aban_090811_01
TRANSCRIPT
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7/31/2019 aban_090811_01
1/4Emkay Global Financial Services Ltd 1
August 8, 2011
Reco
Buy
Previous Reco
AccumulateCMP
Rs454
Target Price
Rs580
EPS change FY12E/13E (%) -5.0 /-
Target Price change (%) -9.2
Nifty 5,211
Sensex 17,306
Price Performance
(%) 1M 3M 6M 12M
Absolute (19) (25) (33) (51)
Rel. to Nifty (12) (21) (31) (49)
Source: Bloomberg
Relative Price Chart
450
545
640
735
830
925
Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11
Rs
-50
-38
-26
-14
-2
10%
Aban Offshore (LHS) Rel to Nifty (RHS)
Source: Bloomberg
Stock DetailsSector Offshore Oil Field Services
Bloomberg ABAN@IN
Equity Capital (Rs mn) 87
Face Value(Rs) 2
No of shares o/s (mn) 43
52 Week H/L 932/426
Market Cap (Rs bn/USD mn) 19/425
Daily Avg Volume (No of sh) 349106
Daily Avg Turnover (US$mn) 4.2
Shareholding Pattern (%)
Jun-11 Mar-11 Dec-10Promoters 53.8 53.8 53.0
FII/NRI 8.6 8.5 7.1
Institutions 3.7 4.3 5.3
Private Corp 5.7 6.7 8.0
Public 28.2 26.7 26.5
Source: Capitaline
Ajit Motwani
[email protected]+91 22 6612 1255
Chandan Asrani
+91 22 6624 2241
Re
sultUpdate
Aban Offshore
Strong revenue visibility-Upgrade to BUY
n APAT a t Rs941 m n ( -54% yoy ) m ar g ina l l y be low expec t a t i on
on accoun t o f l ow e r t han expec t ed r evenues . Revenues
dec l i ned 13% yoy & ( 8 .6% qoq ) be low es t im a t es
n EBIDTA a t Rs4 .6 bn ( -12% yoy ) , cam e be low es t l ed by l ow e r
r evenues . M ar g ins t hough up100 bps yoy t o 62 . 7%, dec l i ned
331 bps qoq due t o 55% jum p in i nsu r ance c ha r ges
n Only 2 r igs id le -see s t rong c ash f low v is ib i l i t y fo r Aban -USD
400 mn o f CFO over FY11-13 , lead ing to ac ce le ra t ed de-
leverag ing-Leverage ra t ios co u ld im prove 40% over FY11-13E
n St ock dec l i ne o f ~20% ove r l as t 3M , m ak es va lua t i on o f 4 .9 X
& 0 .8X P /B a t t r ac t ive p r ov id ing dow ns ide suppo r t t o s t ock .
Upgrade to BUY . Targe t Rs580
Lower operating days lead to lower than expected Q1FY12 performance
Abans Consolidated Q1FY12 EBITDA of Rs4.6bn (-12% yoy) came in below estimates
of Rs4.8bn on account of lower than expected operating days for the Aban IV. This led
to lower than expected revenues for the quarter at Rs7.3 (vs est of Rs7.7 bn) which
declined 13% yoy & 18.6% qoq. The 18.6% sequential revenue declined was on
account of idle status of Aban III & V which are undergoing periodic dry-dock. Abans
EBIDTA margins though up 100 bps yoy to 62.7%, declined 331 bps qoq due to 55%
jump in insurance charges. Insurance charges jumped due to higher renewal premium
charges for rigs. With 60% decline in other income Abans 1QFY11 APAT before
minority (RPAT included forex losses of Rs55mn) at Rs0.94 bn decline 15% yoy (-52%
yoy), lower than our estimates of Rs.98 bn. Q1FY11 APAT included income from Deep
Venture (Abans 50% JV which got terminated in Q3FY11) and hence Aban APAT after
minority declined 54.2% yoy.
Cash generation of ~ USD 400 over FY11-13 to accelerate de-leveraging
During the quarter Aban Abraham commenced its 5 years operation in Brazil. Further
With Aban III & V ready to commence operation from 3QFY12, Aban now is left with
only 2 rigs idle. Such healthy deployment status arms Aban with contracted revenue
backlog of ~USD2 bn and revenue visibility of 95% for FY12E. We estimate Aban to
generate CFO of ~ USD400mn over FY11-13E, leading to accelerated deleveraging of
its stretched balance sheet (FY11 D: E of 5.7X). We see Aban D: E reducing sharply
from current levels of to 3.4 for FY13.
Valuation at 4.9 PER and 0.8X P/BV attractive Upgrade to BUY
Stock decline of ~ 20% over last 3 months have made current valuations at 4.9X FY12
PER and 0.7X FY12 P/BV attractive and could provide downside support to stock. We
upgrade our rating from ACCUMULATE to BUY. However we are downgrading FY12E
earnings by 5% (EPS of Rs90.3) and lower our target price to Rs580 (as compared to
Rs645 earlier) due to lowering of our EV/EBIDTA multiple for Aban from 6.5X to 6X
earlier led by decline in valuation of its international peers.
Key Financials
YE- Net EBITDA EPS EPS RoE EV/
Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV
FY10 33587 21004 62.5 5518 119.4 54.4 15.0 3.7 7.3 1.0
FY11 33472 21868 65.3 5670 122.9 2.9 23.3 3.6 6.1 1.0
FY12E 32393 19651 60.7 3929 90.3 -26.5 16.9 4.9 6.4 0.8
FY13E 35079 20542 58.6 5029 115.6 48.5 17.9 3.8 5.7 0.7
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Aban Offshore Result Update
Emkay Research 8 August 2011 2
Results table
Rs mn Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 YoY (%) QoQ (%) YTDFY12E YTDFY11 YoY (%)
Revenue 8,425 8,281 7,780 8,987 7,313 -13.2 -18.6 7,313 8,425 -13.2
Expenditure 3,223 2,718 2,614 3,050 2,725 -15.5 -10.7 2,725 3,223 -15.5
as % of sales 38.3 32.8 33.6 33.9 37.3 37.3 38.3 -2.6
Consumption of RM333 276 319 436 279 -16.2 -36.1 279 333 -16.2
As % of Sales 3.9 3.3 4.1 4.9 3.8 3.8 3.9 -3.5
Employee Cost 884 870 850 692 759 -14.1 9.8 759 884 -14.1
As % of Sales 10.5 10.5 10.9 7.7 10.4 10.4 10.5 -1.1
Other expenditure 2,006 1,572 1,445 1,922 1,687 -15.9 -12.3 1,687 2,006 -15.9
As % of Sales 23.8 19.0 18.6 21.4 23.1 23.1 23.8 -3.1
EBITDA 5,202 5,563 5,166 5,937 4,589 -11.8 -22.7 4,589 5,202 -11.8
Depreciation 1,291 1,230 1,186 1,200 1,231 -4.6 2.6 1,231 1,291 -4.6
EBIT 3,911 4,333 3,980 4,737 3,357 -14.2 -29.1 3,357 3,911 -14.2
Other Income 143 24 94 - 58 -59.7 58 143 -59.7
Interest 2272 2406 2329 2231 2166 -4.6 -2.9 2166 2272 -4.6
PBT 1,783 1,950 1,745 2,506 1,249 -30.0 -50.2 1,249 1,783 -30.0
Total Tax 678 757 557 538 307 -54.6 -42.9 307 678 -54.6
Adjusted PAT 1,105 1,193 1,187 1,968 941 -14.8 -52.2 941 1,105 -14.8
(Profit)/loss from JV's/Ass/MI 952 -302 -433 0 0 -100.0 0 952 -100.0
APAT after MI 2,057 891 755 1,968 941 -54.2 -52.2 941 2,057 -54.2
Extra ordinary items -3496 -139 -135 -451 -55 -98.4 -87.8 -55 -3496 -98.4
Reported PAT -1439.0 752 620 1,517 886 -161.6 -41.6 886 -1439.0 -161.6
Reported EPS 47.3 20.5 17.4 45.2 21.6 -54.2 -52.2 21.6 47.3 -54.2
Margins (%) (bps) (bps) (bps)
EBIDTA 61.7 67.2 66.4 66.1 62.7 100 -332 62.7 61.7 100
EBIT 46.4 52.3 51.2 52.7 45.9 -52 -680 45.9 46.4 -52
EBT 21.2 23.6 22.4 27.9 17.1 -409 -1081 17.1 21.2 -409
PAT 13.1 14.4 15.3 21.9 12.9 -24 -903 12.9 13.1 -24
Effective Tax rate 38.0 38.8 31.9 21.5 24.6 -1340 315 24.6 38.0 -1340
Downgrade FY12E earnings by 5.0%
FY12E FY13E
Earlier Revised Change Earlier Revised Change
Revenues 32851 32393 -1.4% 35079 35079 0.0%
EBITDA 19960 19651 -1.6% 20542 20542 0.0%Margin (%) 60.8% 60.7% -9.7 58.6% 58.6% 0.0
PAT 4136 3929 -5.0% 5029 5029 0.0%
EPS 95.1 90.3 -5.0% 115.6 115.6 0.0%
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Aban Offshore Result Update
Emkay Research 8 August 2011 3
Financials
Income Statement Balance Sheet
Y/E, Dec (Rs. m) FY10 FY11 FY12E FY13E Y/E, Dec (Rs. m) FY10 FY11 FY12E FY13E
Net Sales 33587 33472 32393 35079 Equity share capital 87 87 87 87
Growth (%) 10.1 -0.3 -3.2 8.3 Preference Capital 3260 3260 3260 3260
Total Expenditure 12583 11604 12743 14536 Reserves & surplus 18459 19399 23145 27991
Manpower Costs 2884 3295 3619 4533 Networth 21806 22746 26492 31338
Consumption of stores 1303 1364 1498 1876 Minority Interest 0 0 0 0
Repairs & Rentals to machinery 1087.7 901.0 989.3 1239.3 Secured Loans 138622 126255 112980 103980
Other Exps 7307 6044 6637 8314 Unsecured Loans 3018 3018 3018 3018
EBIDTA 21004 21868 19651 20542 Loan Funds 141641 129274 115999 106999
Growth (%) 21.2 4.1 -10.1 4.5 Net deferred tax 436 436 436 436
EBIDTA % 62.5 65.3 60.7 58.6 Total Liabilities 163883 152456 142926 138772
Depreciation 4616 4907 5024 5024 Gross Block 173147 159435 159435 159435
EBIT 16388 16961 14627 15519 Less: Depreciation 19634 24541 29565 34588
EBIT margin (%) 48.8% 50.7% 45.2% 44.2% Net block 153513 134894 129870 124846
Other income 218 261 280 280 CWIP (incl cap adv) 131 0 0 0
Interest 9768 9238 8585 8084 Investment 4951 4951 4951 4951EBT 6838 7984 6322 7715 Current Assets 14629 21350 16510 17979
Tax 2571 2531 2067 2360 Inventories 2478 2230 2365 2537
Effective tax rate (%) 37.6 31.7 32.7 30.6 Sundry debtors 7691 7434 7883 8458
Adjusted PAT 4268 5453 4255 5355 Cash & bank balance 2360 9585 4161 4884
Growth (%) 100.6 27.8 -22.0 25.8 Loans & advances 2100 2100 2100 2100
Net Margin (%) 12.7 16.3 13.1 15.3 Current Liab & Prov 9341 8739 8404 9004
(Profit)/loss from JVs/Ass/MI 1250 217 326 326 Current liabilities 7891 7289 6954 7554
Adjusted PAT After JVs/Ass/MI 5518 5670 3929 5029 Provisions 1450 1450 1450 1450
E/O items -2408 -4221 0 0 Net current assets 5288 12611 8106 8975
Reported PAT 3110 1450 3929 5029 Misc. exp
Growth (%) -42.5 -53.4 171.0 28.0 Total Assets 163883 152456 142926 138772
Cash Flow Key Ratios
Y/E, Mar (Rs. mn) FY10 FY11 FY12E FY13E Y/E, Mar FY10 FY11 FY12E FY13E
PBT (Ex-Other income) 4430 7723 6042 7435 Profitability (%)
Depreciation 4616 4907 5024 5024 EBITDA Margin 62.5 65.3 60.7 58.6
Interest Provided 9717 9238 8585 8084 Net Margin 12.7 16.3 13.1 15.3
Other Non-Cash items 1991 0 0 0 ROCE 9.6 10.9 10.1 11.3
Chg in working cap 2131 -98 -919 -146 ROE 15.0 23.3 16.9 17.9
Tax paid -2584 -2531 -2067 -2360 RoIC 11.7 11.6 10.8 11.9
Operating Cashflow 20301 19239 16665 18036 Per Share Data (Rs)
Capital expenditure -3935 9623 0 0 EPS 119.4 122.9 90.3 115.6
Free Cash Flow 16366 28862 16665 18036 CEPS 170.2 138.7 205.9 231.2
Other income 48 261 280 280 BVPS 426.5 448.1 534.2 645.7
Investments 8097 0 0 0 DPS 3.6 3.6 3.6 3.6
Investing Cashflow 4211 261 280 280 Valuations (x)
Equity Capital Raised 6982 0 0 0 PER 3.7 3.6 4.9 3.8
Loans Taken / (Repaid) -24278 -12367 -13275 -9000 P/CEPS 2.6 3.2 2.1 1.9
Interest Paid -10307 -9238 -8585 -8084 P/BV 1.0 1.0 0.8 0.7
Dividend paid (incl tax) -478 -509 -509 -509 EV / Sales 4.6 4.0 3.9 3.3
Income from investments 0 0 0 0 EV / EBITDA 7.3 6.1 6.4 5.7
Others -19 217 0 0 Dividend Yield (%) 0.8 0.8 0.8 0.8
Financing Cashflow -28099 -21897 -22369 -17593 Gearing Ratio (x)
Net chg in cash -3588 7225 -5424 723 Net Debt/ Equity 7.4 6.1 4.7 3.6
Opening cash position 5948 2360 9585 4161 Net Debt/EBIDTA 6.6 5.4 5.6 4.9
Closing cash position 2360 9585 4161 4884 Working Cap Cycle (days) 24.8 25.9 37.1 35.8
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Aban Offshore
Emkay Research 8 August 2011
Recommendation History: Aban Offshore ABAN IN
Date Reports Reco CMP Target
27/05/2011 Aban Offshore Q4FY11 Result Update Accumulate 541 645
25/02/2011 Aban Offshore Company Update Accumulate 542 680
11/02/2011 Aban Offshore Q3FY11 Result Update Accumulate 570 680
08/11/2010 Aban Offshore Q2FY11 Result Update Hold 841 875
Recent Research Reports
Date Reports Reco CMP Target
02/08/2011 Shree Cement Q1FY12 Result Update Accumulate 1,750 2,050
01/08/2011 Grasim Industries Q1FY12 Result Update Accumulate 2,193 2,600
28/07/2011 ACC Cement Q2CY11 Result Update Hold 1,020 1,100
28/07/2011 Ambuja Cement Q2CY11 Result Update Reduce 133 140
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