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B o n d s r e d e e m e d , a l b e i t a t a h i g h e r c o s t …
Aban Offshore has redeemed bonds worth US$160 million through a mix
of internal accrual (US$40 million) and a fresh issue of bonds (US$120
million). The coupon rate for the new bond issue is 12% against the
earlier bonds, which had a coupon rate of 9%. Tight liquidity conditions
across the globe have resulted in the company having to pay a higher
coupon rate to secure the refinance. Further, Aban has next repayment
obligation to the tune of US$157 million in March 2012, which could be
on terms similar to the current one.
ƒ Fleet utilisation –key parameter to watch
Aban has four assets, which are without contract. Of these, Aban V and
Aban VII are under marketing while Aban II and FPU Tahara are expected
to be deployed in Q4FY12. The key parameter to watch for Aban would
be the deployment of idle assets. It is of paramount importance that Aban
improves its fleet utilisation. Otherwise, servicing its interest and debt
repayment obligations would be a challenge.
ƒ Higher coupon rate to negatively impact FY13E EPS
We have conducted a sensitivity analysis to gauge the impact on Aban’s
FY13E EPS due to higher coupon rate on refinancing of debt due in March
2012. We have considered three scenarios wherein the company repays
20%, 10% and 0% of the debt to be repaid in March 2012 and refinances
the remaining at the higher coupon rate of 12%. In January 2012, the
company has also refinanced debt amounting to | 612 crore at a higher
cost. We have also factored the same in our sensitivity analysis.
Cumulatively, this would negatively impact the FY13E EPS in the range of
4.6% to 8.4%. We have not revised our estimates as we await further
details on the refinancing. We would review our estimates after a detailed
interaction with the management post the Q3FY12 results.
V a l u a t i o n
At the CMP of | 438, the stock is trading at 3.8x FY13E EPS of | 116.7 and
0.67x FY13E book value of | 651. We have valued the stock at 0.70x
FY13E book value to arrive at a price target of | 456 and recommend a
HOLD rating. Existing investors can also continue to hold the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
B o n d s r e d e e m e d , a l b e i t a t a h i g h e r c o s t …
Aban Offshore has redeemed bonds worth US$160 million through a mix
of internal accrual (US$40 million) and a fresh issue of bonds (US$120
million). The coupon rate for the new bond issue is 12% against the
earlier bonds, which had a coupon rate of 9%. Tight liquidity conditions
across the globe have resulted in the company having to pay a higher
coupon rate to secure the refinance. Further, Aban has next repayment
obligation to the tune of US$157 million in March 2012, which could be
on terms similar to the current one.
ƒ Fleet utilisation –key parameter to watch
Aban has four assets, which are without contract. Of these, Aban V and
Aban VII are under marketing while Aban II and FPU Tahara are expected
to be deployed in Q4FY12. The key parameter to watch for Aban would
be the deployment of idle assets. It is of paramount importance that Aban
improves its fleet utilisation. Otherwise, servicing its interest and debt
repayment obligations would be a challenge.
ƒ Higher coupon rate to negatively impact FY13E EPS
We have conducted a sensitivity analysis to gauge the impact on Aban’s
FY13E EPS due to higher coupon rate on refinancing of debt due in March
2012. We have considered three scenarios wherein the company repays
20%, 10% and 0% of the debt to be repaid in March 2012 and refinances
the remaining at the higher coupon rate of 12%. In January 2012, the
company has also refinanced debt amounting to | 612 crore at a higher
cost. We have also factored the same in our sensitivity analysis.
Cumulatively, this would negatively impact the FY13E EPS in the range of
4.6% to 8.4%. We have not revised our estimates as we await further
details on the refinancing. We would review our estimates after a detailed
interaction with the management post the Q3FY12 results.
V a l u a t i o n
At the CMP of | 438, the stock is trading at 3.8x FY13E EPS of | 116.7 and
0.67x FY13E book value of | 651. We have valued the stock at 0.70x
FY13E book value to arrive at a price target of | 456 and recommend a
HOLD rating. Existing investors can also continue to hold the stock.
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