Hot or Not? Shipping companies sailing smoothly!

Introduction:

With the advent of civil aviation, the contribution of the shipping companies in passenger transport has become negligible. For example, about 1,200 passengers travelled from Chennai Sea Port to Port Blair (Andaman & Nicobar Islands) every week in the year 2004. This is very negligible when compared to rail transport or air transport. However, shipping companies carry heavy cargo, including dangerous and inflammable liquids like crude oil. This is not possible by air transport.

In our previous “Hot or Not?” articles we discussed about Indian automobile and aviation stocks. In this article let us discuss about shipping companies.

Listed companies in India:

At NSE, following shipping companies are listed:

• ABG Shipyard
• Bharti Shipyard
• Great Eastern Shipping
• Great Offshore
• Mercator Linings
• Shipping Corporation of India
• Shreyas Shipping & Logistics
• South East Asia Marine & Construction
• Varun Shipping

Of these, Mercator Linings belongs to ‘S’ group of BSE; Shreyas Shipping belongs to ‘B2’ group. We discuss the rest of the stocks.

Great Eastern Shipping’s offshore business was demerged in 2006 and Great Offshore was formed. Accordingly, for every 5 shares of GE Shipping held on record date, 1 share of Great Offshore was allotted. This was done by deducting Rs.2 from face value of Rs.10 of GE shipping. 5 shares of Great Offshore with face value Rs.2 were consolidated to form 1 share of face value Rs.10; similarly 5 shares of GE shipping with face value of Rs.8 were consolidated to form 4 shares of face value Rs.10.

Because of this demerger, GE Shipping was relisted in November 2006.

The following table lists percentage loss these stocks witnessed during the huge correction in May and June 2006.

Scrip	% fall May ‘06	% fall June ‘06
BHARTISHIP	22.87	17.30
SCI	13.93	0.15
SEAMECLTD	1.37	25.46
VARUNSHIP	0.24	16.53
NIFTY	13.68	1.86

It can be seen that, except Bharati Shipyard, the other companies did not lose much compared to Nifty in May 2006.

After the correction, the stocks have gained reasonably, as shown in the following table:

Scrip	3 month % gain	6 month % gain
ABGSHIP	45.17	67.01
BHARTISHIP	15.84	59.55
GESHIP	14.30	69.92
GTOFFSHORE	8.44	69.37
SCI	0.53	24.76
SEAMECLTD	17.85	25.45
VARUNSHIP	17.71	20.67

NONE of the shipping stocks returned negative results in the last 6 months.

Bharti Shipyard:

Bharati Shipyard’s monthly chart shows that the stock had completed its 2^nd wave (corrective decline). It is still bullish for the long term, as can be seen below.

This stock went up from a low of 108.80 to a high of 528 or or by 485%. After a year’s consolidation, it has broken out in July 2007, but without much volumes. It just implies that further uptrend may not be as strong as the previous one. Nevertheless, the stock is likely to move up from these levels; For the long term investors, 854 should be the target.

GE Shipping:

This stock too, is bullish in medium term chart. It appears to have completed wave 2 as it has already closed above 61.8% retracement. A weekly close above 369 with good volumes will ensure an upside breakout. The stock may be expected to achieve a target of 597.

Great Offshore:

The stock is in consolidation pattern, with a possible upside breakout. When that happens, it will be a confirmation of “bullish flag” pattern. See my earlier article “Top 10 Hot India Stocks for July 2007” in which we discussed about this pattern with the daily chart of Evenix Accessories Limited. So medium term investors can stay invested in the stock.

Shipping Corporation of India:

The stock had broken out in February 2007 as can be seen in the chart. In the last few months it has formed two lower highs and lower lows; but it can be seen that the stock has not yet closed below the support trendline even once. This is an indication that the stock is still bullish. Also, at support levels, a bullish “three outside up” candlestick pattern has been formed. This is yet another confirmation of bullishness. The stock can be expected to touch 291 in the medium term.

South East Asia Marine & Construction:

This stock has had a “rising channel” pattern in the weekly charts as shown below.

The prices fluctuate between two parallel trendlines which have positive slopes (moving upwards). The stock will continue channeling upwards until it is able to break either the upper or lower trend line. An upside break is bullish, while a downside break is bearish. There is no downside breakout yet, and we have to look for a confirmation on the upside.

Varun Shipping Company:

This is the only stock that is yet to encounter a resistance breakout in the medium term charts. It has made higher highs and higher lows; prices have penetrated the resistance trendline; but the stock has failed to close above the resistance line.

The stock had fallen from a high of 99 in May 2006 to a low of 49.40 in March 2007 (50% fall when the Nifty gained about 25% during this period!). Higher highs and higher lows have been formed, indicating the stock is bullish; but the stock failed to break its resistance at 68.30 on weekly close basis. But it is still bullish in medium term charts.

Conclusion:

All the seven stocks discussed above are good for investment from a medium term perspective.

5 Reasons to Remain Bullish on India Stocks in the Short Term

We have been discussing about technically bullish Indian stocks for the last one month. In this article we shall analyze 5 stocks that are interesting from a short term perspective. These stocks are either from ‘A’ group or ‘B1’ group of Bombay Stock Exchange (BSE).

Mangalore Refinery and Petrochemicals Limited (MRPL):

MRPL was set up in 1988 with a crude processing capacity of 3 million metric tonnes per year by HPCL (Hindustan Petroleum Corporation) and Aditya V Birla group. ONGC (Oil and Natural Gas Corporation) acquired entire shareholding of A V Birla group in 2003, making it a majority held subsidiary. Currently the refinery’s capacity stands at 9.69 million metric tonnes per year. MRPL implemented Quality Management System (QMS) as per ISO 9000:1994 standards from December 1999. In January 2003, MRPL upgraded its QMS to ISO 9001:2000 standards and was accredited on March 13, 2003 by TUV Rheinland. It has declared a net profit of Rs.525 crores for the financial year 2006 – 07.

Both weekly and daily charts of MRPL are displayed below. In weekly chart, an “inverse head and shoulder” pattern has been formed. We have seen in my previous article “Chart patterns and market’s reaction” that this pattern is a bullish sign. Watch the low on the ‘inverse head’ nearly going down to test the previous low. The neckline resistance has been broken comfortably.

In the daily chart, we can see the waves clearly. The first wave retraced from a low of 32.50 to a high of 45.70. Some decline and consolidation has taken place in the last two months; on July 23 it had broken its resistance with very good volumes. The next resistance exists at 48.50, which is also the 50% retracement level considering a previous high of 64.40 and recent low of 32.50.

Close above 48.50 will take the stock to 52.25 and 56.90.

Neyveli Lignite Corporation of India Limited:

Neyveli Lignite Corporation (NLC) is located at Neyveli in the state of Tamil Nadu. It has been involved in exploitation of lignite deposits and thermal power generation for over 40 years. NLC offers consultancy services to other organizations in thermal power generation. It has two lignite mines with a capacity of 10.5 million metric tonnes per annum each and another with a capacity of 3 million metric tonnes per annum. The total installed power generation capacity is 2490 MW. It has also proposed to install power plants in Tuticorin (Tamil Nadu), Gujarat, Rajasthan and Orissa.

The company’s net profit for the financial year 2006 – 07 was Rs.567 crores.

As in the case of MRPL, this stock too, has formed an “inverse head and shoulder” pattern in weekly chart. It has also broken its resistance in weekly chart.The breakout volumes in daily chart have been good in both MRPL and NLC. In fact, it has managed to close above 80.50 which is 61.8% retracement considering a low of 48.75.

The next target for the stock is its previous high i.e. 100.20.

Rashtriya Chemicals and Fertilizers Limited (RCF):

RCF manufactures various grades of urea, bio fertilizer, liquid micronutrients, methanol, sodium nitrate, sodium nitrite, ammonium bicarbonate, methylamines, dimethyl formamide, dimethylacetamide etc. Over the last 3 years, its net profits have been more or less consistent i.e. Rs.141, 149 and 148 crores.

The daily chart of RCF is displayed above. The stock, after making a high of 49.85 on February 9, 2007, was on a downtrend for about a month. Nearly after 4.5 months it has broken the previous high with very good volumes. The previous high should act as a support for the stock. It is also bullish on weekly charts. The next targets for RCF are 56.50 and 62.50.

Tata Sponge Iron Limited:

The company was initially set up in 1986 as a joint venture undertaking by Tata Steel and the Industrial Promotion and Investment Corporation of Orissa (IPICOL). In 1991 Tata Steel acquired the entire stake of IPICOL. Tata Sponge manufactures sponge iron with an installed capacity of 390,000 metric tonnes per year. Company’s net profits for the last two years have been steady at around Rs.22 crores.

In the daily chart of TATASPONGE, the classic “cup and handle” breakout, a bullish continuation pattern can be observed. It has taken about 6 months to form this pattern. The cup’s left peak of 132 was broken on Monday with good volumes. In weekly chart, the stock had formed a “double bottom” between January and April 2007.

The target after the cup and handle breakout works out to 168.

Varun Shipping Company Limited:

Varun Shipping is a private hydrocarbon cargo carrier in India with a fleet of 12 LPG tankers, 3 crude oil vessels, 3 offshore supply vessels and 1 product vessel. These vessels are either placed directly with the end users or in the pools wherein the managers of the pool arrange for chartering of these vessels. The company had declared a net profit of Rs.141 crore for the year 2006 – 07.

The stock is bullish in both daily and weekly charts. It has been consolidating over the last 2 months and on July 23 it had broken out with reasonably good volumes. Minor resistance exists at 71, after which the targets are 75 and 83.