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Aban Offshore:: Risk reward unfavourable…
Aban Offshore (Aban) reported subdued Q3FY11 results mainly on
account of a delay in deployment of its assets on long-term charter
contracts. Despite the recent correction in stock price we remain
cautious on the medium-term outlook for the company on account of
significant headwinds. The foremost concern is the repayment of ~ |
3300 crore of debt, part of which comes up for repayment in April 2011.
In order to facilitate the repayment, the company would either have to
refinance the debt or consider equity dilution options. Although equity
dilution would be more damaging as it would expand the equity base
substantially, refinance at higher interest costs would also lead to
pressure on PAT. Further, five of its assets are coming out of long-term
contracts over the next four months and a delay in placement of assets
could lead to a pressure on the performance. Lastly, six out of its 19
vessels are deployed on long-term contracts in Iran. This is a matter of
concern considering the current political scenario.
Subdued Q3FY11 performance due to delay in deployment of assets
Aban reported a 6.0% QoQ drop in revenues to | 778.0 crore in
Q3FY11. The EBITDA margin contracted to 66.4% in Q3FY11 from
67.2% in the previous quarter. The company reported a net profit of |
62.0 crore, which also included a | 13.5 crore provision for loss on
account of its investment in Petrojack and | 43.3 crore provision for loss
from its joint venture in Deep Venture Drilling.
Valuation
At the CMP of | 588, the stock is trading at 5.7x FY12E EPS of | 103.2 and
1.0x FY12E book value of | 592. We have valued the stock on P/BV and
P/E multiple basis to arrive at a price target of | 539. We recommend a
REDUCE rating on the stock.
We remain cautious on the medium-term outlook for the company on
account of significant headwinds. The foremost concern is the
repayment of ~ | 3300 crore of debt, part of which comes up for
repayment in April 2011. Further, five of its assets are coming out of
long-term contracts over the next four months and a delay in placement
of assets could lead to pressure on performance. Lastly, six out of its 19
vessels are deployed on long-term contracts in Iran. This is a matter of
concern considering the current political scenario.
At the CMP of | 588, the stock is trading at 5.7x FY12E EPS of | 103.2 and
1.0x FY12E book value of | 592. We have valued the stock on P/BV and
P/E multiple basis to arrive at a price target of | 539. We recommend a
REDUCE rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Aban Offshore:: Risk reward unfavourable…
Aban Offshore (Aban) reported subdued Q3FY11 results mainly on
account of a delay in deployment of its assets on long-term charter
contracts. Despite the recent correction in stock price we remain
cautious on the medium-term outlook for the company on account of
significant headwinds. The foremost concern is the repayment of ~ |
3300 crore of debt, part of which comes up for repayment in April 2011.
In order to facilitate the repayment, the company would either have to
refinance the debt or consider equity dilution options. Although equity
dilution would be more damaging as it would expand the equity base
substantially, refinance at higher interest costs would also lead to
pressure on PAT. Further, five of its assets are coming out of long-term
contracts over the next four months and a delay in placement of assets
could lead to a pressure on the performance. Lastly, six out of its 19
vessels are deployed on long-term contracts in Iran. This is a matter of
concern considering the current political scenario.
Subdued Q3FY11 performance due to delay in deployment of assets
Aban reported a 6.0% QoQ drop in revenues to | 778.0 crore in
Q3FY11. The EBITDA margin contracted to 66.4% in Q3FY11 from
67.2% in the previous quarter. The company reported a net profit of |
62.0 crore, which also included a | 13.5 crore provision for loss on
account of its investment in Petrojack and | 43.3 crore provision for loss
from its joint venture in Deep Venture Drilling.
Valuation
At the CMP of | 588, the stock is trading at 5.7x FY12E EPS of | 103.2 and
1.0x FY12E book value of | 592. We have valued the stock on P/BV and
P/E multiple basis to arrive at a price target of | 539. We recommend a
REDUCE rating on the stock.
We remain cautious on the medium-term outlook for the company on
account of significant headwinds. The foremost concern is the
repayment of ~ | 3300 crore of debt, part of which comes up for
repayment in April 2011. Further, five of its assets are coming out of
long-term contracts over the next four months and a delay in placement
of assets could lead to pressure on performance. Lastly, six out of its 19
vessels are deployed on long-term contracts in Iran. This is a matter of
concern considering the current political scenario.
At the CMP of | 588, the stock is trading at 5.7x FY12E EPS of | 103.2 and
1.0x FY12E book value of | 592. We have valued the stock on P/BV and
P/E multiple basis to arrive at a price target of | 539. We recommend a
REDUCE rating on the stock.
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