Aban Offshore - Triggers lined up - Upgrade to Accumulate - Emkay

- 6 rigs due for renewal in FY13. Aban confident of contract renewals and better pricing for 4 rigs. Revenue visibility expected to improve to 96%/86% for FY13/14 with renewals.

- Interest burden to come down as Aban plans repayment of Rs10 bn of debt in FY13 and looking at refinancing INR debt of ~Rs18bn leading to savings of Rs1 bn in interest cost.

- Improved rig pricing and lower interest cost pressure to improve cash flows driving increased pace of de-leveraging of Aban's stretched balance sheet.

- Multiple triggers by way of renewal of rig contract and lower interest cost to help stock out-performance. Reasonable FY14E valuation at PER-3.5X, P/B-0.6 & EV/E-6.2X to provide downside protection- Upgrade to ACCUMULATE- TP-Rs525.

Source : Equity Bulls

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