Analysts' pick: Aban Offshore
Citigroup global Markets has reiterated its “buy” rating on Aban Offshore, saying the stock is attractively valued at 5.2 times estimated FY10 earnings.
Aban Offshore
CMP: Rs 2,460.45
Target Price: Rs 3,600
Citigroup global Markets has reiterated its ���buy��� rating on Aban Offshore, saying the stock is attractively valued at 5.2 times estimated FY10 earnings. ���The company offers an extremely attractive free-cash flow yield of 20% against 3-15% for peers (average 9%),��� said a Citi note to clients.
According to Citi, Aban���s earnings over FY09-11 (estimated) are well supported by an order backlog of $2 billion, which yields a market cap/order backlog ratio of 0.9 times compared with 0.6-3.6 times for US peers.
At the target price of Rs 3,600 , Aban would trade at eight times FY10E earnings, a small discount to global peer multiples, said the note.
However, Citi has increased the risk rating on Aban to ���high risk��� from ���medium risk��� earlier to factor in the company���s high leverage and its significance in the current macro environment.
It says the key risks that could prevent the shares reaching the target price are: E&P activity decline; declining day rates which vary with the demand-supply scenario in the rest of the world; delays resulting in jack-ups going on day rates later than expected and currency fluctuations.
CMP: Rs 2,460.45
Target Price: Rs 3,600
Citigroup global Markets has reiterated its ���buy��� rating on Aban Offshore, saying the stock is attractively valued at 5.2 times estimated FY10 earnings. ���The company offers an extremely attractive free-cash flow yield of 20% against 3-15% for peers (average 9%),��� said a Citi note to clients.
According to Citi, Aban���s earnings over FY09-11 (estimated) are well supported by an order backlog of $2 billion, which yields a market cap/order backlog ratio of 0.9 times compared with 0.6-3.6 times for US peers.
At the target price of Rs 3,600 , Aban would trade at eight times FY10E earnings, a small discount to global peer multiples, said the note.
However, Citi has increased the risk rating on Aban to ���high risk��� from ���medium risk��� earlier to factor in the company���s high leverage and its significance in the current macro environment.
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It says the key risks that could prevent the shares reaching the target price are: E&P activity decline; declining day rates which vary with the demand-supply scenario in the rest of the world; delays resulting in jack-ups going on day rates later than expected and currency fluctuations.
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