Analysts see Great Offshore debuting at Rs 700-725 today
Great Offshore (GOL), the entity carved out of Great Eastern Shipping, will make its debut on the bourses on Thursday. Analysts expect GOL to list approximately at Rs 700-725, as against GE Shipping’s delisting price of Rs 336.70 on November 7.
By Nishanth Vasudevan & Nevin John, TNN |
MUMBAI: Great Offshore (GOL), the entity carved out of Great Eastern Shipping, will make its debut on the bourses on Thursday. Analysts expect GOL to list approximately at Rs 700-725, as against GE Shipping’s delisting price of Rs 336.70 on November 7.
The temporary suspension of GE Shipping shares was to effect the demerger of the offshore business into a separate entity — GOL, which will be managed by Vijay Sheth — one of the promoters of GE Shipping. As part of the demerger scheme, shareholders of GE Shipping got one share of GOL for every five shares of GE Shipping held.
The demerged shipping entity of GE Shipping was relisted at Rs 264.65 on the BSE on November 27. Analysts are more bullish about GOL’s business prospects atleast over the next couple of years, as against the shipping entity, given the stability in this business.
“There is visibility in earnings for the company, as its rigs and other vessels are on longer-term contracts. Also, the demand-supply situation in the industry is also expected to remain in favour of the company over the next 4-5 years,” said Surbhi Chawla, analyst, Angel Broking.
Despite the positive business prospects, analysts feel GOL’s growth would lag the bigger global players, given its smaller size and lack of wider client base. GOL derives 40%-45% of its total revenue from ONGC.
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Investment bank Morgan Stanley, in an earlier report, had estimated the earnings growth of most global drilling companies at over 100% in 2006-08. Not to be left behind its global peers, GOL has lined up a $350-million capital expenditure programme for the acquisition of its newly-built offshore support vessels (OSVs). The acquisitions will be completed by 2008. GOL had already inherited two subsidiaries operating in the United Arab Emirates as per the scheme of demerger. Analysts said the higher valuations for the offshore business is in line with the global trend, where offshore businesses trade at higher multiples.
Brokerage SSKI Securities, in a note prior to the GE Shipping’s re-listing, said, “We have valued the offshore business at 20 times FY07 earnings. This translates to a market cap of Rs 26 billion. On a reduced equity of 38 million shares, it translates to a price of Rs 685 -700.”
Mr Chawla estimates GOL’s earnings per share (EPS) for 2006-07 at Rs 39.9 and Rs 42.4 in 2007-08, as against Rs 24.1 reported in 2005-06.
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