Results

In line: 1Q13 Core profit was flat YoY at RM24m, making up 26% and 24% of HLIB and consensus full-year estimates, respectively.

Highlights

Revenue flat YoY due to the bareboat charter model despite the disposal of 49% equity in SJR to EOC Limited which is expected to be completed in the 3Q13, we expect the new 51% stake in the US$272m FPSO contract to make up for the loss in future earnings of SJR.

Growth is set to continue with the delivery of an FPSO in 2013, a pacific class 400m jack up rig in mid-2014 and the option on an additional rig in mid-2015. Recall that in addition to the proposed 10% placement, the corporate exercises (announced on 3 to 6 Dec 12), resulted in a 50% swap of Enterprise 3 (E3) pipe laying barge for 51% stake in FPSO Lewek Arunothai, additional payment of RM50m cash and 144.6m new shares at RM1.10, is expected in Jul 13. Thereafter, the sale of the remaining 50% in the E3 is expected in mid-2014, when the Perisai Pacific 101 jack-up rig is delivered.

We continue to like Perisai due to management talent and growth strategy which is not dependent on sourcing specialised O&G talent to build or operate assets.

Risks

• Political risk.
• Execution risk.

Forecasts

FY13 and FY14 earnings raised by 7% and 30% to RM97m and RM121m respectively to reflect the inclusion of FPSO earnings in 2H FY13 and Perisai Pacific Jack Up Rig in 2H FY14. Due to enlarged share base from the equity financing of new assets, FY14 EPS only increases 13% to 11.2 sen/share.

Rating

BUY

• Positives –
  • Clarity in earnings
  • Clear and proven growth strategy and business model
  • Growth is not dependent on securing O&G talent
• Negatives –
  • Growth is dependent on domestic conditions

Valuation

We tweak our TP from RM1.58 to RM1.57 based on a lower P/E multiple of 14x (previously 16x because we have factored growth into our forecasts as the previous higher multiple was to account for the potential earnings boost from the FPSO and Pacific Jack Up Rig) and a higher EPS of 11.2 sen/share.

Source: Hong Leong Investment Bank Research - 9 May 2013