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1QFY12 result
Aban’s 1QFY12 net profit of Rs886mn came above our estimate. Below
estimate revenue was more than offset by lower than expected opex and
Aban’s choice to account FCCB repayment YTM through reserves rather
than P&L. Building this and lowering our opex estimate offsets the impact
of lower revenues due to delay in our assumed rig deployment dates and
leads to a marginal upgrade in our FY12/13 EPS. However, we expect
consensus downgrades to continue and lower our peer PE based target to
Rs475/share as we reset to the decline in peer multiples. Maintain U-PF.
1QFY12 net profit at Rs886mn – ahead of our estimate
Aban’s 1QFY12 consolidated PAT came ahead of our estimate at Rs886mn.
While 2% lower revenue was more than offset by significantly lower than
expected opex (Rs2.7bn, -15%YoY/-11%QoQ) allowing EBITDA (Rs4.6bn, -
12%YoY/23%QoQ) to rise 8% above our estimate, Aban chose to account for
YTM expense on its FCCB repayment through reserves (we had modelled a
charge on P&L). This drove a large beat on reported profit inspite of an FX
loss and higher than expected implied tax rate in Aban’s Singapore subsidiary.
Change in new rig deployment assumption; lower opex
We now assume that Aban V & VII would get new contracts and be deployed
by Dec’11. Aban II should complete its contract with Cairn by Sep’11 and we
assume deployment under a fresh contract from Mar’12. Our discussion with
Aban’s management revealed that contract for Deep Driller 7 has a 1 year
extension option under its existing rate of US$106k/day, implying a delay in
re-pricing to Nov’12. While these changes lead to a decline in revenue, our
EPS rises as we lower our opex assumption and adjust the YTM charge to be
passed through reserves and not P&L (FY12) that we were earlier expecting.
Falling earnings and rising repayment concerns
Oversupply of jackups would lead to a sharp fall in day rate of most rigs that
come out of contract over FY12-13. This would lead to a 50%YoY decline in
FY13 PAT and raise concerns around Aban’s high leverage as FY12 repayment
obligation is greater than its market cap. We are 58% below FY13 consensus
EPS and expect this optimism to be belied as 30% of its fleet is re-priced.
Maintain U-PF with a lower target of Rs475/share
This should precipitate consensus downgrades which will amplify concerns
around Aban’s rising repayment gap and weigh on stock performance. We
lower our target to Rs475/sh as we reset to recent decline in peer multiple.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
1QFY12 result
Aban’s 1QFY12 net profit of Rs886mn came above our estimate. Below
estimate revenue was more than offset by lower than expected opex and
Aban’s choice to account FCCB repayment YTM through reserves rather
than P&L. Building this and lowering our opex estimate offsets the impact
of lower revenues due to delay in our assumed rig deployment dates and
leads to a marginal upgrade in our FY12/13 EPS. However, we expect
consensus downgrades to continue and lower our peer PE based target to
Rs475/share as we reset to the decline in peer multiples. Maintain U-PF.
1QFY12 net profit at Rs886mn – ahead of our estimate
Aban’s 1QFY12 consolidated PAT came ahead of our estimate at Rs886mn.
While 2% lower revenue was more than offset by significantly lower than
expected opex (Rs2.7bn, -15%YoY/-11%QoQ) allowing EBITDA (Rs4.6bn, -
12%YoY/23%QoQ) to rise 8% above our estimate, Aban chose to account for
YTM expense on its FCCB repayment through reserves (we had modelled a
charge on P&L). This drove a large beat on reported profit inspite of an FX
loss and higher than expected implied tax rate in Aban’s Singapore subsidiary.
Change in new rig deployment assumption; lower opex
We now assume that Aban V & VII would get new contracts and be deployed
by Dec’11. Aban II should complete its contract with Cairn by Sep’11 and we
assume deployment under a fresh contract from Mar’12. Our discussion with
Aban’s management revealed that contract for Deep Driller 7 has a 1 year
extension option under its existing rate of US$106k/day, implying a delay in
re-pricing to Nov’12. While these changes lead to a decline in revenue, our
EPS rises as we lower our opex assumption and adjust the YTM charge to be
passed through reserves and not P&L (FY12) that we were earlier expecting.
Falling earnings and rising repayment concerns
Oversupply of jackups would lead to a sharp fall in day rate of most rigs that
come out of contract over FY12-13. This would lead to a 50%YoY decline in
FY13 PAT and raise concerns around Aban’s high leverage as FY12 repayment
obligation is greater than its market cap. We are 58% below FY13 consensus
EPS and expect this optimism to be belied as 30% of its fleet is re-priced.
Maintain U-PF with a lower target of Rs475/share
This should precipitate consensus downgrades which will amplify concerns
around Aban’s rising repayment gap and weigh on stock performance. We
lower our target to Rs475/sh as we reset to recent decline in peer multiple.
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