ABAN Offshore’s successful qualified institutional placement (QIP) of equity shares comes as a major positive development for the debt-ridden company, which had recently rescheduled its debt obligations.
With an outstanding debt of over Rs 16,600 crore, the company’s debt-to-equity ratio stayed above 9.5 for the year ended March 2009. This will now ease to below 6, after the QIP placement. This equity infusion and earlier debt rescheduling signal an attempt by the company to overcome key hurdles to performance — both financial as well as relating to the stock market — over the past couple of years.
With oil prices rebounding above the $75 level, Aban Offshore has been able to deploy 17 of its vessels and has just three jack-up rigs idle presently. This, along with the improvement in the global E&P industry, has helped ease the concerns of the analyst community. Most brokerage houses are now offering a ‘hold’ or ‘buy’ recommendation on the company.
Over the past one year, the Aban Offshore scrip had been on a frenzied course — outpacing the market in both upward and downward directions. This was mainly due to significantly high trader interest and limited investor interest, as indicated by low double-digit delivery percentage. The scrip that was underperforming the benchmark Sensex in the first three months of 2009, has nearly quadrupled since April as against a 72% recovery in Sensex. This higher volatility has increased the company’s beta — a measure of volatility and risk compared to the benchmark Sensex — to 1.3 now as against just 0.77 in 2007.
Earlier this year, Aban rescheduled repayment of the mountain of debt it had raised to finance its expansion plans including the acquisition of Norwegian Sinvest in 2007. Now the debt repayment is spread over the next 10 years with an average of Rs 1,600 crore due every year.
The company has more than quadrupled its consolidated operating income to Rs 3,050 crore in FY09 from Rs 719 crore two years ago, while its cashflow from operations grew nearly seven-fold to Rs 2,108 crore from Rs 319 crore in FY07. Although the interest burden during this period has more than tripled to Rs 885.3 crore in the year ended March 2009 and could rise to Rs 1,000 crore for FY10, Aban Offshore appears well-poised to meet future debt obligations.
The scrip is currently trading at a multiple of 15.3 to its earnings of Rs 87.7 per share for the trailing 12 months. Considering the equity dilution following the QIP, the P/E works out to 17.6. Much will hinge on earnings growth or news of deployment of its idle vessels.
With an outstanding debt of over Rs 16,600 crore, the company’s debt-to-equity ratio stayed above 9.5 for the year ended March 2009. This will now ease to below 6, after the QIP placement. This equity infusion and earlier debt rescheduling signal an attempt by the company to overcome key hurdles to performance — both financial as well as relating to the stock market — over the past couple of years.
With oil prices rebounding above the $75 level, Aban Offshore has been able to deploy 17 of its vessels and has just three jack-up rigs idle presently. This, along with the improvement in the global E&P industry, has helped ease the concerns of the analyst community. Most brokerage houses are now offering a ‘hold’ or ‘buy’ recommendation on the company.
Over the past one year, the Aban Offshore scrip had been on a frenzied course — outpacing the market in both upward and downward directions. This was mainly due to significantly high trader interest and limited investor interest, as indicated by low double-digit delivery percentage. The scrip that was underperforming the benchmark Sensex in the first three months of 2009, has nearly quadrupled since April as against a 72% recovery in Sensex. This higher volatility has increased the company’s beta — a measure of volatility and risk compared to the benchmark Sensex — to 1.3 now as against just 0.77 in 2007.
Earlier this year, Aban rescheduled repayment of the mountain of debt it had raised to finance its expansion plans including the acquisition of Norwegian Sinvest in 2007. Now the debt repayment is spread over the next 10 years with an average of Rs 1,600 crore due every year.
The company has more than quadrupled its consolidated operating income to Rs 3,050 crore in FY09 from Rs 719 crore two years ago, while its cashflow from operations grew nearly seven-fold to Rs 2,108 crore from Rs 319 crore in FY07. Although the interest burden during this period has more than tripled to Rs 885.3 crore in the year ended March 2009 and could rise to Rs 1,000 crore for FY10, Aban Offshore appears well-poised to meet future debt obligations.
The scrip is currently trading at a multiple of 15.3 to its earnings of Rs 87.7 per share for the trailing 12 months. Considering the equity dilution following the QIP, the P/E works out to 17.6. Much will hinge on earnings growth or news of deployment of its idle vessels.
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