Results

In line: 1Q13 PATMI swung from a loss of RM8.2m to a profit of RM11.3m, making up 21% of HLIB and consensus core earnings estimates, respectively.

Deviations

Given the monsoon season and drydocking in 1Q13, we expect Perdana to meet our full year forecast since it has hit the inflection point.

Dividends

None.

Highlights

1Q13 revenue increased 6.2% yoy due to improvement in vessel utilisation and charter rates. QoQ decreased 12% mainly due to monsoon season and scheduled drydocking for certain vessels.

Given the increased utilisation from 56% to 74% yoy, 1Q13 PATMI swung from a loss to a profit. This reaffirms our view that the OSV market is in a cyclical upswing as capacity overhang evaporates. With the possibility of most of the fleet locked into long term contracts, growth from new vessel acquisition will become increasingly viable and likely.

In addition, participation in HUCC jobs won by major shareholder Dayang (BUY) and expected to mobilise in 2H13 will also boost profit. Investors can also gain leveraged exposure through the warrant, Perdana-WA (2.4x gearing) which despite expiring in 25 Oct 2015 is trading at a 3.6% discount.

We are still positive on the stock in view of additional catalysts of: consensus upgrade with higher core operating margins and higher utilisation from the HUCC contracts; M&A or even privatisation; winning a marginal field; and the sale of the 7 old AHTS to Maimah Marine Pte Ltd.

Risks

Global recession hitting O&G price; Business and restructuring execution failure; and Increase in OSV supply

Forecasts

Unchanged pending contract wins.

Rating

BUY

• Positives –
  • Demand drivers improving.
  • OSV supply relatively inelastic.
  • Earnings inflection as restructuring nears completion.
• Negatives –
  • Increased competition for growth markets.
  • Complexities of restructuring.

Valuation

Maintain a BUY call and TP of RM1.96 based on an unchanged 14x FY13 EPS of 14.1 sen/share.

Although potential upside to our target price is now less than 10% (or 8.3%), we believe the stocks will continue to outperform due to contract flow related to major shareholder Dayang’s HUCC bids which will keep investors interested. Moreover, any successful bid by Dayang is likely to benefit Perdana. Coupled with potential of new vessel(s) acquisition and marginal field win, there are catalysts to boost earnings and consequently valuation. Hence we maintain our buy recommendation.

Source: Hong Leong Investment Bank Research - 21 May 2013