GE Shipping was founded in 1948. The company is engaged in shipping and offshore services. The shipping business is involved in transportation of crude oil, petroleum products, gas and dry bulk commodities. The offshore business services to the oil companies in carrying out offshore exploration and production. The company is well reputed and well set in the shipping industry. It is one of the most respected companies in the sector in India. The company has 12 crude carriers, 18 product carriers and one gas carrier along with 31 tankers and six dry bulk carriers.
Sector Focus
The shipping industry has seen as much, or probably more downfall as any other industry in the past year. The Baltic Dry Index, one of the economic indicators fell from around 12000 to close to 690. The Baltic Dry Index tracks worldwide international shipping prices of various dry bulk cargoes. Now the Baltic Dry Index is seeing an upward movement, which shows that economic activity on the ships- cargo, etc is increasing and improving. This upward movement in the BDI has been followed by a rally in the shipping stocks. However, the outlook remains cautious given the possibility of China reducing imports on realization of built up stockpiles which would result in the abeyance of a lot of shipping activity. Large US oil inventories coupled with new building deliveries will keep tanker rates down. On the product tankers side, low refining margins and depressed demand will add to the existing pressure on rates.
However, on a YoY basis, the current spot freight rates in the tanker segment are still sharply lower, as global demand for vessels in this segment is still to fully recover to those that prevailed a year earlier.
Revenues and Profits - Q3
3QFY10 results of GE Shipping were disappointing, nevertheless, expected. The company had sold a lot of ships last year, and this accounted for a decrease in the total revenues of the company. A drop in demand for steel, iron ore and coking coal with recession in major global economies saw freight rates, particularly in the dry bulk segment, dropping as much as 90 percent while in tankers rates fell over 75 percent, giving a double whammy to the topline with the bottomline following the same trend. The Group has posted a net profit after tax of Rs 1084.70 million for the quarter ended September 30, 2009 as compared to Rs 5699.00 million for the quarter ended September 30, 2008. Total Income has decreased from Rs 12314.20 million for the quarter ended September 30, 2008 to Rs 8019.40 million for the quarter ended September 30, 2009.
The EPS has reduced significantly in the past two quarters of this year. However, with the rise in the BDI and the expansion plans of the company into the offshore business should show us better results and more revenue. However, one has to understand that this will not happen now and quickly.
| (in Cr.) | Sep-09 | Jun-09 | FY08-09 |
| Revenue | 487.66 | 587.65 | 3,083.47 |
| Net Profit | 96.77 | 126.28 | 1,384.82 |
| EPS | 6.35 | 8.29 | 90.94 |
| Cash EPS | 12.39 | 13.75 | 113.82 |
Capex/ Expansion Plans and Prospects of the company:
It has expansion plans of Rs. 2075 crores to expand its carrier and dry bulk capacity. There were also reports that the company would increase its offshore business organically. With increase in economic activity as the world economy crawls (or may be zooms!) out of recession, the BDI will be in sync with it, and so would be the revenues of shipping companies. Also, with increase in focus on the offshore business as crude oil prices seen stabilizing, this would further make the revenue stream more fluent.
Investment advice:
The stock trades currently at a P/E of 6.25, with reduced net expectations. Expected P/E at current market price would stand at around 10 if revenues do not improve significantly. With a market cap if 4400 cr, the stock has a satisfactory dividend yield of 2.77%.
If you are considering investing in a shipping stock, different from a shipyard stock, GE Shipping is arguably the best company with great fundamentals and is relatively cheaper amongst its peers in terms of market price.
Historic price of GE Shipping:
| Year | Open Price | High Price | Low Price | Close Price | No. of Shares | No. of Trades | Total Turnover(Rs.) | * Spread (Rs.) | |
| H - L | C - O | ||||||||
| 2005 | 168.50 | 239.25 | 130.80 | 230.80 | 85742612 | 493659 | 15,673,609,910.00 | 108.45 | 62.30 |
| 2006 | 233.00 | 353.00 | 171.00 | 200.20 | 113647961 | 801889 | 29,901,723,556.00 | 182.00 | -32.80 |
| 2007 | 202.00 | 572.00 | 185.00 | 557.65 | 49841290 | 417854 | 15,863,447,752.00 | 387.00 | 355.65 |
| 2008 | 564.00 | 564.00 | 138.60 | 202.90 | 27042117 | 539798 | 9,303,650,266.00 | 425.40 | -361.10 |
| 2009 | 205.45 | 315.90 | 142.00 | 289.15 | 51244507 | 741714 | 12,577,828,143.00 | 173.90 | 83.70 |
GE Shipping Live Quote:
No comments:
Post a Comment