'Accumulate' Aban Offshore: Dolat Capital

MUMBAI: Dolat Capital has changed its recommendation on Aban Offshore from ‘Sell’ to ‘Accumulate’ after the company signed a contract with Petrobras, Brazil for the deployment of the Drillship Aban Abraham offshore Brazil for a period of 5 years.

The estimated revenue from the deployment is about $494 million plus a potential 3.85% performance bonus.

“The recent long term contract of Aban Abraham for 5 years improves earning visibility going forward. We expect that news relating to the deployment of one idle assets ( Deep Venture) would be announced by the end of December 2010 could also be a positive trigger for the company.

On the back of recent contract which will contribute 12% of the total revenue we change our recommendation from Sell to Accumulate with a revised DCF based target price of Rs 1033. At CMP of Rs 919, the stock is trading at 10.4x FY11E EPS of Rs88.1 and 4.8x FY11E EPS of Rs 191.5,” the report said.