Ambit Capital views on Smallcap Oil & Gas stocks

GARWARE OFFSHORE

Aggressive fleet additions concomitant with firm day rates, is likely to propel Garware Offshore Services (GOSL) from being a small-sized Offshore Supply Vessel (OSV) owner to one of the major player in the segment. Driven by this expansion we expect the company to clock revenue and net profit CAGR of 36% and 48% over FY08-FY11E.

GUJARAT GAS

Gujarat Gas (GGCL), a niche player in city gas distribution, has reaped the benefits of a quantum jump in natural gas usage in Gujarat, driven by rapid industrialisation over the last few years. We believe that supplies should normalise by CY09e to 4mmscmd. At the current market price, the stock is quoting at an undemanding valuation of 8.0x P/E and 3.4x EV/EBITDA our CY09e earnings.

Angel Broking Views on Gujarat State Petronet, Gujarat Gas Company

Angel Broking on Gujarat State Petronet - Target price Rs 133

Angel Broking has maintained buy rating on Gujarat State Petronet with target price of Rs 133 in its May 09, 2008 research report. "GSPL is likely to be one of the prime beneficiaries of the increased gas availability from the KG basin as well as from the West Coast. Pipeline expansion is expected to drive future growth for the company. Strategic stakes in CGD ventures are likely to add value over the next couple of years. We have valued GSPL using DCF methodology, Cost of Equity - 15.6%, WACC - 10.1% and Terminal growth rate - 2.5%. Due to higher volatility we have assigned higher risk premium to the company and subsequently downgraded our Target Price. We remain positive over the prospects of GSPL and maintain a Buy, with a Target Price of Rs107 (Rs133)" according to Angel Broking report.

Angel Broking on Gujarat Gas Company - Target price Rs 340

Angel Broking has maintained its buy rating on Gujarat Gas Company with a revised target price of Rs 340 in its May 9, 2008 research report. "We believe CY2008 will be a challenging year for Gujarat Gas as gas supplies would continue to be a concern. However, we expect Guj gas to secure supplies of about 0.5-1.0mmscmd from different sources like the RIL KG basin gas, Petronet Spot LNG and incremental volumes from PMT fields. Gujgas' parent British Gas is actively seeking Spot LNG for Gujarat Gas, which we believe will ease out the concerns about gas supplies. Demand remains robust in current operational areas and expansion into newer territories will provide further impetus to gas sales."

He further added, "The stock has recently corrected significantly on the bourses over concerns about the CGD Regulations and gas supplies. CGD regulations are not likely to impact Gujgas' performance and the company has successfully tied up supplies with GAIL. Owing to these developments, we have revised our numbers and assigned the stock a lower multiple. The stock is available at 9.2x CY2009E EPS of Rs 28.4. We are positive on the company's growth prospects and maintain a Buy on the stock, with a revised target price of Rs 340 (Rs 396), says Angel's report.