News

• Perisai has agreed with Petronas Carigali to farm out drilling contract for its Perisai Pacific 101 jack up rig to Hess for duration of 9 months with an extension period of up to 1 month for US$26.9m.

• Perisai Pacific 101 is operating under Petronas Carigali since mid of 2014 for 3 years contract duration.

• The farm-out commenced on 23 Sept 15 and will be reassigned to Petronas Carigali at the end of farm-out period. Financial Impact

• The farm-out contract value translated to daily charter rate (DCR) of US$98k/day, implied 31% discount to initial DCR of US$144k/day.

• This is inline with existing average charter rate of US$90- 110k/day after the plunge in crude oil price.

• No changes to our earnings as we understand that its Perisai Pacific 101 rig already provide similar discount to its customer since Apr 15.

Pros/Cons

• The farm-out contract will help to sustain its utilisation rate as Petronas continue to reduce capex and opex amidst low crude oil price environment.

• At current rate of circa US$100k/day, EBITDA remain positive but in order to be P&L positive, we estimate utilisation rate need to be as high as 85%. If take into account the interest expense and principle repayment, cash flow is likely to be negative at current average charter rat e of US$100k/day.

• Worldwide newbuild orderbook is 130 units or 27% of existing fleet of 480 units. In order to adjust the oversupply situation, the industry needs higher level of scrapping activities.

• Given current soft market, we expect Perisai to delay the delivery of its 2nd rig from Aug 15 to 1H16 which will provide more time to search for potential contract before delivery.

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 unchanged TP of RM0.30 based on unchanged 8x FY16 P/E.

Source: Hong Leong Investment Bank Research - 5 Oct 2015