Results

• FY14 revenue was broadly inline with expectation but core PAT only making up 91% of HLIB and consensus full-year estimates.

Deviations

• Mainly due to earlier dry-docking for three vessels in 4Q14 (Expedition, Liberty and Sovereign) and two vessels off-hire.

Dividends

• None.

Highlights

• 4Q14 earnings fell by 32% yoy due to earlier dry-docking (from 1H15 to 4Q14) for 1 AHTS (Expedition) and 2 workboats (Liberty and Sovereign) coupled with lower utilisation as 2 OSVs were off-hire (Liberty and Horizon). With the earlier dry-docking of 3 vessels, Marathon will be the only vessel scheduled for dry docking in July15.

• The new work barge, Perdana Emerald was delivered in 4Q14 and will be used to replace an existing barge (Enterprise) instead of tender for EOR job at St Joseph field. We expect FY15 to be a consolidation year for Perdana with lesser number of OSV (after disposal of Superior) in operation before rebounding in FY16 given the delivery of 2 new units of 500-men work barges in 1Q and 2Q of FY16. We estimate one vessel to contribute RM15m 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. More than 70% of vessels are under long term contract and only 2 vessels are on spot charter.

• 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.

• We are still positive on the stock in view of additional 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

• FY15 earnings reduced by 18% due to lower utilisation and lesser number of vessels in operation.

Rating

BUY

Positives

• Increasing demand on maintenance services.
• OSV supply relatively inelastic.

Negatives

• Increased competition for growth markets.

Valuation

• We maintained our BUY call with TP adjusted from RM1.30 to RM1.44 with valuation rolled forward to FY16 by pegging at an unchanged targeted 10x P/E for small cap.

Source: Hong Leong Investment Bank Research - 24 Feb 2015