News

• Major shareholder Dayang has proposed to acquire 5.75% stake in Perdana Petroleum from Affin Hwang Asset Management for a total cash consideration of RM67m or RM1.55 per share which will inc rease Dayang’s stake from 29.77% to 35.51%.

• Upon completion of the proposed acquisition, Dayang will be obliged to extend a MGO for all the remaining shares (at RM1.55) and warrant (at RM0.84) not already owned by Dayang.

• The proposed MGO will be conditional upon Dayang has in aggregate accumulated more than 50% stake in Perdana.

• Dayang intends to maintain the listing status of Perdana subsequent to the Proposed MGO.

• Perdana’s other substantial shareholders are Kho Brothers and LTH with 8.8% and 8.4% respectively. Financial Impact

• The potential MGO price translates to about 11x FY16 P/E which is line with average peers at 10-11x.

Comments

• The potential MGO offer came as no surprise to us as Dayang has been accumul ating Perdana’s share due to more compelling valuation after the fall in crude oil prices. The acquisition is strategic fit for both companies as Perdana’s fleet of vessels will be complementary to Day ang’s HUCC business. Vessels charter contracts from Dayang contribute more than 40% of Perdana revenue.

• To note, the MGO is conditional upon the completion of proposed share acquisition from Affin Hwang (which will take around 3 months). Share price has appreciated 26% since our last Buy Call report dated 24 Feb 2015 and exceeded our TP of RM1.44. Given the limited upside, we downgraded our call from Buy to Hold with TP adjusted f rom RM1.44 to RM1.55 based on the potential GO price.

• Perdana is one of our preferred pick for brownfield development play with strong earning visibility amidst weak oil price. It stands to benefit from maintenance job on aging platform and upcoming EOR projects. However, current price al ready largely reflected its fundamentals and potential MGO.

Risks

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

Forecasts

• Unchanged.

Rating

HOLD

Positives

• Demand drivers improving.
• OSV supply relatively inelastic.

Negatives

• Increased competition for growth markets.

Valuation

• We downgraded our call from Buy to Hold with TP adjusted from RM1.44 to RM1.55 based on the potential GO price.

Source: Hong Leong Investment Bank Research - 15 May 2015