News

• Major shareholder Dayang has proposed to acquire 5.75% stake in Perdana Pet roleum from Affin Hwang Asset Management for a total cash consideration of RM67m or RM1.55 per share which will increase 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 al ready 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. Financial Impact

• Three Scenarios Analysis: i) 35.51% stake: Fund requi red: RM67m (Funded by 100% equity). Net gearing: 0.03x, EPS will be increased by 3%. ii) 51% stake: Fund required: RM246m (Funded by 60% debt). Net gearing: 0.21x, EPS will be increased by 8%. iii) 100% stake: Fund requi red: RM815m (Funded by 85% debt). Net gearing: 0.8x, EPS will be increased by 20%.

Pros/Cons

• The proposed share acquisition in Perdana and potential MGO offer came as not a surprise to us as Dayang has been accumul ating P erdana’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 fl eet of vessels will be complementary to Dayang’s HUCC business and this will help Dayang to entrench its position for next round of HUC tender in 2018/2019. Overall, we are positive on the deal given it will potential enhance Dayang’s FY16 EPS by 3-20%.

• To note, we have assumed zero contract replenishment in FY15 and FY16, any contract win will provide upside to our forecasts.

Risks

• Political risk; Delays in contract disbursement; and Execution risk.

Forecasts

• Unchanged.

Rating

HOLD

Positives

• solid track record and expertise in HUCC.
• captive market for topside maintenance.

Negatives

• unsure of international growth prospects.
• difficulties in sourcing O&G engineering talent.

Valuation

We maintain our HOLD call with unchanged TP of RM2.87 based on unchanged 11x FY16 P/E.

Source: Hong Leong Investment Bank Research - 15 May 2015