GE Shipping has announced the sale of two assets of its offshore division, namely a platform supply vessel (PSV) and an under-construction platform/ROV supply vessel. And while the company has not provided any financial details,

analysts estimate that the company could see a cash inflow of nearly
$40-45 million (approximately Rs 210 crore) from this transaction over
the next few quarters.

The latest transaction by the company is not being viewed as
significant at a time when it is focussed on growing its offshore
division. That’s because at the end of October 2009, the company had
planned a capex of $467 million (nearly Rs 2,150 crore) over the next
15 months in its offshore division, in a bid to acquire additional
vessels.

During the first half of FY10, the turnover of its offshore division
was Rs 334.5 crore, a jump of 162.4 % y-o-y, but this business segment
accounted for only 19.8% of GE Shipping’s consolidated net sales during
this period. Also, funding of this capex for its offshore division
should not be a problem for GE Shipping, as its leverage ratio of 0.6
at the end of the March 2009 was lower than two years earlier.

The company’s current offshore fleet — owned and leased — includes six
PSVs, two jack-up rigs and eight anchor-handling towing supply vessels.
In addition, the current pick-up in the global upstream oil industry
should help ensure adequate demand conditions for GE Shipping’s
expanded offshore division over the medium term.

Meanwhile, in the company’s key shipping division, like its peers, it
also has benefited from a pick-up in spot freight rates in the tanker
segment over the past few weeks, given signs of a global economic
rebound. Indian shippers have a majority of their fleet capacity
utilised in the tanker segment and they employ a combination of long-
and short-term contracts with their key customers.

In the VLCC (very large crude carrier) segment, spot freight rates are
currently at $27,820 per day levels, as compared to the average spot
freight rate of $4,514 per day in September 2009 quarter. However, spot
freight rates in the tanker segment despite the current improvement are
still lower on a y-o-y basis.

The GE Shipping stock rose 0.3% to Rs 281.3 on Thursday, and over the
past two months, it has gained 17% compared to a 9% rise in the Sensex.
The largest player in this sector, Shipping Corporation of India (SCI),
has also risen 12.5% over the past two months. And despite the run-up
in stocks in this sector, GE Shipping trades at a reasonable 6 times on
a trailing basis while SCI trades at 11.5 times and we are neutral on
this stock.

Source: Economic Times India

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