Pipavav Shipyard Limited IPO Message Board (Page 6)

it will list at rs 45

196 IPOIPO
Thanks for your fantastic analysis - quite meaningful one. I have taken into consideration the possible global economic recovery by second half of 2011. Import and export transaction value will increase by, atleast 50% to 70% of the current trade levels, which means engaging more ships to meet increased container traffic. Many ships will be rebuilt and repaired to meet the demand.
Your informative and meaningful participation will definitely be considered and with more analysis I may decide my waiting period from 10 years to 5 years with reduced expectations.

193.Kamal:
As per bullish estimates say after 4- 5 years co. can do 6,000 Cr. revenue. Consider 10% net margin (vs. ABG -8% and other world’s shipyard making 5 to 11% op. margin and not net margin.) So in this case co. can post 600cr. net profit. Consider a multiple of 10, then company’s value can become 6000cr. If mkt. values them bit more than ABG- 6x say 8 multiple than Value will become 4800cr. Mkt. should give them 13.3x to double the mkt cap at 8000cr.
Let us examine Sky as potential.
Pipavav at 600Rs. will reach 40,000cr. in mkt. cap. Consider further capital raising by diluting 30% stake in the company .Thus company’s mkt. cap @600rs after 10 yrs should be around 52,000cr.~11bn$.
HHI (Hyundai heavy industries- world’s largest conglomerate not only shipyard) has large 9 dry docks, 7 ‘Goliath cranes’ and can built 45mnDWT vessel - 110 times more capacity than Pipavav rated capacity). They can built 1 ship/week, plus they can do giant offshore oil and gas project. They also built turnkey industrial plant (like L&T or to some lesser extent Punj llyod). They make their own diesel engine and electro machine required for ship and other industrial project. On top of it they also makes construction and mining equipment (like BEML) . Do not forget they also do Defence work submarine, frigate and what not.
So after 40 years this Giant company has reached mkt. cap of ~13bn$. Other korean company , Samsung -5.5bn$, Dawoo-3.5bn$ are also giant with decades of experience.
Singapore congloromate ( Sembcorp marine -3%equity holder in pipavav) is valued at 4.6 bn$ (12xmultiples- better multiple, because it does high end oil and gas offshore vessel and Singapore has well developed eco system to do this high end work).
HHI is combination of L&T, BEML, plus shipbuilder. Clearly if you leave HHI, other giants are in region of around 3 to 5bn$. Does this data makes us believe Pipavav to reach 11bn$ in mkt cap in just 10 years ??
Whereas Korean shipyard have natural advantage as
1.      Downstream steel, forging, casting industry is well developed within korea. Good Eco system
2.      Korean – HHI makes their own diesel engine, electro mechanical parts etc.
3.      Government is very friendly always wanted to maintain competitive shipbuilding industry
4.      Shipyard requires large labour force. Korean workers are very hard working.
5.      Infrastructure building was done at highly subsidised interest rate .
Chinese shipyard also has this most of the above advantage, their government is big plus as they are determined to develop shipbuilding industry.
Sadly in India, we do not get any government support, have to pay high interest rate and higher power cost. Our labour is not that hard working as Korean or Chinese. We have to even import steel for ship building. We have to import almost most of ship parts. We do not have well developed eco system for ship building thus we have to create it, which will take lot of time .
Many things have to come together to run yard efficiently and profitably like:
1.      First both promoter brother should remain as promoter for next ten years, and concentrate on this company. Remember this is bit question mark considering their history? Also they have other business venture to drive.
2.      They have built facilities, but I am not sure on people. They will require huge pool of qualified technocrats and should built institute like L&T. (well assume they will able to manage)
3.      L&T is also building larger shipyard facilities at Ennore. That can give real competition on larger defense work. Smaller defense order other player ABG can give tough competition. Remember u have likes of MDL, cochin, Goa and HSL (PSU yard too)
While I am not disputing your claim of longer term value creation, 11bn$ in mkt. cap in 10 years time is not bit but lot stretch target.
I am only concerned on what value they are offering company at IPO time (first public investor). If giant company are available at 1.8 to 2 book value, why should we pay 3 BV or Say 2.3xbook value (diluted after IPO). I see profitability not up to the mark for next two years and thus in healthy mkt. practices shares prices should reflect this reality.
Let us hope this management can create this large value creation in 10 years time.

192 ipoipo
Just to clarify I am a long term player for the past 20 years. I still hold stocks such as RIL and SBI which I acquired for Rs.275 and Rs.100 respectively. You are right in saying that generally people take excuse.
As I posted in my very first message, I have a target of 10 times the investment over the period of 10 years, at an average compounded rate of around 25% per annum, to meet my son's higher education expenses. I am sure I will be able to achieve this target well before the fixed target date. My experience shows that Indian stock market has a cycle of 8 years. The next boom is due in 2016. Lets wait and watch.

190.kamal
As u mentioned that u r not sure on short and medium term price performace. Let us leave it there. U hv initiated the call and I was just reponding to your call.
Now a days if stock is not correctly priced, ppl hv this long term excuse.
I believe long term Gold price will reach 25,000 Rs. Will u buy Gold at 25,000rs now. Well u can make that choice buy at 25,000Rs. now and long term it will become 25,000Rs.

Adani and NHPC: 3 years down the line at-least Adani EPS might become 10. So PE will look like 10, so stock might react to that. NHPC - 4 year down the line earning will only become Rs.2. So at IPO price of Rs. 36. PE still remain towering @18 multiples. Company who is earning only 6.5%ROE, was been valued @2.2x book value.

On the closing day of the ipo i.e on 18 th Sept, 2009 i recd. call from the calls from the local karvy office arround 2 p.m to subscribed this wonderful issue. My others friends too recd. this similar calls . Now you can well understand who this ipo is fully subscribed my the karvy was offered was upfront commison for convicing the people to apply for this issue.

Warm Regards

189 ipoipo
I am not trying to justify the pricing from the short or medium term perspective. But from the long term perspective it is definitely a good investment. Car making (auto) industry is also one of the quite oldest industries, is it not shining with the induction of new technology? Exactly, thats what is happening with every industry.
Let us not waste time in putting thru for and against arguments any further. Time will only tell. In the correct market condicitons, this script, might yield the same type of response like Adani and NHPC. But, all these three scripts are definitely sure bets for long term.

188.kamal,
Dear, Everything has its price? Can u please tell me with reason what is present buy price and sell price as per you. What price it should trade on listing and why?

Experience counts a lot specially if u are in heavy industry. Youth with energy but guided by experience man are the best combination. I am talking statistics.
Also this industry is one of the oldest industry. It is not like industry itself is a new, and no players have experience.

They have created large infrastructure, but they have either sold or not running profitably. Pipavav port is still running under loss.

If you see recent large listing are struggling to maintain it's ipo price. What happens if there is a correction ?

187 ipoipo
The success of any company is teamwork. Pipavav has the world's largest dock which can harbor big ships. This factor is the major advantage for pipavav and disadvantage to others. Navy's big INS ships can be handled by pipavav than its competetitors, I believe. Defense expenses are budget based and is not much affected by global recession. I do not have any clue on the new team. Generally new teams have more energy.

185. kamal
There is no guarantee that Entire Naval order will come to them. Share Prices already includes this orders.
Ship building is not one man brilliance job. Entire team need to work together to efficiently and profitabily run the company.
Entire team is new with some few expat employed. They will have to go through learning curve, before they start running company efficiently.
Why should public pay 3times Book value for a venture Which is new, no past record, industry plagged with uncertaininty.

Dear 175 Kamal,

Don't invest in one stock for your son's education / daughter's marriage / owning house in future. Stock market is marked by scams periodically. It is very important to diversify.

You should invest in at least 5 - 6 stocks (preferably in 3 - 5 instalments at market corrections). You should pick fundamentally good track record stocks having given consistently good results in last 3 - 5 years (also, at least having three years listing record at browses).

In 1992 (Harshad Mehta scam), Sensex fell more than 50% & old economy stocks like ACC, Capital goods stocks lost around 70% from their peaks. In 2000 (IT bubble), Satyam, Rold & many IT stocks lost between 60% - even 90% from their peak (Senses lost more than 50%). Similary, real-estate sector was having fancy story similar to Pipavav. This sector lost more than 90% from their peak. Even many stock outside this sector lost 70% - 90% (some stocks even 95%) from life-high.

When your son needs money after 10 years, what you will do if market condition was bad at that point of time. Always diversify. Diversified Mutual Funds having past track record of at least three years is preferred way to achieve such goals.

182 ipoipo
Good one about the industry from the global perspective. But, Pipavav is having orderbook mainly from local, that too from Decense Ministry. Will not be following the global trend - this is my understanding.

Retail Individual Investors (RIIs) 25455068 73713750 2.8958
3(a) Cut Off 66062590 2.58 times
3(b) Price Bids 7651160

pipavav ipo final cut off at 2.58 times, hope to get atleast two lots after five lots

Shipyards Face Global Price War Risk, Mitsui Engineering Says
Saturday, 29 August 2009
Shipbuilders may be drawn into a global price war next year triggered by South Korean discounting, an executive at Mitsui Engineering & Shipbuilding Co., Japan’s second-largest builder of vessels, said. “A risk of some new Korean yards setting very low prices is our biggest concern,” Norio Nagata, the head of the company’s ship and ocean project division, said in an interview in Tokyo. The possible price cuts to fill idle docks could lead to global discounting, he said.
Shipping lines have postponed or canceled vessels as demand dropped amid the recession. Bulk carrier prices have declined as much as 30 percent from levels before the economic slump and a global fleet oversupply may continue for six years, boosted by the expansion of Korean and Chinese yard capacity and weak demand, Nagata said.
“Things will be extremely tough until 2015,” he said. “The most important thing is how quickly we will respond to a rapid change in the business environment.”
Mitsui Engineering & Shipbuilding rose 0.4 percent to 255 yen on the Tokyo Stock Exchange. The Nikkei 225 Stock Average advanced 0.6 percent.
The company will compete with Asian rivals by developing more fuel-efficient ships, said Nagata, who became head of the ship division in June. The company plans to sell, as early as 2013, very large crude carriers, or VLCC, and handymax vessels designed to cut greenhouse gas emissions by 30 percent.
Order Books
About 854 million gross-ton vessels are scheduled to come into the global ship market, based on order books held by yards around the world, Koichi Kato, an official at the transport ministry’s Maritime Bureau, said this month, citing government data. That’s equivalent to about 40 percent of the fleet in operation, even as demand is expected to remain flat, he said.
Overall capacity at South Korea shipyards is expected to increase by almost 20 percent in the two-year period ending December, according to analysts, including Cho In Karp at Good Morning Shinhan Securities Co. in Seoul. That includes plans by Hyundai Heavy Industries Co. to add two additional yards and the extension of docks by rivals.
Japan lost its title as the world’s largest shipbuilding nation to South Korea in 2000. Six years later, China overtook Japan as the second-largest shipbuilder by new orders.
Excess shipping capacity across the world will peak in 2012 before returning to growth as early as 2015, Nagata said.
Orders received by Japanese shipyards tumbled 63 percent in July and have fallen 76 percent since the beginning of this year, according to the Japan Ship Exporters’ Association.

Source: Bloomberg

It is dangerous sign, people are now showing earning of FY11 and 12 for which company not even got L1 status of order. Analyst are predicting high Ebidta margin for company, who may bag order at distress prices to get entry.
Refer following link for excellent news collection on world scenario's in ship building industry. It is panic there....

http://www.encyclopedia-titanica(dot)org/discus/messages/6937/119521.html?1253236147

Even ABG is qualified to do Naval and defence work, which is presently at tender stage. Even if pipavav wins the entire Naval order, Still Rs.60 is not justified.

However in short term they may corner stock and take it to higher level, so do not short it. Weight of the stock will come haunting when FY10 numbers are declared.

This has been a big flop show considering 500 crore rs issue only garnered 4000 crore which means it is subscribednot even 1 time if you compare it with rec which got subscribed 23 times.

get ready for this to list at 15-20% discount

those who have applied 1650 shares of pipavav will get minimum...630...shares.

angainst oppose it seems to fill 9 to 10 times.
Dont miss golden chance.

pipavav retail at 5=10 hrs sub. by 2.54 times