Accumulate Aban Offshore; target of Rs 650: PLilladher

“Aban Offshore (Aban) reported revenues of Rs8,987m in line with our estimates, a growth of 15.5% QoQ; however, down 12% YoY. EBITDA margins were slightly below estimates at 57.3% in Q4FY11 compared to 64.6% in Q4FY10 and 66.4% in Q3FY11. However, reported PAT was ahead of estimates on account of a reported gain of Rs448m on sale of its 50% stake in Venture Drilling (JV which owned the drillship Deep Venture). We had estimated a loss to the tune of Rs217m. However, on account of a probable direct adjustment in the balance sheet, the PL a/c shows a resultant gain. Adjusting for the one-time gain and the write-off of Rs116m on diminution in value of Norwegian subsidiary, PAT came in at Rs1,185m, up 57% QoQ but down 57.7% YoY.”

“Better sequential operational performance this quarter was on account of two rigs, Aban II and Aban VII (dry docked in Q3 FY11), being operational. Aban Abraham, which was to commence its charter by the end of Q4FY11, has not yet started. During the quarter, two of its older assets (Aban III & Aban IV) have bagged long-term charters from ONGC of three years each. As expected, these assets have been placed at substantially lower day rates of US$60,000/day compared to US$160,000/day on their earlier contracts. Although we expect higher utilization levels for Aban’s fleet in FY12, lower rates for the older assets would result in revenues being flat next year.”

“On the basis of PER and EV/EBITDA, Aban trades at 5x FY12 and 4.3x FY13 and 6.4x FY12 and 5.9x FY13, respectively. With crude being under pressure, Aban’s stock price has taken a hit over the last month. Going forward, we are valuing the company at 15% discount to global peers, based on FY13 valuations due to scale difference. At our TP of Rs 650, Aban is valued at EV/EBITDA of 6.7x FY12 and 6.1x FY13. We maintain Accumulate on the stock,” says Prabhudas Lilladher research report.

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