BNP Paribas puts 'reduce' on Great Offshore

Great Offshore

CMP: Rs 250.80

Target price: RS 196


BNP Paribas has asked its clients to reduce their exposure to Great Offshore on declining profit margins, weak operational environment for off-shore support vessels (OSVs) and other management concerns.

���Our channel checks indicate that there might be delays to the March 2009 deadline, by which Bharati Shipyard is expected to deliver Samed Shikhar, the jackup rig. 2009. A delay in delivery by one quarter could reduce FY10 EPS by 7%,��� the research note added. In addition to this, analysts��� checks indicate that the OSV pricing is holding up for most of the contracts signed until the end of May 2009.

���The recent concerns surrounding the stock and the financial health of the company has resulted in our WACC (weighted average cost of capital) in-creasing to 13.5% from 13%. The core business has not shown severe weakness, but the negative headwinds surrounding management have hurt the stock,��� the BNP Paribas note added.

According to analysts, Great Offshore could be an acquisition candidate, as the underlying assets still hold value, which is not reflected in the current share price due to negative sentiment around the stock.