Saturday, October 12, 2013

SECTOR FOCUS - OIL EXPLORATION AND ALLIED SERVICES ...



Generally price movement of most of the commodities in global markets are  closely linked with growth of economies.Some commodities  like oil are very sensitive and aggressively moving in tandem with global growth indicators.We have seen a sharp crash in Crude oil prices few years back when US  and European economies  were  in a fragile shape and a sharp recovery later even with very early signs of relief in US economy alone. If this is any indication,there is every chance for a spike in oil prices once there  is further improvement in US and some better feeling in EU.Since India is a large importer of  crude oil ,such a  situation may not be good for  Indian economy .But some sectors will benefit immensely from a situation like this. One of the major beneficiary  will be the firms providing services for oil exploration companies. I believe ,this is the time to look into such opportunities with a long term view.As many of you are aware, companies from such sectors under performed for the past 4 or 5 years.Due to this long period of recessionary situation in this industry , a good consolidation happened during this period and only the fittest are surviving now.Since existing players even find it difficult to keep their business afloat ,no major capacity addition happened during this period .Moreover ,adding additional capacity on short notice  is not possible in many cases in this industry.So , capacity constraints will help the remaining players to reap rich benefits once the industry turned around .Let us look into two such companies ,one in this week and another next week.



     1)    ALPHAGEO INDIA






Alphageo was a star during the last boom time of oil exploration Industry .Its stock price hits a high of Rs.1075 in 2008. Ace investors like Rakesh Jhunjunwala,Bharat Jayanthilal Patel,Ashish Kacholia ..etc were the share holders of this small company.( RJ and BJ still holding stake in it) .From the high of Rs.1000 + its share price crashed to sub Rs.20 level during June 2013 ,thanks to the  pathetic business performance during 2012-13 where it reported its worst ever sales during the last ten years.Due to sharp fall in crude prices and policy inaction of Indian Government ,activities in oil exploration sector were standstill  in our country and company could not clinch any major orders for it seismic data services.Man and machine kept idle for long period and promoters forced to bring additional capital by subscribing shares and warrants at a price of Rs.60 during August 2012, to keep the company afloat . As the proverb ‘Necessity is the mother of Invention’  company forced to look beyond India for opportunities which now seems clicked and giving a new lease of life for this company.

With the experience and credibility of India’s  largest inland integrated seismic services provider from the private sector ,for the first time ,Alphageo awarded Rs.75 Cr order from Myanmar ( Myanmar is a hot destination for OE now) by out bidding Chinese companies.Out of these, almost Rs.45 Cr orders will be executed in this FY itself. This is a big victory for the company and successful execution of these orders are expected to bring further business outside India .In the past ,Alphageo reported very good performance in timely execution and company having very good experience in working with tough terrains like Assam.Manipur,Meghalaya ..etc.In addition to this , with revival in major economies and thus increase in crude prices ,oil exploration activities are heating  up all around the world. Recently company awarded an order for Rs.17 Cr from Oil India for 3D Seismic data acquisition.


 In another  important development ,India Government is planning to launch the 10th round of auction of oil and gas blocks in next January. Government is expected to auction as much as 68 blocks this time.Since there is good improvement in oil prices over the past few months  NELP 10 is expected to attract more investors this time. Oil minister recently mentioned as  “Having learnt some lesson from 1 to 9 rounds (of NELP), 10th round will be a perfect round,” the Minister said adding hindrances faced in the previous rounds would be removed.  Any effort to remove delay in decisions and avoid red tape will attract more investors and more activity in this sector ultimately create more business opportunities  for companies like Alphageo.

  
I hope ,this is the time of revival in this industry both in India and all over the world and also the beginning of a new cycle. Promoters are taking every steps to improve the business and even during this tough business environment they recently spend Rs.13 Crore for technology up gradation to keep the company accessible for most modern technology in Seismic Data acquisition and analysis. This is a high margin niche business and the effect of available orders will be visible in its bottom line from here on .With revival in US and some signs of revival in EU ,oil exploration is a sector to keep in your radar and Alphageo may emerge as a winner from this space.Company offering good chance for appreciation in medium to long term.Stock listed both in NSE and BSE and trading around Rs.38


Link to Company website HERE


Link to  Latest annual Report HERE


Disc : Holding shares of Alphageo

44 comments :

  1. Dear sir
    whats your view on Fresenius Kabi Oncology Ltd. it has reported to bse a delisting update

    ReplyDelete
  2. what is your valuable view on Aban offshore.
    please share,

    thank you

    ReplyDelete
    Replies
    1. Huge debt is a concern.If they can manage it even with some asset sale ,that will be better.

      Delete
  3. Dear ValuePick, You are doing a great job by guiding us....Hats off to you...Keep it up :)

    ReplyDelete
  4. Sir, your research is unmatched!

    Do you have a view on other players in the industry such as Shiv Vani Oil exploration and SEAMEC?

    ReplyDelete
    Replies
    1. according to my opinion shiv vani oil not a good investment option to a value investor ... because of its debt burden....

      Delete
    2. Not positive on shiv vani due to corporate governance issues.

      Delete
  5. Hi Sir..
    Have a Happy Weekend & Congratulations on Vijaydashmi..!
    Sir pls share ur views on Resurgere Mines..

    ReplyDelete
    Replies
    1. Thanks Aman , not positive based on fundamentals .Pump and dump game may repeat again

      Delete
  6. Dear sir,
    Wockhardt falling, falling, falling, any new bad news or the same old one, how you expect the half yearly results are going to be, & you quoted in your view about wockhardt, that in another 2 months either it will break or make- can we expect that sought of situation before this year end?

    ReplyDelete
    Replies
    1. No great expectation from result.USFDA decision on Chikalthana plant will decide the short to medium term trend.

      Delete
  7. Hi VALUE,,, wanted ur special views in regards to firstsource and also about one other stock from IT WHICH could increase from current level....plzzzz reply

    ReplyDelete
  8. helo sir .. blue star infotech has now reached its 52 week high of 90 .. shud v hold on for further profits .. pl advise ..

    ReplyDelete
    Replies
    1. Let us take a call after the result on 17th.

      Delete
  9. Hello,

    Thank u for all ur great analysis. I am looking for a good mid sized Pharma company for investment. Please advice. How is Torrent Pharma or any other better pic. I am looking at long term perspective.

    Thanks
    Tushar

    ReplyDelete
    Replies
    1. Many pharma stocks like Granules,Neuland ,Biocon,Lupin ..etc discussed in the past. I prefer Sun,Ipca, ..etc over Torrent.

      Delete
  10. Dear sir, 'Atul Auto' crossed 52 week high and looks strong and you already recommended this stock couple of times. I see it a still worth bet. They are growing aggressively even in this economy...
    However, to be on safe side, would like to know your opinion @cmp 225?

    Pls advise sir, is it still safe for holding 2 years from now?

    Thanks,
    Amit Totala

    ReplyDelete
    Replies
    1. If ready to take medium risk - Hold it.

      Delete
  11. Dear sir,
    Kindly throw your views on wockhardt UK MHRA Withdrawal of GMP certificate, sir please give your views & recent developments, i bought after your explanations for cmp around 590, though you had clearly quoted everything, so its my risk only but if you can give you suggestions, it will help me & fellow investors to face this issue better.

    ReplyDelete
    Replies
    1. Not MHRA but USFDA decision is crucial

      Delete
  12. VP Sir...

    How about Selan exploration. is it currently at an inflection point? can it be apart of core portfolio ?

    ReplyDelete
    Replies
    1. Selan Exploration is a stock recommended earlier ,no change in positive view on it for long term.

      Delete
  13. Dear vp sir,

    I read your views about wockhardt, i liked it, if i want to take a risk, is it the right time, or should i wait until some more clarifications come? if this is the right time kindly tell, i will take the risk.

    ReplyDelete
    Replies
    1. Outcome of the main factor - USFDA Verdict on Chikalthana plant- is yet come.

      Delete
  14. helo sir .. R J biotech has come out of T2T and is now priced at 45 levels .. was 23 at the recomendation stage .. can v go for R J at this 45 level ..

    ReplyDelete
    Replies
    1. Stock already appreciated almost 100% in two weeks.So no comments on buy side at current price.

      Delete
  15. HI Valuepick,,

    I havent started my trading yet...just making some research....and I would like to know what is your analysis on Geentanjali gems Ltd...it is at its worst..now.......Do u think that it can become double...maybe in an year?

    ReplyDelete
  16. Dear Daniel

    I am only an investor and my opinions are only for investors ,it may not suitable for traders.

    ReplyDelete
  17. Dear VP, do you track Caplin Point laboratories,Gulshan Polyols and Acrysil India?
    Regards,
    Pratul

    ReplyDelete
    Replies
    1. Tracking only Acrysil and repeatedly expressed my positive view on this stock

      Delete
    2. Dear VPji,
      Caplin point is developing a mfg plant focused on developed markets by sep 2014. Also PAT for fy13 increased 76% over fy12. Dividend yield is currently over 4%. Kindly comment if there are any concerns over mgmt. or otherwise as I find it a value buy.
      Regards,
      Pratul

      Delete
    3. Dear Pratul

      I read a negative remark on Caplin point .ie, It is manufacturing counterfeit medicines and exporting to foreign countries.Check the below link and read the 4th paragraph on page 54.


      http://www.aging.senate.gov/publications/792002.pdf


      I am neutral and keeping fingers crossed

      Delete
    4. Dear Vpji,

      thanks for pointing the same. I am amazed how you manage to google such information. But I have noticed this was a senate hearing in 2002 and by now, if the MD was culpable he could have been arrested. There does seem to be any further allegation regarding counterfeit drugs that are being exported.

      Regards,
      Pratul

      Delete
  18. Dear VPji,
    Blus Star Infotech reported excellent results. Thanks to you for bringing this stock to small investors like us.
    The stock has corrected after results which is surprising. You had indicated to review it after the results.

    whats your take on it? The company has released info that they had won some good projects too.

    you views Sir?

    warm regds,

    ReplyDelete
  19. Sir do you track omni tech info solution.

    ReplyDelete
  20. Dear Valuepick,

    First off all, thank you for patiently taking queries from everyone who has visited your awesome blog!

    I could not buy your recommendations yet, as I have invested almost all that I have got in Cairn India hoping it to be multibagger, now when I look back I should have followed your recommendations regularly.

    Nevertheless appreciate your kind responses to us!

    Best Regards,
    Abhijeet

    ReplyDelete
  21. Sir, Can you please throw some light on Super Sales India Ltd.It seems the company is coming back to track. BJ is also a investor in this script it seems. thank you sir!! thanks a ton for being a wonderful human being. As advised by you, i will wait for buying more Suzlon.
    Sulekha Sathyan

    ReplyDelete
  22. Was BJ Patel involved in some sort of stock manipulation . The link mentioned below has the info - http://www.watchoutinvestors.com/history.asp?def_code=C0035818

    ReplyDelete

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