ABG Shipyard

ABG Shipyard 

ABG Shipyard

ABG Shipyard

United Breweries, ABG Shipyard

United Breweries, ABG Shipyard

ABG Shipyard

Valuations of the ABG Shipyard stock have moved up sooner than expected, owing to the rally it witnessed in the last six months on pick-up in orders and expectations of restoration in capital subsidy. The stock has gained 47 per cent from our ‘buy' recommendation in June 2010, thus capturing much of the potential we saw in the medium term.

ABG Shipyard, JK Tyres

ABG Shipyard, JK Tyres

ABG Shipyard, Adhunik Metalliks, Bartronics, Cairn India, Dishman Pharma, Garware Offshore, Koutons Retail, Nitin Fire Protection, Shree Cement, SBI

ABG Shipyard, Adhunik Metalliks, Bartronics, Cairn India, Dishman Pharma, Garware Offshore, Koutons Retail, Nitin Fire Protection, Shree Cement, SBI, Tanla Solutions

ABG Shipyard

Investors with a two-three-year perspective can consider limited exposure to the stock of ABG Shipyard. Lull in order flows, slower execution pace and liquidity issues, as a result of severe cash crunch faced by shipowners globally led to Indian shipyards being de-rated from an average price-earnings multiple of 12-18 times to less than five times.

However, with an order backlog of 5.2 times FY-10 sales and nil order cancellations in the worst of times, ABG Shipyard has also shown more indications of pick-up in execution pace and order flows compared with other players.

A superior order mix, quicker revival in earnings and additional rig facilities to cater to the offshore market make this stock a superior option in the Indian context. However, given that shipbuilding as a sector is not fully out of the woods, ABG Shipyard may at best be a dark horse play. Investors with some risk appetite can consider exposure to the stock.

At the current market price of Rs 250, the stock trades at about 5.5 times its estimated per share earnings for FY-11. This does not factor in any revenue potential from its subsidiary, Western India Shipyard, a loss-making ship repair entity that ABG acquired under a scheme of arrangement. However, ship-repair business could fetch lucrative operating margins of 25-30 per cent.

Indian edge

While lower order cancellations and improved execution pace are likely to provide relief for shipbuilders worldwide, orders may take time to pick up as revival across the globe remains painfully slow.

However, Indian shipyard players stand differentiated for three reasons: They hold a more diversified order book across segments compared with their South Korean and Chinese counterparts. Indian players most often gain repeat orders, thereby reducing risks of cancellations.

With improved capacities, Indian players would be better placed to take orders for larger-sized vessels that may provide better profit margins.

Chinese and South Korean shipbuilders — leaders in shipyards — have been concentrating on dry and wet bulk carriers and containership segments. Globally, a majority of sea-borne trade happens in the dry bulk carrier segment. However, as demand for dry bulk commodities such as coal and iron-ore is largely perceived to be driven by China, the outlook for this segment remains muted.

Interestingly, according to a CARE Research Report on the Global Shipbuilding Industry, Indian shipbuilders have diversified by constructing offshore and specialised vessels.

When viewed in terms of volume (dead weight tonnes), dry bulk account for 82 per cent of Indian players' order composition as a result of the larger size of dry bulk vessels.

However, in terms of number of vessels, offshore and specialised vessels account for a good 52 per cent of Indian players' order book as against 35 per cent of dry bulk.

In contrast, offshore and specialised vessels accounted for just 9 per cent (in terms of number of vessels) of China's order book and 5 per cent of Korea's orders.

It is, perhaps, this diversified profile that has provided some cushion to Indian players. ABG, for instance, witnessed a 37 per cent growth in revenues annually over the last two years, while net profits expanded by 14 per cent over the same period.

Offshore opportunity

Offshore vessels could also be an area that holds prospects over the long term. According to reports, close to 50 per cent of offshore vessels are over 25 years of age and need replacement.

Recent incidence of oil spill puts forth the need to have double hulls to reduce the impact of such accidents on the marine ecology.

Indian shipyards specialise in the construction of offshore vessels. For instance, ABG shipyard has a rig facility in its existing yard to cater to the increasing demand in this space. Besides, Indian shipyards have also been promised orders (for both public and private companies) by Defence, partly to combat recessionary times. Companies such as Larsen & Toubro have already been recipients of such orders.

Why ABG?

ABG Shipyard, Bharati Shipyard and Pipavav Shipyard are the three major players in the shipbuilding industry in India, aside of L&T's Greenfield project.

ABG tops the list in terms of volume of order book (86 as against 42 for Bharati).

While Pipavav holds larger capacity, the company has already faced order cancellations and is re-negotiating terms for a number of other orders, thus adding uncertainty on the revenue front.

The Bharati Shipyard stock has traditionally suffered a discount to ABG as a result of its high gearing.

While the company's recent stake in Great Offshore has brought with it business opportunities (and debt) in the offshore segment, its inability to bag orders in the mainstream business in recent times is a cause for worry.

The company is also reported to have taken a German customer to court after the latter cancelled an order.

ABG, on the other hand, has managed to get orders for cement carriers recently, thus bringing some relief on the order flow front.

Besides, the company has ramped up execution pace significantly, suggesting that clients have not been requesting for postponement of delivery.

The company delivered 17 vessels in FY-10 as against just six in FY-09. This increased execution also means that cash flows from clients would flow in at a faster pace.

For the full year ended FY-10, ABG's sales grew 28 per cent to Rs 1,807 crore while net profits expanded 22 per cent to Rs 208 crore.

However, for the March quarter, operating profit margins, excluding subsidies, fell sharply by 5 percentage points to 13.5 per cent over the previous quarter, suggesting that raw material costs are beginning to hurt once again.

As shipbuilders tend to have adequate stock of raw materials such as steel, there may not be too much volatility in input costs for a few quarters.

With debt of Rs 2,500 crore, ABG's debt-equity ratio has become more risky at 2.5 times. However, this appears to be largely a result of slower execution pace, which means longer periods of guarantees and higher working capital cycle.

With execution pace picking up, this may be expected to decline. Fund flows from clients such as Essar (financial closure being over) may help tide over immediate concerns.

via bL

ABG Shipyard

ABG Shipyard

ABG Shipyard

ABG Shipyard

ABG Shipyard gets 15% stake in Great Offshore

ABG Shipyard, which exited the fight for Great Offshore by selling its entire stake and pricing its bid lower than rival Bharati Shipyard, has ended up with a 15% stake in the company. ABG's open offer was priced at Rs 520 per share against Bharati’s Rs590. ABG wanted to buy 32%, while Bharati’s offer was meant for a 20% stake. Both offers closed on December 22. Bharati’s open offer attracted shares amounting to 27% of the company’s equity capital against its target of 20%. Bharati will thus have to reject 7%, while ABG will accept all shares tendered in its offer. ABG will have to pay Rs2.8bn for buying the 5.65 million Great Offshore shares. A senior ABG Shipyard official confirmed the development but declined to talk about what the company plans to do with its unexpected equity stake. ABG sold its 8% stake in Great Offshore a day before its open offer, sending a message that it was not interested in having management control of the company. Bharati Shipyard, which now holds 43% stake in Great Offshore, is considering another open offer to acquire management control of the company, as its recently-concluded offer was under a section of the takeover rules which does not automatically confer the status of a promoter on the acquirer.

Great Offshore...ABG enters race; Bharati ups ante

Dhanshree Properties Pvt. Ltd., on behalf of Bharati Shipyard Ltd., on June 23, acquired 16,99,611 equity shares of Rs 10 each of Great Offshore Ltd., constituting 4.58% of the current paid-up share capital of the target company, at a price of Rs 403.00 per equity share through a block deal. The transaction was done with some members of the Sheth family, the original promoters of Great Offshore. The deal took place shortly after ABG Shipyard Ltd. threw its hat in the ring for the acquisition of a substantial stake in Great Offshore. ABG Shipyard offered a price of Rs375 per share to acquire close to 32% stake in Great Offshore.

Bharati Shipyard will surpass the counter bid by ABG Shipyard for a controlling stake in Great Offshore, Managing Director P.C. Kapoor told reporters in Mumbai, raising prospects of a protracted bidding war. "We will be making another revised offer, the timing will be a few days hence, and what the price will be I cannot say right now," he said. Bharati Shipyard has invested Rs2.45bn till now to acquire about 19.5% in Great Offshore, Kapoor said. ABG Shipyard currently holds 2% in Great Offshore. Kapoor hinted that the bid could rise above Rs403 and total investment in Great Offshore could top Rs4bn.

It may be recalled that on June 4, Dhanshree Properties, Natural Power Ventures Pvt. Ltd. along with Bharati Shipyard had announced a public offer to acquire on a voluntary basis up to 78,26,788 fully paid-up equity shares of Rs10 each of Great Offshore, constituting 20% of the emerging voting capital of the target company at a price of Rs344 per share.

Meanwhile, ABG Shipyard's Managing Director Rishi Agarwal said that the company will not come back with any immediate reactions," after Bharati announces a revised price. "We will evaluate at the right time," he told reporters in Mumbai when asked if it would make a counter offer again. "Next step is we'll sit and decide what's the best way forward." ABG Shipyard plans to fund the acquisition from its cash reserves of Rs2.5-3bn, Agarwal said. Bharati Shipyard has substantial support from some major shareholders of Great Offshore, including the Sheth family, Kapoor said. The company is also in talks with some key financial partners and cannot rule out tying up with a strategic partner for this deal, he added.

ABG Shipyard

ABG Shipyard

ABG Shipyard

We recommend a buy on ABG Shipyard from a short-term trading perspective. It is evident from the charts of ABG Shipyard that it has been trending upwards from its 52-week low of Rs 62 recorded in early February. Since this low, the stock has been forming higher peaks and higher troughs. Moreover, we notice that the stock has formed an inverse head and shoulders pattern, a bottom reversal pattern signalling major trend reversal.

This pattern was formed between November 2008 and early May 2009, with neckline at Rs 140. On May 8, the stock decisively broke out of this pattern’s neckline by jumping 13 per cent, accompanied with extraordinary volume. It is trading well above it 21- and 50-day moving averages.

The daily relative strength index (RSI) has re-entered the bullish zone from the neutral region and the weekly RSI is rising towards the bullish zone. Our short-term forecast is bullish for the stock. We expect it to rally further until it hits our price target of Rs 167. Traders with short-term trading perspective can buy the stock while maintaining a stop-loss at Rs 143.

ABG Shipyard

ABG Shipyard

Aban Offshore, ABG Shipyard, ACE, Areva, Banking, Bhagwati Banquets, Capital Goods, Bharati Shipyard, EMCO, Geometric, IVRCL, Ranbaxy

Aban Offshore, ABG Shipyard, ACE, Areva, Banking, Bhagwati Banquets, Capital Goods, Bharati Shipyard, EMCO, Geometric, IVRCL, Ranbaxy, Reliance Communications, XL Telecom, India Technology

ABG Shipyard

ABG Shipyard

ABG Shipyard

ABG Shipyard

ABG Shipyard, Anant Raj Industries, KPIT Cummins

ABG Shipyard, Anant Raj Industries, KPIT Cummins

ABG Shipyard

ABG Shipyard

ABG Shipyard

ABG Shipyard