SEAMEC ltd---- BUY

According to Sharekhan's result update, SEAMEC's Q1CY2009 results were
much ahead of estimates on account of a strong top line growth and
further improvement in margins.

It says that the company's valuation is particularly attractive given
the company's strong return ratios and debt-free status. It maintains
Buy call on the stock with a target price of Rs 197 per share which is
an upside of over 130 per cent.

"The Q1CY2009 results of SEAMEC were much ahead of our estimates on
account of a strong top line growth and further improvement in
margins. The revenues for the quarter grew by 149% to Rs100.1 crore,
as all four of its vessels were deployed during the quarter against
just two in the same quarter of the last year.

Currently, the contracts for all the vessels are in place and all its
vessels would be operational for the first half of the fiscal.

The company has recently received a one-year contract for Seamec II,
though at lower rates, while it has also received a two-month contract
for Seamec Princess, starting May 15, 2009. Going forward, in the wake
of lowering global exploration and production (E&P) capital
expenditure (capex), the deployment of assets would also be a
challenge.

We have already built in the likely softening in the rates into our
estimates for CY2009 and CY2010. There is no dry-docking expected for
any of its vessels in CY2009, while dry-docking for Seamec I is due in
CY2010.

We are slightly fine-tuning our CY2009E sales estimate due to a
stronger dollar, but are raising our profit estimate by 18.2% on
account of strong improvement in the margins. We are also introducing
our CY2010E earnings estimate in this note.

For CY2010, Seamec I is likely to go for dry-docking, while currently
the company has contract only for Seamec II, which would expire in
June 2010.

In view of the tough outlook on the industry and softening rates, we
expect the company to report a 7.5% decline in its revenues, while the
margins are also likely to contract on a year-on-year basis on account
of lesser utilisation. Consequently, we are building in a profit
decline of 21% year on year (yoy) in CY2010.

On the valuation front, the stock appears to be trading at an
extremely attractive valuation of 2.4x CY2009E earnings and 3.1x
CY2010E earnings. The valuation is particularly attractive given the
company's strong return ratios and debt-free status.

Moreover, at the end of CY2008, the company had cash on books to the
tune of Rs63.5 crore, which works out to Rs18.7 per share. Further, on
the back of strong performance, we expect excellent cash inflows for
the company, with the cash flow from operations expected at Rs121
crore for the current year.

We maintain our Buy recommendation on the stock with a price target of
Rs 197," the report said.