Among the defence shipping stocks from the above list we may note that there is wide valuation disparity between Mazgaon dock and other two Garden reach & Cochin shipyards
If you see the financial performance of last few quarters, all the three have fared almost equally well. Mazgaon dock though has the highest order book currently trades at 42 P/E TTM, where as Garden reach trades at 67 P/E TTM and Cochin shipyards at 72 P/E 73 TTM.
One of the reason could be that the promoter holding for mazgaon dock is 84% where as for Garden reach and Cochin shipyard is 73% / 74% respectively.
As per norms the govt is supposed to bring down its holding to minimum 74% for all PSU’s
Also, In a recent pre- budget meeting with the finance minister, the MF industries and other related institutions had suggested that the Govt should increase liquidity /floating stock in some of the PSU stocks to enable Mutual funds and other institutions to participate in owning those stocks.
So going by the above facts , the next OFS candidate could be Mazgaon dock.
If there is an OFS, the govt offers the stock at 5-8% discount to market price to enable institutions and MF’s to buy the stock in bulk.
In such a scenario , the stock price falls by 5-8%.
So it could be the OFS hangover/ Low floating stock which perhaps haunts the MF’s and other institutions and HNI’s who are waiting to pick up at a lower discount during OFS.
But when is the OFS? should a retail investor should wait for the OFS?
Going by the historical data, Whenever there is an OFS at a discounted price, on first day the stock price falls by 5-8 % and MF and institutions / HNI’s subscribe to the OFS. On 2nd day the retail investors subscribe and simultaneously the share price recovers as more and more investors buy from open market. Thereafter , the stock price stabilises and depending upon fundamentals the stock price goes up as more and more qty are bought into.
If you are a long term retail investor and if you find the fundamentals and valuations of the stock is reasonable , and you don’t bother for temporary blip … any time is the right time to buy without waiting for the OFS. If your assessment is high valuation , then you may consider adding in decline.
Discl:
Invested in defence shipping stocks from lower level. I may be biased. Please do your own assessment before buying. Investments in PSU stocks carry its own risk due to frequent changes in govt policy which may or may not be in favour of retail investors.
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