News

Perisai announced that the upcoming expiration of the 2 year charter of its MOPU, Rubicone by the end of Sep 2013. In preparation for the expiration of the charter, planning for the demobilisation of Rubicone has commenced.

Perisai is considering available options in securing continuing charters for Rubicone and would make the necessary announcement thereafter.

Comment

We gather from management that there will be no extension for the MOPU as part of the Bekok platform is now back in production. The MOPU will starts to demobilise from the platform and park at one of the port in Johor.

In our previous report dated 23 Aug 2013, we mentioned in the event that the contract is not extended, there will be around RM2m burn rate per month. Management guided 6 month of idle period before re-charter to another client. The company is looking at opportunity from Malaysia and South East Asia. If the company manages to secure a 2 year contract (similar to previous contract), it should command similar charter rate (~US$70k per day). We also do not rule out the possibility that the MOPU might need refurbishment before redeployed to other location given the differences in properties of various oilfields.

On the E3, we understand the company has received strong charter inquiries from various clients. The company is positive to secure a contract by 4Q2013. We also believe that the partnership with Ezra is expected to enhance the potential of re-chartering E-3 to other clients. We have assumed no contribution from E-3 during Sep-Dec 2013 period. The company expects to secure a drilling contract, 3- 4 months before delivery, which will be in 1Q2014. The impending UMW’s IPO in 2H13 could drive sentiment and serve as a potential re-rating catalyst for drilling related stocks. We do not rule out the possibility of high UMW O&G IPO valuations driving up the P/E multiple of drilling related stocks.

Forecasts

Given the expiration of the MOPU by Sep 13, we have assumed 6 month idle period before re-chartering to other party and lower margin assumption for MOPU’s new contract (adjust PAT margin from 60% to 50%). Hence, PATAMI cut by 19%, 15% and 5% to RM78m, RM115m and RM149m for 2013, 2014, and 2015 respectively.

Catalysts

• Securing drilling contracts before rig delivery.
• New contracts for E3 and MOPU.
• UMW’s IPO in 2H13 likely re-rate drilling related companies.

Valuation

We lowered our TP to RM1.49 (from RM2.00) based on lower P/E multiple of 14x (previously 16x) on FY/14 EPS of 10.6 sen/share to reflect risks of delay in securing contract for E3 and MOPU.

We believe that the 13% decrease over the last month has largely reflected the negative news. Moreover, despite lower TP, potential upside is still attractive at 11%. Thus, we are maintaining our BUY call on the stock.

Source:Hong Leong Investment Bank Research- 18 Sep 2013