Results

• 1Q15 PATAMI was below expectation and only making up 10% of HLIB and consensus full-year estimates.

Deviations

• Mainly due to lower utilisation of Sovereign (workboat) and Odyssey (workbarge) and 2 OSVs (Liberty and Enterprise) were off-hire.

Dividends

• None.

Highlights

• 1Q15 earnings fell by 61% YoY and 42% QoQ due to lower utilisation of Sovereign (workboat) and Odyssey (workbarge) and 2 OSVs (Liberty and Enterprise) were off-hire. Dayang had earlier terminated charter contracts for both Sovereign and Odyssey in Feb 15 and Mar 15 respectively. Hence, average utilisation for vessels has fallen from 89% in 1Q14 to 76% in 1Q15. 2 OSVs remain off hire as Liberty is looking for contract and Enterprise is earmarked for disposal.

• More than 50% of vessels are under long term contract with some up to year 2019. This will continue to provide earnings visibility amidst declining oil price environment.

• 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.

• Perdana is one of our preferred picks for brownfield development play with strong earnings visibility amidst weak oil price. It stands to benefit from maintenance jobs on aging platforms and upcoming EOR projects. However, current price already largely reflected its fundamentals and potential MGO price.

Risks

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

Forecasts

• FY15 earnings reduced by 26% after factored in lower utilisation rate of vessels (from 86% to 71%).

Rating

HOLD

Positives

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

Negatives

• Increased competition for growth markets.

Valuation

Despite the weak result, we maintained our HOLD call with TP of RM1.55 supported by the potential GO offer price.

Source: Hong Leong Investment Bank Research - 22 May 2015