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Amit Kumar -03 Brahmanand Jha - 09 Krishnakumar Chirakkal-10 Darshan Joshi -11 Dinesh Gangwar - 13 Jagdeeshwara Reddy S 14 Parvaz Alam Khan 19
Security Analysis and Business Valuation - Prof. Sanjay Bakshi
Agenda
Company Profile Evaluating the Business & Management Company Analysis Future Prospects Recommendations
Company Profile
SEAMEC - provider of Diving Support Vessel - subsea inspection, repair, maintenance and light construction required for offshore oil production.
Vessels Seamec I
Current Status long term charter with DOEL for two years firm with option for extension. Start time -16th May 2011 long term charter for 3 years with HAL OFFSHORE LTD for ONGC work. Start time Nov 2011 (likely) charter till Mar 2013 with option for extension. Start time - 19th May 2011
Seamec III
23 days
Seamec Princess
129 days
charter with M/S KREUZ SUBSEA PTE LTD for a firm period of 30 days with option for extension. Start time 2nd
Concern
Demand driver - oil prices, production platforms, operational drilling rigs, day rates and fresh E&P activity. Cyclic business due to high volatility in oil prices.
Increased bargaining power of Clients regulation and bid - price slash 30-40% Offshore activities - shallow water that favours small and mid-sized DSVs. Deep water drilling is future that requires large sized DSVs. Operation and maintenance cost increases with age of fleet.
No Moat - Switching cost, Intangible asset, network effect, cost and size advantage.
Current Impact (More likely) Reasons
Economic Indicator
Growth in revenues
Market share Profit Margin
Decrease
Decrease Decrease Decrease Decrease Decrease
In short term, this business does not look maintenance due to aged fleet good.
Capital Efficiency
Return on Capital
Decrease
-do-
Economic Indicator
In short term, it may not lookdemand for large vessels. Increase More good business but in long term it is good Market share Decrease business. foreign player and Shipbuilders. Reason black gold (oil) is scarce. Profit Margin Increase High revenue per day and more utilization. More demand due to rising population Growth in Profits and Increase economies (BRICS). -doemerging Growth EPS Increase World has no option but to explore -dooil until Capital Efficiency more Increaseunless some substitute is -doReturn on Capital Increase not found. -doGrowth in revenues
Operating Skills
Failed to predict gloomy economy in 2009. Failed to explore diversifying its operations with huge PAT:203.9 cr With good growth predictions In 2003 , management failed to upgrade or purchase a new vessel for expansion.
Capital Allocating Skills ( What have been done with free cash flows )
Company was sitting on pile of cash without using it for expansion in the last 10 years. Declared 30% dividends on 8th June 2010
Management Salary ?
The residual life of vessel SEAMEC Princess has been reassessed by approved Surveyors. Based on the surveyors report residual life of the vessel Seamec Princess has been considered as 15 (fifteen) years with effect from March 16, 2008.
Is it Cheap ?