Results

• Above Expectation: 4QFY14 registered RM13.5m earnings and managed to bring FY14 result to RM14m versus our forecast of RM8m.

Deviations

• Mainly due to forex gain of RM3.7m and better contribution from jack up rig.

Highlights

• QoQ, 4QFY14 core profit increased from RM2.2m to RM13.6m mainly due to :o i) better contribution from jack up rig business; and ii) forex gain of RM3.7m.

• Both MOPU and E-3 assets remain idle with estimated burn rate of RM3.3m per month. Given the low oil price environment, we foresee difficulty to secure contract for both vessel. Currently, we have factored in one quarter contribution from both vessels in FY15. To note, successfully securing contract for both vessels in FY15 will serve as re-rating catalysts and boost earning significant with FY16 P/E at circa 5x if both vessels fully utilised. Perisai will add its second and third rigs in 2Q15 and 3Q16.

• According to channel check, rig service providers started to see pressure on charter rate with average 6% to 7% reduction and number of new tender also dropped by 50%. However, local driller like Perisai should be less impacted as compared to other rig service providers in the region due to shortage of locally owned rigs.

• Out of 16 rigs operating in Malaysia, only 2 rigs are local owned. Of the 14 foreign-owned rigs, we understand that 9 will expired in 2015 which provide opportunities for Perisai.

• Despite benefiting from localisation of rigs, we are cautious on the near term outlook given pressure on charter rate amidst declining oil price coupled with lower utilization.

Risks

• Delay in contract award for MOPU and execution risk.

Forecasts

• Unchanged.

Catalysts

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

Valuation

• We maintain our Hold call with TP adjusted from RM0.46 to RM0.69 after rolled forward valuation to FY16 (based on unchanged 8x P/E (lower compared to peer at 10-11x due to uncertainty on MOPU and E-3).

Source: Hong Leong Investment Bank Research - 26 Feb 2015