28 May, 2008, 1545 hrs IST, INDIATIMES NEWS NETWORK
MUMBAI: Religare Securities has recommended ‘buy’ on Mercator Lines and has raised their target price by 10 per cent to Rs 160 ( 54% upside from current level) to incorporate the larger fleet size (but not the coal mine initiative since it is still early days).
The company is in the midst of a major fleet expansion drive which would buoy growth in the coming years. The company has already purchased a dredger and deployed it with Dredging Corporation of
It has also acquired its third VLCC in Apr-Jun 2008-09. In addition, through its subsidiaries, MLL will acquire a VLCC converted into an ore carrier in Oct-Dec 2008-09, three post Panamax vessels - two in 2009-10 and one in 2010-11 - and a jack up rig in Apr-Jun 2009-10.
The company’s offshore arm, MLL Offshore, will receive delivery of a 350ft shallow water jack up rig in Apr-Jun 2009-10. This rig has already been contracted for a period of three years at an attractive day rate of $ 150,000. Religare expects the operating expense for the rig to be $ 50,000 per day, with the balance accruing to the company’s operating profit.
During 2007-08, fleet expansion coupled with a robust day rate environment led to a 30 per cent year on year increase in the company's consolidated net revenue to Rs 1,450 crore and a 143 per cent rise in profit after tax to Rs 330 crore. Religare expects the continued build-up of a young and modern fleet, deployed at attractive day rates, to bolster revenues and profitability in the coming years as well.
This apart, MLL has purchased interests in two coal mines, wherein it will be in a position to mine and transport coal, thus providing a holistic logistical solution. The stock is trading at a P/E of 4.5x, P/BV of 1x and an EV/EBITDA of 3.6x on FY10E.
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