>ABAN OFFSHORE LIMITED: Book profit and re-enter at lower levels…

Aban Offshore Ltd (Aban) is likely to post a loss in Q1FY11 if the company makes a provision for extraordinary loss on account of the loss of Aban Pearl in Q1FY11.

■ Expect subdued results in Q1FY11E
Aban is likely to report a 3.6% QoQ drop in topline of Rs 984 crore in Q1FY11E. The loss of Aban Pearl would be the major contributor to the drop in revenue. The operating margin is likely to contract to ~64% with EBITDA at Rs 628 crore.
However, we expect the company to make a provision in excess of Rs 350 crore (to account for the difference in the book value and insured value of the asset), which if provided in the current quarter would result in the company reporting a loss in Q1FY11E. Excluding this one time extraordinary hit the company is likely to report a profit of Rs 267 crore in Q1FY11E.

■ Fairly valued at current price
The stock price has moved up by 31% since our last BUY recommendation at Rs 677 and achieved the price target of Rs 884 (refer our report on Aban dated May 27, 2010). The stock is fairly valued at the current market price. Hence, investors are advised to book profits and re-enter later.

To read the full report: ABAN OFFSHORE