AGB Shipyard : Will history repeat itself ?

Good IPO, but getting Allotment wouldn't be easy !
ABG Shipyard has eneterd the capital markets with an offer of 85 Lac shares at a price band of Rs. 155-185. This IPO reminds of the Bharti shipyard IPO which was offered at Rs. 66 and is currently trading at Rs. 338. SO the question arises , Will the History repeat itslef ? Can ABG repeat the Bharati story ?

Investment Guru analyse the IPO and answers the above question too.
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What makes this IPO attractive ?
1. The shipyard industry is in limelight and has attracted investor attention. ABG will not be an exception to this.

2. The company is the largest private sector shipyard in India. It builds marine ships, including bulk carriers, deck barges, interceptor boats, anchor handling supply ships, driving support ships, tugs and offshore vessels.

3. It has built over 88 ships since its inception in 1990, and currently has an order book position for 27 ships under construction. The comapny's order book is worth Rs.1300 crores and 50% of this is from exports.

4. The Issue price at upper band of Rs.185 comes at a PE multiple of around 14 (considering annualised EPS of Rs. 13). However at wieghted average EPS of last three years, the issue comes at a PE of 17. The Bharati shipyard stock is currently trading at a PE of 25.

5. The company expeansion plans to set up a new shipyard at Dahej will start bringing fruits in another 3-4 years and hence the stocks looks good even from long term perspective.

6. The weighted average return on networth is to the tune of 33.8%

Concerns :
The company is running at 100% utilisation of its facilities. The time lag between the usage of the new facilities may show up on the returns of the company.
Since the company has a good share of export earning, competition from other countries like china may have impact on future earnings.

Investment Guru's Outlook on the IPO

Investment Guru recommends investors to apply for the IPO. The IPO will certainly not repeat the history of Bharati Shipyard. The reason behind this is that the Bharati IPO was priced quite conservatively and hence provided spectacular gains to Investors. This is not the case for ABG shipyard. The company has certainly left something for Investor but it is not copmarable to Bharati IPO. Given the small size of the IPO, one need to have lot of luck on his side to get allotment. The small size but huge apetite scenario will also lead to smart listing of the stock.
The IPO can also be used as a entry for long term investment in the stock. The shipyard sector is at the upward trend of its cycle and there are no near term concerns of its moving to downtrend.

Issue Opens: 18-Nov-2005
Issue Closes : 24-Nov-2005
Registrar :Intime Spectrum

24 comments:

Anonymous said...

Hi Rajesh
Thanks for the IPO update.
How much can a reatil investor put in this IPO ?

Mera said...

My ICICI demat account says upto Rs.1 Lakh.

Anonymous said...

Hi, Rajesh...

Thanks for yr update on AGB Shipyard. Can u please provide yr invaluable view on AIA Eng. Please try provide it fast if possible as today is the last date.

Will it provide avg. listing gains? As I am looking to invest for listing gains only.

Thanks..

Anonymous said...

Hi Rajesh,

Whats yr view on Triveni Engineering IPO ? Please try to through some light on it.

Regards...

Anonymous said...

Hi Rajesh,

I have invested in "Abhishek Industries". I would like to know your view about Abhishek Industries.

Thanks and Regards,
-Amol.

Rajesh Soni said...

I would avoid teh Triveni Engineering IPO

Rajesh Soni said...

AIA Eng. is priced aggresively . I do not expect mcuh gains unless the market at the time of listing is quite bullish.

Rahul said...

Triveni engg. has a poor mgmt. record and so must be avoided. However, I feel AIA engg. should list at a decent premium. Looking at recent listings, its difficult to comment on the medium-term price, but anybody applying only for listing gains should apply.

Amit said...

Hi Rajesh,

Just a point of concern on the ship-building industry. It is an intensely cyclical one which rises and falls along with the shipping industry and is also one where India faces stiff competition from other Asian countries (Korea and China are the major ones I think).

The current shipping cycle has been on a rise for the past couple of years and is now possibly close to a peak. If one is looking to invest for a long time (more than a year) the IPO might not be a good idea.

Rajesh Soni said...

Yes Amit, The shipping industry is cyclical in nature and it impacts the ship building activities too. However if we see the order book of ABG, it already have oredrs for 27 Ships and the silverlinig is that it is not dependant much on the local consumption.
Even on the local consumption front, it is estimated that due to the sagar Mala project announced by Govt. of India , the estimated demand for ships will be around 2500. This gives enough scope to ABG to build up its order book further !

Mohit said...

Hi Rajesh,
I am a big fan of your blog and I find your articles very interesting.
Could you please provide an update on the Everest Kanto IPO ?
Also is it worth investing in PNB at current levels?

Thanks
Mohit

neha said...

Hi Rajesh,
I visit ur blog regularly. I have noticed tht u have not posted any Investment Idea for a long time.
Also I saw that your Investment Idea - Narmada Chematur is not working that well.
There are so many blogs for IPO but I liked your as it was more than IPO ideas. I think you should start posting Investment ideas as well.


Thanks, Neha

Amit said...

PBA Infrastructure is listing today on NSE and BSE.
Let's hope for the best

Anonymous said...

Sir need some tips for short term, the last fom u was gujarat ambuja. Waiting for your next tip anxiously.

Anonymous said...

Dear Rajesh,
Nice to see you back. We are awaiting your next investment idea.
Your posts are full of insight and helps to take investing decision.
Thanks
vishwa

Satya said...

Rajesh,

I heared a news that china entering to steel industry and it can deliver the output @ low cost. So the scripts like SAIL are going to be down ever. Please comment on the steel industry.

I have 200 shares of SAIL @ 65.

Anonymous said...

Haven't had any comments on Narmada Chematur. I belive you must have done some research on your investment and will be helpful to readers of your blog whoi have invested in NCPL, if you can comment on the current status of the script. Thanks

Rajesh Soni said...

Dear friends,
I am going to put a post on Narmada chematur based on the latest development in the stock.

Anonymous said...

Rajesh

Please comment on SAIL. I have 500 shares @ 55.

Anil Kumar said...

Hi Rajesh,

Also please track once again of Beeyu Overseas. It is still going downe.
I bought 1000 @ 18.75.
Please suggest, what to do!

Thanks in Advance
Anil Kumar

Anonymous said...

Hi Rajesh,

Yr blog is doing excellent and we all are thankful. I have one suggestion: With IPO updates and investment idea if u can also share your views on buzzing/hot sectors, it will be great.

Supal

Anonymous said...

For steel industry perspective (bit old though)...http://www.valuenotes.com/Bbiswas/bb_steel_12apr04.asp?Writer=&ArtCd=33708

Anonymous said...

I have been looking for sites like this for a long time. Thank you!
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