The guidance provided by the company and Institutions interest seems company rerating /PE expansion is in place.
Posts tagged Value Pickr
Dreamfolks services limited( DFS) (18-06-2024)
I disagree with the article writer view.
Pax numbers may be down by some 0.1 M on QoQ but it will be normalized in 2-3 quarters as people get used to this spend based lounge access as its not a big task.
Maharashtra seamless-a value plus cyclical play (18-06-2024)
I just checked sceener, and looks like the net income / net profit they have is a little wrong. What screener is doing is simply taking the profit before tax and then directly taking consolidated net profit. While this is good enough in most cases, MAHSEAMLES has a Non-Controlling/Minority Interest, we add this in a consolidated statement, but for net profit attributable to shareholders, we need to subtract it.
I just went through the annual reports, and there is almost 1,961Cr of minority interest over these years that does not reflect on Screener. The remaining 985Cr can be explained due to tax rate, what Screener seems to be doing is that they are taking profit before tax and then taking consolidated profit after tax without subtracting minority interest and using the above two created a plug for tax rate, which is why it is negative during some years.
I just redid the calculation, this time without rounding decimals, Cumulative earnings were 2,965.3Cr, their investments were 2,087.7Cr with which they increased earnings by 833.6Cr, so redeployed 70.4% @ 39.9% returns, multiply that and again, compounding value at 28.1%, hope this adds context.
Lic housing finance (18-06-2024)
Can you please shed more light on this? Is the market anticipating that if the stock rises fast these PE firms will exit causing the stock to crash again?
Cineline India – Picture abhi baaki hai (18-06-2024)
Now there is a pledge by two promoters. Do we know the real reason? Document says for personal reasons
TGV SRAAC erstwhile Sree Rayalseema Alkali (18-06-2024)
Nothing fundamental, just spray and pray strategy. Amara is in green energy / battery sector which has PLIs and can benefit from a favorable political affiliation, what’s the trigger for TGVSL?
Seamec Limited: formidable player in niche space; in a dull & boring sector (18-06-2024)
Industry Overview
Indian Offshore Oilfield Industry
- India: 3rd largest oil consumer globally after the United States and China with ~36% of the country’s energy demand met by Oil & Gas
- Despite being 3rd largest globally, India’s per capita energy consumption stands significantly lower than the USA, China and global average, underscoring huge growth potential in energy consumption moving forward
• India currently imports about 85% of oil and about 50% gas that it consumes.
Growth Drivers for Indian Oil and Gas Industry
-
Growing demand
• Oil demand in India is projected to register a 2x growth by 2045.
• Diesel demand in India is expected to double to 163 MT by 2029-30 -
Policy support and Govt initiatives (focus on reducing dependence on oil imports)
• In Union Budget 2022-23, the customs duty on certain critical chemicals such as methanol, acetic acid and heavy feed stocks for petroleum refining were reduced.
• As per the recent report of the Petroleum Ministry, India currently imports about 87% of the oil demand. Govt has announced capital commitment of Rs. 1.2 lakh crore by state and oil PSUs in oil and gas exploration, refineries; to reduce dependence on oil imports and meet the needs of our nation -
Increasing investment
• India aims to commercialize 50% of its SPR (strategic petroleum reserves) to raise funds and build additional storage tanks to offset high oil prices.
• ONGC has announced plans to invest USD 4 billion from FY 2022 to 2025 to increase its exploration efforts in India.
Strong Outlook & commentary from ONGC
- Strong outlook in terms of wells drilled and the planned capex
Business Cycle – offshore sector
FY 16 to FY 21 : Industry went through a down cycle, characterized by low utilization levels, low charter rates and resultantly lot of companies went through financial restructuring / consolidation, etc
Post FY 21: E & P activities are increasing, contracts are getting repriced; and business getting back to profitability
Company Background
Seamec was originally incorporated as Peerless Leasing Private Limited in 1986. In 2001, it became part of the TECHNIP Group and was rechristened as Seamec.
In 2014, HAL Offshore acquired Seamec from Technip Group. HAL currently holds around 70% of company’s share. HAL Offshore has an experience of around 25 years and is a leading end-to-end solution provider of underwater services and EPC services to the Indian oil and gas industry.
Seamec operates in two distinct verticals, offshore subsea support vessels and bulk carrier charter business.
Offshore subsea support
Its the leading provider of offshore oil feed services in the subsea segment. The company has five diving support vessels, one Offshore Support Vessel and one barge in the offshore subsea support business, wherein the vessels are deployed in the domestic as well as international market.
Diving support vessels
- Seamec Paladin
- Seamec Princess
- Seamec II
- Seamec III
- Seamec Swordfish
Offshore Support Vessel – Sea Diamond
Accommodation Barge – Seamec Glorious
Among these, Swordfish was acquired in 2023.
Bulk Carrier charter business
Two bulk carriers provide marine transportation services of dry bulk materials such as food staple, commodities, and industrial products
Some of the marquee clients in Bulk Carrier Services, include United Marine, Clipper , Eagle, etc
What is DSV, OSV and Barge ?
More info here - https://www.youtube.com/watch?v=AiJczimBL58
Business Overview
- Company has the biggest fleet of DSV in Middle East and India region
- Vessels are equipped with specialized equipment from where the diver goes under water upto 80 meters (Bombay Heights) or even maybe 130 to 200 meters depending on the location
- Divers go underwater and carry out the maintenance of the assets which have been installed by ENP player. Main function of these vessels is to maintain asset integrity and see to it that the assets are compliant with environment regulations, etc
- Based on number of days the vessels are deployed and the revenue rates per day, they do billing to the customer, on monthly basis.
- Out of the 6 vessels, 3 are already on a long-term charter contracts. The balance 3 are also on a spot contract for 2-year basis. This lends stability and resilience to the business.
- Company has extensive experience in providing specialized services, including inspection, maintenance and repairs, remotely operated vehicles and subsea construction activities. These operations require specialized vessels and well-trained crew, with a diving team experienced in handling complex activities to ensure seamless operations for E&P companies such as ONGC, Aramco and ADNOC. ~ Entry barriers
- SEAMEC is an ISO 45001:2018, ISO 9001:2015 and ISO 14001:2015 certified Company, which conforms to Quality, Health, Safety, Environmental (QHSE) standards and occupational health along with Shore Based Management system.
- Company has stated during calls, that they are not impacted by the volatility of crude oil prices as its primarily taken care by customers like ONGC who are utilizing charter hire services. But this is a monitorable.
Range of Services offered –
Overview of Vessels
Name of vessel | Type | Built year | Procurement year | Tonnage |
---|---|---|---|---|
Seamec II | DSV | 1982 | 1993 | 4500 |
Seamec III | DSV | 1983 | 1993 | 4300 |
Seamec Princess | DSV | 1984 | 2006 | 11,100 |
Seamec Paladin | DSV | 2008 | 2021 | 5600 |
Seamec Swordfish | DSV | 2007 | 2023 | 5400 |
Seamec Diamond | OSV | 2011 | 2023 | 1922 |
Seamec Glorious | Barge | 2006 | 2021 | 9850 |
Three of the vessels are a little older. So they are looking to replace these vessels, over next 2-3 years.
Further, they have recently acquired Seamec Pearl and NPP Nusantara (covered in detail, later); in addition to Seamec Diamond (in 2023).
Revenue split
Currently 85% revenue from offshore assets and 15% from dry bulk… Targeting to increase it to 90% from offshore assets since the offshore support services are niche services, there is a higher EBITDA margin compared to dry bulk
Business linkage to ONGC
- Preferred partner to ONGC (the largest player) in maintaining their oil fields
- ONGC plans to invest, almost $4 billion in the medium term. Business is linked with that. And even if there is a slowdown in further investment by ONGC, company will keep doing maintenance work for ONGC
Comfortable operating performance
- Long-term contracts spanning 3-5 years, executed to charter the MSVs, offer medium-term revenue visibility.
- A healthy gross margin of 50-60% is earned on the MSV fleet.
- While the company has secured long-term contracts for its MSV fleet and diving support vessel (DSV); barge and bulk carriers are on short-term/spot basis
Capex plans
- Capex plan of 200 to 300 cr for FY 26. And around 300 to 350 cr for FY 27. This is likely to be incurred for replacement of the ageing current vessels.
- Major part of capex will be funded by internal accruals
Seasonality impact
- During monsoon, 3 of the vessels are not deployed; dry docking is caried out during that period. Q1 and Q2 are a little muted (Q2 weakest).
- Q4 and Q3 are the best quarters, particularly Q4
Not impacted much by Red Sea Crisis
All vessels are operating on Indian coast only and one vessel is operating in Saudi Arabia (other side of Red Sea) , so minimal impact
Tonnage tax company- Negligible tax
Company enjoys an incentive by Government under Indian Income Tax Act where companies are taxed on the basis of the tonnage. Its a very low tax rate. Tax provisions are very less.
Recent updates on new fleet
- Sea Diamond
- Takeover completed on 2nd January 2024.
- Expected to be deployed with ONGC from Q1 FY25 for a period of 3 years at USD 8,750/- per day
- Revenue contribution from Q2 FY 25
- Seamec Pearl
- Entered into agreement to purchase this OSV for USD 7 million.
- Delivery of the vessel is expected to completed on or before 22nd June 2024
- Expected to be deployed with ONGC from Q2 FY25 for a period of 3 years at USD 8,750/- per day
- NPP Nusantara
- Seamec International FZE has entered into an MOA for purchase of OSV - NPP Nusantara
- Delivery is expected to be around mid-September 2025
These have been finalized within a span of last 2-3 months; an indicator that the company sees strong revenue visibility and might well be at an inflection point in terms of growth trajectory.
Financials
- 3 year Sales CAGR 41%
- Last FY Sales growth 67%
- ROCE : 17%
- Debt / equity : 0.36
- No equity dilution in recent times
- Promoter holding: 72%
Balance sheet
- Healthy cash reserves- has almost tripled in last 6 years
- Negligible debt on balance sheet during the downcycle (till FY 21).
- Fixed assets have grown more than 2x in last 3 years
Outlook & Guidance
• Company expects new contracts to be signed and executed over the next 2 to 5 years.
• Also repricing of contracts too is expected as charter rates are firming up.
• Revenue growth guidance of 15-20% for next FY and about 15% CAGR over next 3 years
• Looking to sustain EBITDA margin of around 35 to 40% as company will look to maintain higher number of deployment days of its fleet.
Promoter Buying
Promoter has been buying from open market recently
Valuations
- GE shipping can be considered as a peer. Though Seamec operates in a more niche area of diving support vessels whereas GE Shipping mainly provides supply vessels and platform support vessels.
- For Seamec, offshore business contributes the majority (almost around 75% to 80%) of the revenue mix, which is not the case in case with GE.
Name | Sales growth 3Yrs % | Sales growth % | P/E | M. Cap / Sales |
---|---|---|---|---|
SEAMEC Ltd | 41.61 | 66.79 | 21.64 | 3.55 |
GE Shipping Co | 16.35 | -7.65 | 5.75 | 2.86 |
On FY 25 estimated earnings, it trades at about 15 to 16 PE multiple. Considering the better operational performance based on deployment of new vessels and revenue visibility over next 2-3 years, it seems to be trading at a reasonable multiple currently
Likely Risks
-
Susceptibility of operating performance to redeployment risk, due to some ageing vessels
- Amongst the vessels owned, three vessels are more than 40 years old. This increases the redeployment risk of these vessels as they may not meet the bidding criteria of E&P players such as ONGC.
- They have replaced one of its vessels with a younger fleet, with the balance expected to be replaced over the next 2-3 years. Timely replacement is a key monitorable.
-
Cyclical and Asset heavy industry -
-
Susceptibility of charter rates due to inherent volatility in crude oil prices
- Offshore and deep-water block investments, are sensitive to crude oil prices. In the past, the slowdown in global oil and gas E&P capex has led to a decline in demand for offshore equipment.
- Though the company has mentioned in the last call that charter rates are holding firm and they foresee the pricing trend to continue in the future years
Disc: Invested
Reference Links:
https://www.bseindia.com/xml-data/corpfiling/AttachLive/dceece21-e8b3-453e-aa37-4d263d19b05e.pdf
TYPES OF OFFSHORE VESSEL | Platform | METO
ONGC ppt
Premier Explosives (18-06-2024)
Thanks for sharing the snippets. In that case if execution happens in time, we should see a huge uptick in revenues.
Maharashtra seamless-a value plus cyclical play (18-06-2024)
Thank you for the response. The cumulative earnings between 2015-24 according to screener is 3260cr. So the means 61.9% of the capital was re-deployed into the business. You have suggested the no. is 68%. Could you kindly re-check. Just want to make sure I am not making a mistake with my calculations. Thank you.
Smallcap momentum portfolio (18-06-2024)
Go through the description ( first post) of the thread there you will find the answer, that how the thread creator manage his momentum pf.
To a generic question like yours suggest you to read books get a conviction then try this method, bcz after FNO this is the riskiest.
Regarding generic momentum strategy:
To screen stocks:
- Look for stocks that have performed well over the past 3 to 12 months.
- Check for high trading volumes.
- Favor sectors that are leading the market.
For entry:
- Buy stocks near their highs with consistent upward movement.
- Look for positive momentum indicators.
For exit:
- Sell if the stock starts underperforming.
- Use trailing stop-losses.
- Rebalance your portfolio regularly, like monthly.