Accumulate Aban Offshore; target of Rs 485: Emkay

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Accumulate Aban Offshore; target of Rs 485: Emkay

Emkay Global Financial Services is bullish on Aban Offshore and has recommended accumulate rating on the stock with a target of Rs 485 in its January 20, 2012 research report.

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RELATED NEWS Buy Mangalam Cement; target of Rs 119: SKP Securities Buy Bajaj Finance; target of Rs 806: Nirmal Bang Buy Bajaj Auto; target of Rs 1850: PINC Research ALSO READ See previous views by Emkay Global Financial Services See what other Experts & Brokerages are saying about Aban Offshore See messages about Aban Offshore Aban Offshore BSE | NSE 30/05/12 Are Mutual Funds betting on Aban Offshore?

Emkay Global Financial Services is bullish on Aban Offshore and has recommended accumulate rating on the stock with a target of Rs 485 in its January 20, 2012 research report.

"Aban Offshore 100% subsidiary DDI Holding AS has redeemed the bonds aggregating to USD 160 mn. The redemption is financed through mix of internal accruals (USD 40 mn) & debt refinancing (USD 120mn). The refinance of USD 120 mn is done through a fresh bond issue with coupon rate of 12% & repayable over 4 years (10% each in the first 3 years (cumulating to 30%) & 70% in the terminal year). Though the repayment terms are favorable for Aban's stretched balance sheet, the coupon rate at 12% (v/s 9.3% for the redeemed bonds) is negative and is significantly higher than our estimates of 9%. The management highlighted that the sharp jump in the refinance rate is on account of severe liquidity crunch (particular for USD debt) currently experienced by European Banks & their unwillingness to extend credit."

"The next repayment obligation is due 15th March-12 which is worth ~USD157 mn (For rig DD7 & DD8) and we expect that the redemption of these bonds will also be on similar lines as the redemption of DD1 bonds. The higher than expected coupon rate has lead to downgrade of 11.4% for FY13E EPS."

"Though Aban's today boasts of contracted revenue backlog of ~USD1.9 bn over FY12- 15E, what we are concerned is the yearly revenue visibility. Though the current deployment status is healthy & provides revenue visibility of 95% for FY12E, the revenue visibility stands at 65% for FY13 as 6 of Aban's premium jack up rigs are slated to complete their drilling contracts in H2FY13 and the extension of these contracts are not yet firmed up. We lower our price target on Aban to Rs485 (Rs522 earlier) led by the earnings downgrade. We also lower our rating on the stock from BUY to ACCUMULATE led by lowering of target & a sharp 30%+ recent run up in the stock price," says Emkay Global Financial Services research report. 

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