It is common practice for new players such as Mercator Lines, which don't have the required technical experience, to route their contracts through experienced intermediaries. The rig has been chartered at a daily rate of $92,700 plus profit-sharing. It can work in 350 feet water depth and drill up to 30,000 feet. Being a new and technically superior rig, with 'high pressure, high temperature' capability, the rig can command a premium over other rigs.Mercator has also paid an additional premium to the Singapore-based shipyard for pre-poning the delivery of this rig by three weeks.
The company is likely to book around a fortnight's worth of revenues or nearly Rs 7 crore in FY09, which will be very small in its consolidated turnover of Rs 2,000 crore. However, in FY10, the rig would single-handedly contribute nearly 7% of the company's revenues.
Mercator's consolidated revenues grew a healthy 67% y-o-y to Rs 1,673.1 crore in the first nine months of FY09, as its long-term contracts helped to minimize the impact of a sharp fall in spot shipping freight rates. Its operating profit margin also improved 460 basis points y-o-y to 44.1% during this period.
Mercator has diversified into other non-core businesses such as the supply of dredgers and coal mining in Indonesia. These non-core activities are expected to represent around 10% of the topline in FY09, which would shoot up to 20% next year.
Market Cap 1,066.68
EPS (TTM) 7.67
P/E 5.89
P/C 3.28
* Book Value 45.91
* Price/Book 0.98
Div(%) 110.00
Div Yield(%) 2.43
Market Lot 1.00
Face Value 1.00
Industry P/E 5.19
This stock is held by many good mutual funds buying mid cap stocks in their portfolio.
It looks like to be a good stock to buy at dips. Investors should buy stocks with 2-3 years investment period for good returns.
