News 

Entered  into  MOA  to  dispose  one  unit  of  accommodation work  barge  (Petra  Superior)  to  Hauston  for  a  total consideration  of US$28.5m  or RM93.5m.

The net book value of  vessel as at 31 Oct 14 is RM92m and the original cost of invest ment  was  RM108m, resulting a gain of  RM1m.  The  expected  time  of  delivery  of  the  vessel  to buyer is before  end Nov  14.

Financial Impact

We  estimate  the  Petra  Superior  to  contribute  about  RM6m (~6% of FY14 PAT) to bottomline.    We expect no impact to FY14  as  the  existing  contract  will  expired  in  Nov   14  and contributes  about  RM6m  or  ~5%  on  FY15’s  PAT.  However, the  proceeds  raise  will  be  used  to  fund  new  acquisition  of assets which will help to mitigate the impact.

Comments 

We are  positive  on the disposal as it will be  part of the  fleet renewal  plan  to  upgrade  existing  vessel  to  higher specification coupled with favourable selling price with RM1m gain. We also understand that by selling Petra Superior, it will save  about  US$2m  on  drydocking  expenses  which  was supposed to take place by end of year  after  existing contract expire in Nov.

We  understand  that   the  proceeds  will  be  used  to  fund  new assets  acquisition with higher specification which will help to differentiate it  from other competitors.  To recap, Perdana has announced  the  acquisition  of  additional  2  units  of  500-men accommodation work barges at US$84m with an option for a further 2 units.  The deliveries of the workbarges are expected in  the  1Q  and  2Q  of  2016.   We  estimate  one  vessel  to contribute  RM15m  (~15%  of  FY14  earnings)  to  company bottomline.

The  new  work  barge,  Perdana  Emerald  was  delivered recently  and  sailing  away  to  Labuan.  We  believe  it  will  be used to tender  EOR job at St Joseph  field.

Perdana  is  one  of  our  top  pick  for  brownfield  development play  with  strong  earning  visibility  amidst  weak  oil  price.  It stands to benefit from maintenanc e job on aging platform and upcoming  EOR projects.

Perdana  could  potentially  be  removed  from  SC  Shariah compliant  list  in  the  Nov  review.  Any  share  price  weakness from  this   issue  is  a  good  buying  opportunity  given  that  its solid fundamental  remains intact.

We  are  still  positive  on  the  stock  in  view  of  additional catalysts  of:  capacity  expansion,  higher  utilisation  from  the HUCC  contracts; M&A or even  privatization.

Risks

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

Forecasts

• Unchanged  pending  completion of the deal.

Rating

BUY

Positives  –

• Demand  drivers  improving.  
• OSV supply relatively  inelastic.

Negatives  –

• Increased  competition for growth  markets.

Valuation  

• We maintained our  BUY  call  with  unchanged  TP  of  RM1.87 pegged  at  an  unchanged  12x  (HLIB’s  small  cap  O&G targeted  multiple)  FY15 EPS of 15.5 sen/share.

Source: Hong Leong Investment Bank Research - 30 Oct 2014