As the takeover battle between Bharati Shipyard and ABG Shipyard for Great Offshore heats up, analysts feel it is the right time for retail investors to book profits, as the fundamentals of the target firm’s stock do not support sustainability of its current price. Ever since the bidding war between Bharati and ABG started in June, Great Offshore’s stock has jumped significantly.
While its stock price was Rs 247.95 on April 1, on June 1 it touched Rs 373.70 and closed at Rs 560.55 on October 1.
“The current price is not a true reflection of the fundamentals of the stock. The prices are skyrocketing because of the hostile takeover issue. Prices are not justified at this level,” Ashina Stock Brokers Research Head Paras Bothra told PTI. Retail investors should book profits at this level and rationalise at the peak, as the stock has jumped more than 100 per cent over the last few weeks, he added.
Similar sentiments were expressed by SMC Capital’s Equity Head Jaggannadham Thunuguntla. “In a scenario like this when there is a takeover anxiety, fundamentals will be forgotten and share prices are likely to trade at a premium,” he said.
Retail investors should book at least half of their position because the fundamentals are not being justified at the takeover price, he added. In June this year, Bharati Shipyard had made an open offer for 20 per cent stake in Great Offshore for Rs 344 per share. This was countered by ABG Shipyard with a price of Rs 375 per share. Subsequently in July, Bharati increased the offer price to Rs 405 per share, which was again met with a counter offer from the rival at Rs 450.
In August ABG Shipyard, which holds 8.28 per cent stake in Great Offshore, again increased the offer price to Rs 520 per share.
On September 16, Bharati Shipyard acquired 3.01 per cent stake in Great Offshore from the open market with the highest share price at Rs 560, as a result of which the open offer price for acquiring Great Offshore has been revised to Rs 560 per share. The stock market regulator is likely to approve the open offer by both ABG and Bharati to acquire Great Offshore soon.
Great Offshore, with net sales of Rs 1,139.2 crore and profit of Rs 275.07 crore for the year ended March 31, 2009, provides logistics support, engineering services and port and terminal support apart from offshore drilling.
