BUY OF THE WEEK(19th March-25th March)

S.E. Asia Marine Engineering and Construction Ltd. (Rs. 170/-):

Sharp rise in crude prices in last 2 years has led to huge activity in the offshore exploration industry in India as well as globally. Oil exploring companies are going to more and more deep water locations for future supplies of oil and natural gas because, onshore oil fields are already exploited. Such development has brightened prospects of the offshore support industry. In view of the same, SEAMEC is recommended as an excellent buy.

SEAMEC has a 78% subsidiary of Technip of France. SEAMEC operates MSVs for diving and for providing underwater/subsea engineering and construction, maintenance, inspection of underwater structures, rescue-operations and fire-fighting and other support services for offshore oil and gas installations and other industries, located in India or abroad.

SEAMEC owns three (1,700 DWT, 2,100 DWT, and 2,100 DWT) of the only five MSVs owned by Indian companies. The other two belong to ONGC. SEAMEC added to its fleet another vessel, Oceanic Princess, on 12 June 2006.

Technip, the company's ultimate parent, is a French company and a leading player in engineering, technologies and construction services for the oil and gas, petrochemical and other industries. The CSO group, Technip's immediate parent, is a global leader in sub-sea engineering and contracts and has complete dominance of deep-sea underwater pipeline business in the world. CSOs international network and access to CSO's technology and experience have strengthened SEAMEC's position as the leading sub-sea contractor in India.

Financial Performance:
Rs. in Crs.

Trailing 4 Quarters

			Quarter Ended
	31.12.06	30.9.06	30.6.06	31.03.06
Total Income	61.60	33.60	36.93	27.00
Gross Profit	30.79	5.00	20.75	18.46
Depreciation	4.63	4.26	3.24	2.78
Net Profit	25.86	0.50	17.10	15.11
Equity	33.90

Rs. in Crs.

	Y E A R E N D E D
	31.12.06	31.12.05
Total Income	163.63	87.30
Net Profit	58.57	19.32
Equity	33.90	33.90
EPS (Rs.)	17.28	5.70

For the Year Ended 31st Dec. 2005, company had made NP of 19.32 crs. which gave EPS of 5.70 on equity of 33.90 crs. It has been a debt-free company and at Rs. 78 crs. cash at beginning of the year. In CY06, its NP has zoomed by 200% to 58.57 crs. translating into EPS of 17.28. During the year, company acquired its fourth MSV, utilizing the available cash. After reporting good NP in H1, its NP in Q3 dropped to just 50 lakhs. Operationally, company had been doing well only but, retrofitting of fourth vessel was being done during Q3 and expenses being incurred for the same were debited in Q3. But for same, Q3 profits also would have been very good.
Subsequently, company got raise in charter rates for its vessels which enabled to report bumper profits in Q4. Q4 alone EPS stands at 7.63.

Future Prospects:

	YEAR ENDED
	31.12.07E
Total Income	275.00
Net Profit	105.00
Equity	33.90
EPS (Rs.)	31.00
P.E. Ratio	5.97

ONGC has drawn up significant plans for undertaking repairs and modifications of their existing oil fields and development of new infrastructure at Mumbai High. In addition to this, there is substantial work lined up for under-water pipe laying and expansion of existing pipelines. ONGC also intends to replace all its existing pipelines over next 10 years. SEAMEC is strategically well placed to seize these opportunities. Its parent company is bidding for exploration project of Reliance in K G Basin. If this materializes, there will be no looking back for SEAMEC and there could be a need for more investments in this company. Company may move up further in value chain by bidding for engineering projects by itself.

Revenues from fourth vessel should start flowing in from May 07. Moreover, full benefits of higher charter rates will be fully felt in CY07.

Valuations: Stock is trading at just 5.97 x CY07E earnings. Stock is hugely underpriced and offers good scope for sharp appreciation. Scrip like Shiv-vani is discounted 48 times. Alphageo with lacklustre performance trades at 20 times.

A debt-free French Company deserves much higher valuations. Our target:

1) Rs. 275/- by August '07.

2) Rs. 450/- by March '08.

A Must Buy for Everyone.