Results

In line but below consensus: FY13 Core profit registered RM72m, making up 101% and 90% of HLIB and consensus full-year estimates, respectively.

Deviations

None.

Highlights

As mentioned in our report titled “It’s all about FY15 and beyond” dated 17 Feb 14, 4QFY13 will be weak due to the contract expiration on MOPU and E3 in Sep 13 with estimated burn rate of RM6m per month for both vessels.

Core profit fell 22% yoy mainly due to MOPU and E3 had completed charters in Sep, partly mitigated by 1-2 month revenue contribution from its FPSO.

We are cognisant that the uncertainty will remain on the timing of securing contract for E3 and MOPU. However, the market has underappreciate potential contributions from the producing and drilling assets (FPSO and Jack Up rigs, collectively to contribute 67% earnings in FY15), which was masked by the absence of revenue from E3 and MOPU. While it is expected to dispose the E3 in FY15, we are optimistic that the company will secure a contract for MOPU given the demand for this asset due to interest in marginal oilfield and increasing rejuvenating activities for existing oilfield.

To note, currently we have factored in 9 month and 6 months revenue contributions for MOPU and E3 respectively. If MOPU facing any delay in securing contract (assume only 6 months vs. our forecast of 9 months revenue contribution), our FY14 earnings would be reduced by 22% to RM64m. However, FY15 earnings will still see a strong jump to RM160m (implied 11x FY15 PER). We advise long term investors to look beyond FY14 with better earnings to filter through in FY15.

The company has partnered with Talisman in the bidding for Block PM-9. This is positive as Perisai will be able to deploy the MOPU for this maturing oilfield if the partnership wins the tender. In addition, Perisai will benefit from other services required for the field such as drilling and pipelaying. We expect the result for the Block PM-9 to be announced in 1Q14.

Perisai is a cheaper proxy to drilling related stocks. Currently, Perisai is trading at 11x CY15 P/E vs. UMW Oil and Gas at 21x CY 15 P/E. We deemed the huge discount to be unjustified and expect the valuation gap between UMW O&G and Perisai to narrow going forward, once Perisai dispose of E3 and secured a contract for MOPU.

Risks

• Political risk.
• Execution risk.

Forecasts

Maintained.

Catalysts

• Securing drilling contracts before rig delivery.
• New contracts for E3 and MOPU.
• Expand into E&P segment.

Valuation

We maintained our BUY call with unchanged TP of RM2.06 (based on unchanged 14x FY/15 EPS of 14.7 sen/share).

Source: Hong Leong Investment Bank Research - 27 Feb 2014