Aban Offshore (ABAN.BO): Terminating
coverage
Company Name: Aban Offshore Ticker: ABAN.BOPrice:
229.75 52-Week Price Range (Rs): 4,183-230
Year Net EPS EPS . Dividend
To Income Diluted Growth P/E Yield
March Rs Rs Dil% X %
2007 -298.57 NA NA NM 1.31
2008 925.19 75.91 1038.32 3.03 1.57
2009E 6,825.74 180.66 137.99 1.27 2.61
2010E 10,096.62 267.23 47.92 0.86 3.05
2011E 8,365.98 221.42 -17.14 1.04 3.48
Price Performance (absolute): 1m: -48% 3m: -70% 12m: -94%
Price Performance (relative): 1m: -36% 3m: -56% 12m: -45%
Stock Rating: N
What's changed
We are terminating coverage of Aban Offshore (Aban) to better focus our resources. Our
estimates and target price are unchanged and our final rating on Aban is Neutral. Aban
needs to re-finance about US$169mn of existing debt in FY10E, and US$148mn out of
that before December 2009 in order to honour the bullet payments of Norwegian Kroner
bonds (from Sinvest) due December 22, 2009. This has become the key issue for Aban
since it has limited options to raise finance by any other means in the current environment,
in our view. Moreover, four of Aban’s assets are currently lying idle owing to major
cutbacks in E&P capex globally. Contracts to another four of Aban’s assets will conclude
over the next six months, increasing the risk of even lower asset utilization and pushing
up the amount of re-financing needed. Our final earnings estimates for
FY09E/FY10E/FY11E are Rs180.6/Rs267.2/Rs221.4. We have observed compression of
EBITDA margins in 3QFY09 primarily due to a rise in costs and lower utilization.
Implications
We believe Aban’s stock is now effectively a binary option, with part of the street
believing Aban’s cash flows will weaken to a point where refinancing will look difficult.
We, however, believe it is possible for Aban to secure re-financing, although this could be
expensive given the current environment.
News
-flow on this remains critical for a
re-rating of the stock, in our view.
Valuation
Our final rating on the stock is Neutral with a P/B-based 12-month target price of Rs475,
implying upside potential of 100%.
Key risks
(1) Re-financing risk in 2009E, (2) delay in deploying idle assets; (3) renewal of contracts
for other assets at day rates lower than our estimates; (4) delay in the deployment of
new-builds; and (5) further news flow on lower E&P capex.
The Goldman Sachs Group Inc. does and seeks to do business with companies covered in
its research reports. As a result, investors should be aware that the firm may have a
conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment
decision.
March 13, 2009 Analyst Comment
2 Goldman Sachs Global Investment Research