WOW India - Broker Rap - Great Offshore

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.

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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%.