Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
GE Shipping: Rough weather ahead - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Dec 19, 2001

    GE Shipping: Rough weather ahead

    Despite a slowdown in the economy and a fall in freight rates, GE Shipping reported a sharp growth in shipping income and profits in 2QFY02. However, if recent trends are any indication, revenue growth is expected to grow at a slower rate in the second half of the current fiscal and in FY03.

    Revenue from shipping operations grew by 30.8% in 2QFY02 to Rs 2,175 m and offshore division also posted a 7.6% growth. For the first half of the current fiscal, shipping income and net profit grew by 32% and 30% respectively. However, if one were to exclude the income from sale of ships in 1HFY01, profit for 1HFY02 has actually gone up by 70%. The cost cutting initiatives taken by the company in the last one and half year seem to have yielded positive results. But all is not rosy for the company.

    With the freight rates touching historically high levels last year, shipping companies, globally, went on an ordering spree. Cumulative orders for clean and dirty fuel tankers are close to 11% of existing fleet. In terms of dead weight tonnage (dwt) it is almost 18% of existing tonnage available in the market. And if were to take a closer look, FY01 and FY02 accounts for 53% of new tanker deliveries. Given the slowdown in the economy and subdued industrial activity in all the major economies, rising world order book for tankers is a cause for concern. The scenario is the same for other segments like dry bulk and product tankers as well. Now with oil prices hovering around US$ 19.6 per barrel, OPEC has already cut crude output by 1.5 m barrels per day. Other countries like Norway have also cut crude output in light of a weaker demand scenario. Consequently, tanker rates are trading around 964 levels as compared with around 1,500 levels a year before. Though the International Monetary Fund expects world trade to grow at a higher rate in 2002, it is far lower than FY01 levels of 4.2%. If the slowdown persists in 2002 also, freight rates could fall even further and thus could affect sales growth of GE Shipping.

    Rising tanker deliveries…
    Year First half Second half Total (dwt)
    FY00 83 59 142 20,573
    FY01 53 40 93 14,642
    FY02E 55 39 94 15,914
    FY03E 32 6 38 6,516
    Total 223 144 367 57,645
    % of existing fleet 6.6% 4.3% 10.9% 18.4%

    Apart from shipping, Gesco is also one of the leading offshore service providers for companies like Oil and Natural Gas Corporation (ONGC), Cairns, Hardy and Enron. The government has encouraged exploration activity on the Indian coastal line in an effort to increase indigenous crude production. So offshore service providers like Gesco are set to benefit in the long run on account of increased spending by exploration companies like ONGC. Given the potential of the offshore division, Gesco has plans to increase fleet size in the coming years.

    The company had embarked on a capital expenditure of Rs 8 bn over a three-year horizon for augmenting its fleet, especially the Aframax tankers. Towards this, it acquired one bulk carrier and a harbor tug vessel in the 2QFY02 at an aggregate cost of US$ 15.7 m (Rs 754 m). It had placed orders for three Aframax carriers with a MTDWT of 105,000 each and the delivery is expected by FY03. It has also placed orders for two platform supply vessels (delivery date around March 2002).

    We expect the company to report around 7% growth in sales to Rs 10,775 m and a 6% growth in profits for FY02E. For FY03E, shipping income is expected to grow by 3%-4%. The scrip is currently trading at Rs 24 implying a P/E multiple of 2.7x FY02E earnings.



    Equitymaster requests your view! Post a comment on "GE Shipping: Rough weather ahead". Click here!


    More Views on News

    G E Shipping: Feeling Pressure From the Offshore Segment (Quarterly Results Update - Detailed)

    Aug 18, 2017

    GE Shipping reported a subdued performance on the back weak offshore segment.

    G E Shipping: A Bad Quarter (Quarterly Results Update - Detailed)

    May 9, 2017

    GE shipping registered a loss in 4QFY17 due to weak global shipping market and lower crude prices which negatively impacted the offshore segment.

    G E Shipping: Crude, Product, and Offshore Segment Drag Performance (Quarterly Results Update - Detailed)

    Feb 16, 2017

    G E Shipping has reported a 22.8% YoY decline in the topline while the bottomline has declined by 33.4% YoY.

    Cochin Shipyard Limited (IPO)

    Aug 1, 2017

    Should you subscribe to the IPO of Cochin Shipyard Ltd?

    G E Shipping: Pressure from All Segments Drags Performance (Quarterly Results Update - Detailed)

    Nov 21, 2016

    G E Shipping has reported a 20.2% YoY decline in the topline while the bottomline has declined by 24% YoY.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 21, 2017 03:37 PM


    • Track your investment in G.E.SHIPPING with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Compare Company With Charts