Seamec Ltd is a company that provides support vessels for offshore installations (for oil exploration and drilling). Its major shareholder and promoter is a French offshore company. The company was the first to manage an ONGC owned vessel. Its fleet currently comprises of 4 vessels - Seamec I - IV and Seamec Princess.
Industry Overview
The global market for offshore operations was a growing market till oil prices crashed. Now a revival is seen, albeit a slow one. The Indian offshore industry has players like Aban Offshore, Great Offshore, GE Shipping- just to name a few. This business is directly related to the Exploration and Production (E&P) activities of oil companies, and E&P activities -it is generally acknowledged- are related to crude oil prices. Most of the offshore supply vessels are old, and would be scrapped in the coming years. This does mean procurement of new ships for these companies- and an increase in expenditure. Companies such as Seamec, which provide ships for offshore activities, would have to pay- but that's part of the business. The good thing about this is, ships once deployed are like cash cows- they generate a lot of money. Deployment rates can be like $23,400 per day (Seamec 1) to $105,500 per day (Seamec Princess).
Financials
In the September Quarter, Seamec posted revenues of Rs. 97 cr vs Rs. 68 cr the quarter last year, and vs Rs. 100 cr in the June Q. The company pays negligible interest, and thus would have very less debt. Margins are good as well. According to last year's filings, the company has reserves of Rs. 278 cr. The company was having all the four vessels deployed in Q2 this year, doing a good show in difficult times. If we compare to other listed offshore companies like Great Offshore or Aban Offshore, the company has better margins on the books and less debt and leverage. The company has posted good profits this year, in sync with its peers- however, with no debt thus good net profit margins, the company looks better than its peers, financially. The company doesn't pay dividends, however.
Valuations
At Rs. 220, the stock trades at a P/E multiple of 3.11. As we had discussed before, P/E never gives a direct buy or sell call. The stock had gone down to levels of 30 in the great bear era. People who had bought shares at lower levels, between last October and March may come out selling after their "1 year" of holding the stock has ended (they would pay no taxes that way). That would be selling pressure, and the stock would dip and then one may buy. Current valuations are high, and price of 170-200 would be reasonable. The operationalization of Seamec Princess has led to increased revenue and profits. As the company would upgrade its fleet, the capacities would increase, and that would also increase the revenues. Seamec's P/E is 3.11 whereas the industry P/E is 6.51. So, expectations are low. If the company posts good results in both the coming quarters, we should see the stock price move up considerably- to the levels of 400-450 and then to 700-750. Otherwise, the stock would follow the general market sentiment, and in case of a bearish environment, it may go down to levels of 150-175.
| Year | Open Price | High Price | Low Price | Close Price | No. of Shares | No. of Trades | Total Turnover(Rs.) | * Spread (Rs.) | ||
| H - L | C - O | |||||||||
| 2007 | 194.00 | 304.70 | 164.00 | 286.85 | 12895566 | 173997 | 2,821,721,508.00 | 140.70 | 92.85 | |
| 2008 | 290.00 | 304.00 | 30.20 | 37.75 | 4091909 | 60041 | 635,951,363.00 | 273.80 | -252.25 | |
| 2009 | 38.75 | 254.70 | 35.00 | 220.20 | 11892532 | 128430 | 1,584,551,176.00 | 219.70 | 181.45 | |
| * Spread H - L -> High - Low C - 0 -> Close - Open | ||||||||||
Stockscenter Verdict
The company looks strong fundamentally. With no debt on its books, it has great net profit margins. Again, with the operationalization of Seamec princess, the company has increased its revenues. Upgradation of current fleet and addition of newer vessels would further the company's revenues. Also, the addition of Seamec princess in the fleet hasn't resulted in debt- and that is noteworthy. The company is doing all the right things the right way. The stock price is good, however, the market expects the future to be bleak for the segment in general and Seamec in particular. If Seamec continues its growth for this year, it would be a definite multibagger, in a bullish market.
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