Results

• In line QoQ, 3QFY14 Core profit increased by 12.5% bringing 9MFY14 to RM73m, making up 75% of HLIB and consensus full-year estimates, respectively.

Deviations

• None.

Dividends

• Declared interim dividend of 2 sen/share.

Highlights

2Q14 earnings surged by 74% yoy and 12% QoQ due to improvement in vessel utilisation and charter rates. QoQ, EBIT margin continue to impro ve f rom 35% to 37% due to cost control measures. YoY, 9MFY14 average vessel utilisation increased from 78% to 93%.

We are positive and surprise by the dividend declared. To note, this is the first dividend payout since FY08. We applauded the move to reward shareholder and do not rule out more dividend in the future given its consistent earnings delivery.

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

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 the company’s bottomline.

Latest orderbook stand at RM1.1bn (circa 3x FY14 revenue) which will continue to provide earnings visibility amidst declining oil price environment. Perdana is one of our top pick for brownfield development play. It stands to benefit from maintenance 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 additio nal catalysts of: capacity expansion, higher utilization 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

• Despite in line 9MFY14 res ult, we reduced our FY15 earnings by 10% mainly to reflect disposal of Petra Superior.

Rating

BUY

Positives

• Demand drivers improving.
• OSV supply relatively inelastic.

Negatives

• Increased competition for growth markets.

Valuation

• We maintained our BUY call with TP reduced from RM1.87 to RM1.68 pegged at an unchanged 12x FY15 P/E post earnings adjustment.

Source: Hong Leong Investment Bank Research - 26 Nov 2014