Aban Offshore Q1FY15 Result Update

Aban Offshore
Margin surprise again
Your success is our success
n
July 31, 2014
Rating
Previous Reco
Accumulate
Accumulate
CMP
Rs770
Target Price
Rs1025
EPS Chg FY15E/FY16E (%)
-7/-4
Target Price change (%)
7,721
Sensex
25,895
n
Price Performance
(%)
1M
3M
6M 12M
1
50
72
Absolute
Rel. to Nifty
-1
30
36
202
126
Source: Bloomberg
Relative price chart
Rs
% 200
760
158
620
116
480
74
340
32
200
Aug-13
n
+19
Nifty
900
n
Oct-13
Dec-13
Jan-14
Aban Offshore (LHS)
Mar-14
May-14
-10
Jul-14
Rel to Nifty (RHS)
Source: Bloomberg
Stock Details
Sector
Offshore Oil Field Services
ABAN IB
Bloomberg
109
Equity Capital (Rs mn)
2
Face Value(Rs)
54
No of shares o/s (mn)
940/ 188
52 Week H/L
Market Cap (Rs bn/USD mn)
42/ 692
Daily Avg Volume (No of sh)
2,265,043
Daily Avg Turnover (US$mn)
26.9
Shareholding Pattern (%)
Jun'14
Mar'14
Dec'13
54.0
54.0
54.1
FII/NRI
9.7
8.2
7.6
Institutions
4.1
4.0
4.4
Private Corp
7.5
6.5
4.3
24.8
27.4
29.7
Promoters
Public
Source: Bloomberg
Ajit Motwani
[email protected]
+91-22-66121255
Emkay Global Financial Services Ltd.
EBIDTA at Rs6 bn (+26% yoy) 10% higher than estimate. Cost
containment boost EBIDTA margins to 58.6% vs estimate of
53.5%. PAT at Rs1.5 bn +104% yoy 60% higher than estimate
Refinances USD60 mn in Q4FY14 further reduces interest
cost (-3% qoq). QIP proceeds & internal accruals enough to
meet FY15 bond repayments, further lowering interest cost
Aban at low risk points: Reset of loan repayment tenure
means lower refinance risk. Positive outlook on global E&P
spending & firm rig rates means lower day rate risk. Possible
lifting of Iran sanction means lower operational risk
Aban to get cyclical uplift for renewal in FY16. See EPS
CAGR of 22% despite large (22.7% dilution). ACCUMULATE
Solid start to FY15, 1QFY15 PAT 60% above estimates
Aban started FY15 on a solid note as it delivered a strong consensus beat performance
with 1Q with EBIDTA at Rs6 bn (+26% yoy) (USD100 +19% yoy) 10% higher than
estimate. Improving cost control/efficiency measures has led to second successive
quarter of EBIDTA margins surprise. Insurance cost saving (~USD1 mn) and substituting
own machinery against rented ones were key drivers of efficiencies and boosted
EBIDTA margins to 58.6% vs estimate of 53.5%. Company indicated sustainable
margins at 56-58% range. Revenues at USD171.9 grew 9.5% yoy (-1.2% qoq), helped
by higher utilization and day rates (particularly for Aban Ice). Strong beat on operational
numbers helped net profit growth of 104% yoy to Rs1.52 bn 60% higher than estimate
Refinance of USD60 drive further reduction in interest cost
After refinancing of high cost INR loan of ~USD290mn with ECB @ LIBOR +6%, (saving
800 bps) in FY14, Aban had further refinanced USD60 mn at Libor+5% (saving 900 bps)
in Q4FY14. Consequently interest cost declined 3% yoy and qoq to USD 45.9 mn.
However because of INR depreciation, INR interest cost increased 2.1% yoy (- 4% qoq).
DD5 starts operation, Aban III & Aban IV to get upward
DD-5 started operation at Offshore Vietnam, for a firm period of 1 year. Aban has been
enjoying the cyclical uplift in day rate in the recent time. Its two Rig renewals in Mexico
saw higher day rates in FY14. Similarly Aban ice saw renewal at very attractive day
rates (USD168k/day vs earlier day rate of USD121k). We expect the company to enjoy
this uplift as two more contract renewals (Aban III and Aban IV) due for renewal in
Q3FY15 are expected to get day rate of US80k as compared to USD62k currently.
Aban at low risk points – retain ACCUMULATE
With the company addressing multiple issues of contract renewals and high cost debt
refinance we believe that Aban now has crossed operational/sustainability hurdles.
Further we see the company at low risk points as compared to recent history. For eg
reset of loan repayment tenure means (where FY15-17 repayments are 60% lower as
compared to earlier tenure) refinance risk out. Positive outlook on global E&P spending
& firm rig rates means lower day rate risk. Possible lifting of Iran sanction means lower
operational risk. Cyclical uplift for renewal in FY16 to drive 40% PAT & 22% EPS CAGR
(post recent dilution of 22.7%) Retain ACCUMULATE as we revise target to Rs1025
based on 7X FY16e EV/EBIDTA (as compared to 6.5 earlier)
(Rsmn)
Financial Snapshot (Consolidated)
YE-
Net
EBITDA
EPS
EPS
RoE
Mar
Sales
(Core)
(%)
FY13A
36,727
20,079
FY14A
39,363
22,039
FY15E
42,692
FY16E
44,139
EV/
APAT
(Rs) % chg
(%)
P/E
EBITDA
P/BV
54.7
2,031
46.7
-31.0
7.3
16.1
8.6
1.1
56.0
3,509
80.6
72.8
10.2
9.3
8.3
0.8
23,643
55.4
5,409
92.8
15.1
11.7
8.1
7.2
0.8
24,645
55.8
6,941
119.0
28.3
12.2
6.3
6.4
0.7
1
Result Update
Emkay
©
Aban Offshore
Result Update
Exhibit 1: Quarterly Financials
Rs mn
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Q1FY15
YoY (%)
QoQ (%)
FY14
FY13
YoY (%)
Revenue
8,885
10,016
9,944
10,518
10,278
15.7
-2.3
39,363
36,727
7.2
Expenditure
4,096
4,698
4,347
4,182
4,256
3.9
1.8
17,324
16,648
4.1
as % of sales
46.1
46.9
43.7
39.8
41.4
44.0
45.3
Consumption of RM
544
589
785
535
465
2,453
1,911
6.1
5.9
7.9
5.1
4.5
6.2
5.2
1,070
1,158
1,244
1,487
1,333
4,480
As % of Sales
Employee Cost
As % of Sales
-14.5
-13.0
28.4
24.6
-10.4
4,958
10.7
12.6
12.2
-1.0
13.8
9,912
10,257
25.2
27.9
22,039
20,079
9.8
11.7
12.0
11.6
12.5
14.1
13.0
2,483
2,951
2,319
2,160
2,458
27.9
29.5
23.3
20.5
23.9
EBITDA
4,789
5,318
5,596
6,336
6,022
25.7
Depreciation
1,270
1,407
1,422
1,384
1,452
14.3
4.9
5,484
4,909
EBIT
3,518
3,910
4,174
4,952
4,570
29.9
-7.7
16,555
15,170
9.1
80
87
125
17
80
-0.1
357.6
309
267
15.7
2695
2887
2957
2867
2753
2.1
-4.0
11,406
11,724
-2.7
PBT
903
1,110
1,342
2,103
1,897
110.1
-9.8
5,458
3,712
47.0
Total Tax
170
316
555
504
395
131.8
-21.7
1,545
1,318
17.2
Adjusted PAT
733
794
787
1,599
1,502
105.0
-6.1
3,912
2,394
63.4
15
-17
16
5
25
18
-2
747
777
803
1,604
1,527
3,931
2,391
64.4
0
0
0
0
0
0
-480
-100.0
Other expenditure
As % of Sales
Other Income
Interest
(Profit)/loss from JV's/Ass/MI
APAT after MI
Extra ordinary items
104.3
-5.0
-4.8
-3.4
Reported PAT
747
777
803
1,604
1,527
104.3
-4.8
3,931
1,911
105.6
Adjusted EPS
17.2
17.9
18.5
36.9
35.1
104.3
-4.8
90.35
54.97
64.4
(bqs)
(bpt)
Margins (%)
(bps)
EBIDTA
53.9
53.1
56.3
60.2
58.6
469
-165
56.0
54.7
EBIT
39.6
39.0
42.0
47.1
44.5
487
-262
42.1
41.3
75
EBT
10.2
11.1
13.5
20.0
18.5
829
-154
13.9
10.1
376
PAT
8.2
7.9
7.9
15.2
14.6
637
-59
9.9
6.5
342
18.9
28.5
41.3
24.0
20.8
195
-315
28.3
35.5
-720
Effective Tax rate
132
Source: Company, Emkay Research
Revision in Estimates
Our EBITDA estimates for FY15e/16e have been revised marginally by 1.65%/1.24% on
account of assuming marginally better margins. However, we revise upwards our PAT for
FY15e/16e by 13.7%/18.0% to factor in lower interest cost on account of recent QIP
proceeds that will be used for retirement of USD330 bonds due in FY15 that carry coupon
rate of 13.25% PA. But our EPS estimates for FY15e/16e have been revised downwards by
7.3%/3.8% on account of 22.7% equity dilution led by recent QIP issue of USD125
@Rs695/share.
Exhibit 2: FY15e/16e EPS revised downwards on equity dilution
FY15E
Rs mn
FY16E
Earlier
Revised
Change
Earlier
Revised
Change
Revenues
42692
42692
0.0%
44139
44139
0.0%
EBITDA
23258
23643
1.7%
24342
24645
1.2%
Margin (%)
54.5%
55.4%
0.9%
55.1%
55.8%
0.7%
PAT
4759
5409
13.7%
5880
6941
18.0%
EPS
100
93
-7.3%
124
119
-3.8%
Source: Company, Emkay Research
Emkay Research
July 31, 2014
2
Aban Offshore
Result Update
Key Financials (Consolidated)
Income Statement
Balance Sheet
Y/E Mar (Rsmn)
FY13A
FY14A
FY15E
FY16E
Y/E Mar (Rsmn)
FY13A
FY14A
FY15E
Net Sales
36,727
39,363
42,692
44,139
Equity share capital
87
87
117
117
16.1
7.2
8.5
3.4
Reserves & surplus
29,940
38,765
53,182
59,981
Expenditure
16,648
17,324
19,050
19,495
Net worth
30,027
38,852
53,299
60,098
Raw Materials
1,911
2,453
2,698
2,761
Minority Interest
0
0
0
Employee Cost
4,480
4,958
5,452
5,580
Secured Loans
Growth (%)
Other Exp
10,257
9,912
10,900
11,154
Unsecured Loans
EBITDA
20,079
22,039
23,643
24,645
Loan Funds
Growth (%)
EBITDA margin (%)
Depreciation
9.1
9.8
7.3
4.2
54.7
56.0
55.4
55.8
Net deferred tax liability
5,921
18,724
EBIT margin (%)
41.3
42.1
41.5
42.4
Net block
Other Income
267
309
444
444
Capital work in progress
11,724
11,406
10,033
9,133
PBT
3,712
5,458
8,132
10,034
Tax
1,318
1,545
2,320
2,690
35.5
28.3
28.5
26.8
Adjusted PAT
2,394
3,912
5,812
7,344
Growth (%)
-26.8
63.4
48.6
26.4
6.5
9.9
13.6
16.6
Other current assets
388
Less: Depreciation
Investment
Current Assets
Inventories
36,017
609
609
609
41,500
47,422
53,343
164,050 178,413 172,492 166,571
245
245
245
62
83
83
83
17,528
19,097
26,119
27,283
245
3,281
3,790
4,720
4,883
10,885
12,796
14,479
13,551
Cash & bank balance
1,386
-1,225
3,184
5,113
Loans & advances
1,976
3,737
3,737
3,737
0
0
0
0
Current lia & Prov
9,751
10,235
14,557
15,411
Current liabilities
9,116
9,117
13,438
14,292
634
1,118
1,118
1,118
7,778
8,863
11,563
11,873
25
25
25
25
Sundry debtors
(Profit)/loss from JVs/Ass/MI
0
0
0
0
Adj. PAT After JVs/Ass/MI
2,394
3,912
5,812
7,344
-480
0
0
0
Reported PAT
1,551
3,509
5,409
6,941
Net current assets
PAT after MI
2,394
3,912
5,812
7,344
Misc. exp
Growth (%)
-26.8
63.4
48.6
26.4
FY13A
FY14A
FY15E
FY16E
PBT (Ex-Other income)
3,445
5,149
7,689
9,590
Profitability (%)
Depreciation
4,909
5,484
5,921
5,921
EBITDA Margin
11,724
11,406
10,033
9,133
2,360
20,764
0
0
-970
-3,696
1,709
Tax paid
-1,318
-1,545
Operating Cashflow
20,151
37,562
-11,985
-19,847
0
0
46.7
8,167
17,715
23,031
23,574
CEPS
159.5
267
309
444
444
BVPS
689.3
E/O items
0
200,066 219,914 219,914 219,914
5,921
17,721
Net Margin (%)
0
Gross Block
5,484
16,555
Effective tax rate (%)
0
141,720 148,142 130,474 118,065
172,135 187,604 184,383 178,772
4,909
Interest expenses
0
148,142 130,474 118,065
Total Liabilities
15,170
EBIT
0
141,720
FY16E
Provisions
Total Assets
172,160 187,629 184,408 178,797
Key Ratios
Cash Flow
Y/E Mar (Rsmn)
Interest Provided
Other Non-Cash items
Chg in working cap
Capital expenditure
Free Cash Flow
Other income
Investments
Investing Cashflow
Interest Paid
Dividend paid (incl tax)
FY15E
FY16E
54.7
56.0
55.4
55.8
Net Margin
6.5
9.9
13.6
16.6
ROCE
9.2
9.4
9.8
10.6
1,619
ROE
7.3
10.2
11.7
12.2
-2,320
-2,690
RoIC
9.1
9.2
9.6
10.6
23,031
23,574
Per Share Data (Rs)
80.6
92.8
119.0
206.6
194.3
220.6
892.1
913.7
1,030.3
2.8
2.8
2.1
2.1
0
0
0
-19,539
444
444
0
0
9,180
0
3,775
-8,682
-17,668
-12,410
-11,724
-11,406
-10,033
-9,133
-505
-545
-545
-545
0
0
0
91
0
-8,363
-20,634
Income from investments
Others
Financing Cashflow
FY14A
-28
Equity Capital Raised
Loans Taken / (Repaid)
FY13A
-11,746
Net chg in cash
Y/E Mar
EPS
DPS
Valuations (x)
PER
16.1
9.3
8.1
6.3
P/CEPS
4.7
3.6
3.9
3.4
P/BV
1.1
0.8
0.8
0.7
EV / Sales
4.7
4.6
4.0
3.6
0
EV / EBITDA
8.6
8.3
7.2
6.4
0
0
Dividend Yield (%)
0.4
0.4
0.3
0.3
-19,066
-22,088
Gearing Ratio (x)
1.9
42
-2,611
4,409
1,929
Net Debt/ Equity
4.7
3.8
2.4
Opening cash position
1,344
1,386
-1,225
3,184
Net Debt/EBIDTA
7.0
6.8
5.4
4.6
Closing cash position
1,386
-1,225
3,184
5,113
Working Cap Cycle (days)
63.5
93.5
71.6
55.9
Emkay Research
July 31, 2014
3
Aban Offshore
Result Update
Emkay Global Financial Services Ltd.
CIN - L67120MH1995PLC084899
7th Floor, The Ruby, Senapati Bapat Marg, Dadar - West, Mumbai - 400028. India
Tel: +91 22 66121212 Fax: +91 22 66121299 Web: www.emkayglobal.com
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Emkay Research
July 31, 2014
www.emkayglobal.com
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