Wednesday, August 29, 2012

>ABAN OFFSHORE: Interest charges mar profits

􀂄 Operational performance in line: Aban’s operational performance was in line with expectations, with top-line at Rs8.5bn (16.2% YoY growth and 5.8% QoQ growth). The depreciation in rupee was the major contributor to the top-line growth. Margins stood at 59.5% as against 62% in Q1FY12 and 52.5% in Q4FY12.

􀂄 Interest charges rise sharply with rupee depreciation: On account of ~70% of the loans being foreign currency loans, interest charges have moved up sharply with rupee depreciation, coupled with an increase in interest costs. Interest charges for the quarter stood at Rs3.1bn, 44% up YoY and 9.4% up QoQ. On account of this, increase in the company’s PAT stood at Rs521m, a decline of 41% YoY and 35% QoQ.

􀂄 Vessel status: Of the 18 vessel fleet, 16 are contracted. DD7 started its contract in June 2012 at a day rate of US$147000/day. Contracts for five vessels will expire in September 2012 and hence, their deployment is the key to watch out for. Other than one asset, all the assets coming up for re-deployment are new and hence, we do not foresee too much trouble in deployment of the same. However, since the company has not yet announced any new contracts, we expect a time lag in deployment.

􀂄 Valuations: We are valuing Aban at 6x FY14 which gives us a value of Rs413. We upgrade the stock to ‘Accumulate’.