Maintain 'BUY' on Aban Offshore – TP reduced to Rs.513 - Geojit BNP Paribas

- Aban reported Q2FY13 PAT of Rs.49.2 crores, which came in below estimates on account of higher expenditure (down time at ABAN VII and idle time at DD7).

- Aban is set to have an unpredictable Q3 on account of various rigs either being in the last month of service or idle as they are in negotiations to renew contracts with existing parties.

- Aban has five rigs which came off contracts and are up for re-charters during H2FY13. Negotiations are at different stages and FY14 should see a full fleet as there is no contract expirations. This will assist in reducing debt levels which in turn will add value to the equity holder.

- There could be a surprise in day rates for rigs like DD1 & DD7 whose old contracts were at lower rates, which could also be a positive catalyst.

- Aban was able to switch USD300 million from its INR loans to USD loans, resulting in interest savings going forward.

- Although BUY rating is reiterated on Aban, mainly due to the financial / operating leverage in the business, the Target Price is lowered to Rs.513 (from Rs.579 earlier) on account of lower margins and higher costs due to its aging fleet and re-chartering expenses. The stock is currently trading at Rs.426 levels.

- Risks to the Target Price: Iran exposure and delays in re-charters.

Source : Equity Bulls

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