Why Such Low valuation - Aban offshore

mohan.sic

Well-Known Member
#1
Hi,

why stocks like ABAN offshore quote at such low p/e in spite of having decent EPS consistently. In fact its p/e is far lower than its industry.

There are other such stocks too which fall under this category. But let us take the example of Aban Offshore. I fail to understand the reason on this.
What factor effects this ? I mean to ask is there anything wrong in the items of Balance sheet or financial ratios for Aban offshore ?

I cant agree with reasons like market sentiment, not investor friendly or any such reason which fall out of Fundamental analysis. There must be something directly or indirectly related to Fundamentals. But what is it ?

Please give your views..
 

DSM

Well-Known Member
#3
Checked the financials. Seems o.k. Also note the company is paying regular dividends for last 8 years.

Doubts though : FII holding is going down from 13% in Jun 2015 to 2.75%. Wonder why they are exiting? What do they know that the public does not? Else, it can be that FII's are overall negative on Oil and Gas related companies. In the current economic scenario, if the capex of oil companies go down, it will negatively impact the revenues of the company. So one needs to know/study how long into the future their assets are contracted for? Another issue could be large capex being commissioned. There will be interest expenses which would otherwise been capitalized as project cost, also depreciation will be a hit on the P&L.

As retail, investors have very little information that is available to corporates, investing in companies with lower public visibility and exposure, while on one hand can give multibagger returns, on the other hand can be a risky bet, and it is difficult to say which is which.


 

saakk

Well-Known Member
#4
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candle

Well-Known Member
#5
Aban has most of his business from the rigs of Iran. After the uplifting of US sanctions, Iran now wants to produce crude aggressively. But at current price levels, it is not profitable to increase production. Though aban has said that it has increased the receivables from Iran, but still it has not received most of his payments. Aban has a total of 18 rigs out of which, only 8 are employed. Business between Iran and India depends on the ties between the two govt. which seems to be positive. There is problem of cash flows with the company, though restructuring is on cards.