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smartcat
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   Topic: Shiv Vani - Lots of Gas Again!
Posted: 10/Oct/2007 at 4:29pm |
Buy Shiv-Vani Oil, target Rs 480: Sharekhan
Largest player in onshore drilling and seismic survey services: With a fleet of 25 onshore drilling rigs and six seismic survey crew, Shiv-Vani Oil & Gas Exploration (SOGEL) has emerged as the largest onshore service provider catering to the needs of oil and gas exploration companies.
The augmentation of assets by the company is well timed in the industry upcycle. The heightened exploration activity has resulted in severe shortage of resources with service providers, leading to firming up of day rates (or billing rates per km in case of seismic survey) for various services. w Healthy order book provides growth visibility: In addition to the favourable business environment, the existing order backlog of Rs2,950 crore itself provides a strong revenue growth visibility over the next two years.
Almost 70% of the order backlog (excluding the Oman order) is executable over the next 24-30 months. The company also has a healthy order pipeline with planned bids worth over Rs5,000 crore for global tenders over the next few quarters. Moreover, to further consolidate its leadership position and effectively tap the huge opportunity, the company has planned an aggressive capital expenditure (capex) of around Rs1,000 crore over the three-year period CY2006-09.
Margins to improve:
SOGEL has reported a healthy operating profit margin (OPM) of 35% in CY2006, which is expected to improve by 300 basis points to 38% by CY2009. The improvement in its OPM would be driven by higher realisation (day rates or billing rates per km) and more efficient utilisation of its assets. Attractive valuation: The consolidated revenues and earnings are expected to grow at compounded annual growth rate (CAGR) of 60.3% and 72.7% respectively, over the three-year period CY2006-09. Despite the robust growth prospects, the stock is available at attractive valuations of 11.3x CY2008 and 8.5x CY2009 earnings estimates. We recommend Buy call on the stock with a price target of Rs480.
Concerns:
Any further delay in CBM project The success of the CBM project is critical to achieve the estimated growth in revenues during CY2008 and CY2009. The revenue growth in CY2007 was affected by the delay in the commencement of the CBM project by the operator ONGC. We expect the project to commence in the current quarter and any delay on this front could have an adverse impact on our estimates and the company.s valuations.
Rupee appreciation:
The steep appreciation of the rupee could adversely affect the financial performance as most of its billing is done in US Dollars. Though the company also incurs a large part of its cost (including the wage cost) in US Dollar which provides a natural hedge, it is further insulting itself from the exchange rate fluctuation risk by quoting in rupee terms in case of some of its contracts.
Valuation:
The consolidated revenues and earnings are expected to grow at CAGR of 60.3% and 72.7% respectively over the three-year period CY2006-09. Despite the robust growth prospects, the stock is available at attractive valuations of 11.3x CY2008 and 8.5x CY2009 earnings estimates (on a fully diluted equity base of 4.4 crore shares). We recommend a Buy call on the stock with a price target of Rs480. |
Financial Performance & Estimates:
Key financials CY2005 CY2006 CY2007E CY2008E CY2009E
Net sales (Rs cr) 221.0 276.8 385.3 891.7 1,139.8
Net profit (Rs cr) 21.2 37.1 55.7 144.3 191.2
No of shares (cr) 3.7 4.4 4.4 4.4 4.4
EPS (Rs) 5.7 8.4 12.7 32.8 43.5
% y-o-y change - 47.4 50.2 158.9 32.5
PER (x) 55.9 43.9 29.2 11.3 8.5
Price/BV (x) 6.3 7.4 5.8 3.8 2.6
EV/EBIDTA(x) 16.3 19.1 15.9 7.9 6.2
RoCE (%) 14.4 18.1 22.2 40.5 36.2
RoNW (%) 10.1 10.4 11.3 18.5 19.1
Source: Sharekhan.com
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kulman
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Posted: 10/Oct/2007 at 4:35pm |
Interesting. First offshore.... now onshore....what next?
Please note there is a typo error in that report:
Though the company also incurs a large part of its cost (including the wage cost) in US Dollar which provides a natural hedge, it is further insulting itself from the exchange rate fluctuation risk by quoting in rupee terms in case of some of its contracts.
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Life can only be understood backwards—but it must be lived forwards
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smartcat
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Posted: 10/Oct/2007 at 4:41pm |
wow. When you read a report, you really READ the report!
um yes, companies like Cairn Energy are concentrating on the Rajasthan area and would require onshore service providers like Shiv Vani. And when it comes to investing, it is best to go with the largest onshore player - which is Shiv Vani.
Also, Kokilaben's dho Anmol ratan Ram aur Lakhan are taking up too much of my portfolio space. So just did a little portfolio rejig to accomodate Shiv Vani.
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kulman
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Posted: 10/Oct/2007 at 5:02pm |
Kokilaben's dho Anmol ratan Ram aur Lakhan .......
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 ha ha ha
Both are on the way to create history of sorts in wealth creation. According to an official who did not wish to be named, brothers seem to have short-term target to achieve wealth of US$100B individually.
As regards their long-term targets the official was tightlipped maybe because of his counting limitations.
Edited by kulman - 10/Oct/2007 at 5:06pm
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Life can only be understood backwards—but it must be lived forwards
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shivkumar
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Posted: 10/Oct/2007 at 5:17pm |
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shouldn't shiv-vani be included in the TED list? if oil hunt is the newest gold rush in India, then shiv-vani which is providing the picks and shovels should be making good money! what are the pros and cons of this stock? profitability, order book positions, future prospects, etc
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smartcat
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Posted: 10/Oct/2007 at 5:32pm |
Regarding 'Cons', I don't like the name of the company that much - it is not 'cool' enough. Other concerns are mentioned in the Sharekhan article.
CBM = Coal Bed Methane. RNRL is also interested in harnessing natural gas (methane) from coal beds. With more operators tapping this resource, there will obviously be more demand for their services.
Shiv-Vani is a complete integrated solutions company - they just don't provide the rigs. They also offer surveying of the area, data analysis, actual drilling, well maintenance and even pipeline construction.
They also plan to expand their offshore drilling fleet by acquiring new rigs.
Sundaram BNP Paribas Tax Saver Fund has taken a tiny exposure to this stock. Sharekhan and ICICI Direct have come out with their research reports. I think it will take some time for this stock to appear on the radar of big investors though.
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shivkumar
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Posted: 10/Oct/2007 at 5:43pm |
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name sounds like some radio channel offering religious songs and bhajans!!
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kulman
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Posted: 10/Oct/2007 at 5:53pm |
name sounds like some radio channel offering religious songs and bhajans!!
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ha ha ha!!
Let's hope the company delivers as projected. Otherwise poor smartcat would be doing that....
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