CITI ON ABAN

Aban Offshore (ABAN.BO)

Buy: Raising Target; Market Conditions Remain Favourable

Increasing target to Rs3530 — On the back of improving earnings visibility and

continued robust day rates as evidenced by recent order win announcements.

Our new target is based on a P/E of 8x fully evolved earnings, likely to be

achieved by FY10E (and discounted back), at the lower end of global peer

comps. Aban remains a material, leveraged play on the tight offshore services

market. We rate the stock a Buy (1M).

Jackup market strong despite supply addition concerns — Though the

international (ex-GOM) jackup market remains strong with utilizations in excess

of 95%, supply additions are a risk. Deficits in several international markets

should, however, result in absorption of newbuilds entering the market over the

next 9-12 months without impacting day rates. The long-term outlook for the

sector remains solid, with steadily rising long-term oil price expectations.

Revising FY08-10E earnings — We are revising our FY08E EPS downwards by

21% to factor in delays to the drilling schedules of a couple of rigs. Our FY09E

EPS remains relatively unchanged, while we have modestly increased our FY10E

EPS forecasts by 5%, driven by a combination of new contract wins, updated

newbuild delivery dates, FY07 annual report details, and a lower diluted share

count following fixing of the FCCB conversion price