News

Perisai announced that its indirect 51% subsidiary, Intan Offshore has entered into a MOA with Lewek Robin Shipping (wholly owned subsidiary of Ezra) to acquire the Lewek Robin (anchor handling tug (AHT)) for US$7m.

The Lewek Robin has 4,750 BHP and can accommodate a crew of 20 and has a deck space measuring 240 square meters. The acquisition would be partially fund by borrowing amounting to US$4.55m with repayment period of 7 years.

After the completion of acquisition, Ezra will charter the Lewek Robin from Intan Offshore on a bareboat charter basis with daily charter rate of US$2,600 per day for 7 years.

Expected to complete by 2Q14.

Comment

We are neutral on the related party transaction given the minimal impact on the company’s bottomline (~<1% of FY14 profit). To note, Ezra holds approximately 26% stake in Perisai and 49% stake in Intan Offshore.

With the acquisition, Intan Offshore’ fleets will expand to 9 vessels comprising 3 AHT, 3 AHTS and 3 fast crew boats.

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% of 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 type of asset due to interest in marginal oilfield and increasing rejuvenating activities for existing oilfield. 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 10x 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 - 17 Mar 2014