Sunday, August 1, 2010

>ABAN OFFSHORE LIMITED: 97% of the USD235mn claim received:

On consolidated basis, Aban suffered loss of `1.4bn on account of write off of the rig. Revenue was in line with our expectation while Ebitda was higher than our expectation. Sales have grown 6% y‐o‐y but declined 17% q‐o‐q to `8.4bn. EBITDA grew by 11% y‐o‐y and was down 21% q‐o‐q to `5.2bn. The EBITDA margin declined to 61% from 64% in the previous quarter. Depreciation
increased by 30% y‐o‐y and 1% q‐o‐q to `1.2bn and Interest cost was down 4% y‐o‐y and up 4% q‐o‐q to `2.2bn. Depreciation and interest cost stood at 15.3% and 27% of sales. Net Loss stood at `1.4bn. We give a Hold rating with a revised target price of `882 per share.

97% of the USD235mn claim received:
Aban pearl has received 97% of the USD235mn insurance claim. The company has written off balance USD70mn against Q1FY11 profits. Another `0.13bn extra ordinary item was on account of write off in relation to its `1.95bn investment in Norway based drilling company that filed bankruptcy. The company is considering the replacement of Aban Pearl.

Equity dilution a must in near future:
After the sinking of Aban pearl, a high yielding asset of Aban that used to earn $3,58,000/per day, the company will face the brunt of huge debt repayment. Its debt as on date stands at ~ `142bn. USD375m is due in FY11E and 650m in FY12E. Yet there is no clarity on new repayment schedule. We have assumed equity dilution to get earning of `107 and `130 in FY11E and FY12E.

Valuation:
Aban currently trades at a PER of 8.3x, 6.8x its FY11E and FY12E earnings of `108 and `132 and EV/EBITDA of 6.6x and 5.7x in the same period. We value Aban by assigning a 4.5x EV/EBITDA multiple to its FY12E EBITDA, considering lack of clarity on debt repayment. Based on this, our target price is `.882, which offers a 1% downside, thus we assign a Hold rating on the stock.

To read the full report: ABAN OFFSHORE

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