as the demand is expected to outstrip supply for foreseeable future keeping the utilization levels and day rate high mainly due to technological capability as well as more deep water exploration. The Demand for jack up assuming a mid case scenario would also remain fairly tight primarily driven by development of Marginal fields and replacement of Older tonnage. B&K points out that the demand-supply gap for the jack up rigs would narrow post CY09, however, the scenario is not expected to be very grim as in 1998 which the supply exceeded demand by a fair margin causing the day rates to correct sharply.
B & K has done sensitivity of PE ratio''s globally and for domestic peers. B & K expects the stock to list not less than implied value of Rs 680 based on pre and post listing price of Great Eastern Shipping Co Ltd. B&K recommends a Buy at any price below Rs 738 with a target of Rs 849 based on 15x Fy08E EPS representing an upside of 15%.