Stock Idea: Castrol

The company has managed to sustain; there has been no spectacular growth but increasing operating costs indicates that margins were under pressure.

For year ended 31st Dec 2009, net revenue rose by merely 5%. Operating expenses were 83% of the revenue which in 2008, were 81%. Interest outgo was maintained at Rs.3.50 crore level and EBIDTA was down 7%. Yet, net profit was up 45% at Rs.381 crore.

2009 was the centenary year for Castrol brand in India and it celebrated that with by declaring a bonus in the ratio of 1:1. It recommended a final dividend of Rs.5/- per` share and a special dividend of Rs.10/- per share for the year ended 31st December 2009. This is in addition to an interim dividend of Rs.10/- per share, totaling to a dividend of Rs.25/- per share for the full year 2009.

Looking ahead, inflation will remain a challenge. And there could be further pressure on the margins till price pressure eases. 2010 would be more about sustaining than about growth.

Stocks like Castrol are for the long term. Capital appreciation will come with time. The company has always been liberal with its dividend payouts and bonus issues. Including the current bonus, this is the seventh bonus from Castrol India. Earlier, the company had issued a liberal 1:1 bonus, each in May 1999, February 1994 and in June 1987. Also, it had issued a 3:5 bonus, each in May 1995, May 1992 and in November 1990.

Stay invested with a 2-3 year perspective.

Source: Internet (premiuminvestments.in by SP Tulsian)

Stock Idea: Seamec Ltd.

Seamec Ltd. is engaged in providing support services including marine, construction and diving services to offshore oilfields in India and abroad and operates 4 multi purpose support vessels (MSVs) for diving and providing underwater / sub-sea engineering and construction, maintenance and inspection of underwater structures, rescue operations and fire fighting and other support services for offshore oil and gas installations.

The company has 4 MSV – Seamec I, Seamec II, Seamec III and Seamec Princess. The company has recently acquired Seamec Princess for about Rs. 180 crores. This is giving US $ 65,000/day, which is resulting in better revenue and profits for the company.

The accounting year of the Company has been changed to year ending 31st March. The current year results will be published for 15 months from January 01, 2009 to March 31, 2010.

The performance for the fourth quarter ended 31st Dec 2009 was not very good, infact it was the poorest show during the entire year. Turnover and profit was lower as three of the four vessels owned by the company were in operation and one vessel was sailing from West Africa to Middle-East for mobilisation of the next contract, compared to corresponding period of the previous year where all four vessels were in operation.

If the company were to end the year in Dec, the performance, compared to 2008 has been more than spectacular to say the least. Net revenue is at Rs.384.49 crore v/s Rs.268.59 crore posted in 2008. Net profit currently stands at Rs.232.62 crore, which is almost 5 times more than that posted in 2008. What is noteworthy is that NPM is very healthy at over 60%. On an equity of Rs.33.90 crore, EPS stands at Rs.68.62. 

At the current price of Rs.203, the stock price is ruling at a PE of less than 3.

Source: Internet (Premiuminvestments.in by S P Tulsian)