Broking house, Sharekhan keeps buy rating on Aban Offshore with price target of Rs 1760.
Sharekhan report on Aban Offshore:
Key points
Open offer for Sinvest:
"Aban Offshore (AOL) is likely to fund the open offer to acquire an additional stake in Sinvest through the placement of a 25-30% stake in its subsidiary Aban Singapore Pte Ltd (ASPL) for around USD 250 million, as per media reports. This essentially means that ASPL is valued in the range of USD 833-1,000 million and has an implied value of Rs656-844 per share for AOLís remaining stake in ASPL. Adding this to the stand-alone value of AOL, the consolidated value per share works out to around Rs 1763-1950."
Earnings accretive:
"A successful acquisition of 100% stake in Sinvest through an open offer could strain the company's consolidated balance sheet but the same would be earnings accretive. After accounting for the additional debt on the books, the incremental share from Sinvestís earnings would add Rs35.4 to the earnings per share in FY2008 (and Rs45.6 in FY2009). Consequently, the acquisition of the additional stake would positively affect the valuation per share by Rs709 and Rs814 based on the incremental earnings in FY2008 and FY2009 respectively."
Valuation
"At the current market price the stock trades at 21.3x FY2008 earnings estimates and 8.9x enterprise value/ earnings before interest, tax, depreciation and amortisation. We maintain our Buy call on the stock with price target of Rs 1760."
