Perisai Petroleum; Buy; RM1.59
Price Target: Under Review; PPT MK

PPT announced that it has placed its 3rd  jack-up rig order with PPL Shipyard Pte Ltd, a subsidiary of Sembcorp Marine, for US$211.5m, which is similar to the price paid for its first 2 rigs to be delivered by 2Q14 and 2Q15. 20% of the purchase price will be payable upfront and the remaining 80% upon delivery of the rig. The rig is expected to be delivered by 3Q16.

We are positive on its new rig order as this will further strengthen PPT’s position as one of the largest rig owners/operators in Malaysia. PPT is likely to finance the purchase with medium term notes (S$700m program established in Aug13). We expect PPT’s gearing to increase to 0.9x by FY14 which is relatively healthy in view of the heavy capital spending for its quality marine assets. PPT has appointed Hercules Offshore as its rig operator for the first 2 rigs and we believe that PPT is on track to secure a drilling contract within the next few months, ahead of the delivery of Perisai Pacific 101 which will serve as a catalyst for the company.

We maintain our Buy rating. Our RM1.55 TP, based on 15x 2014 EPS, is under review. We continue to like PPT for its strong growth prospects, supported by its timely expansion into the production and drilling business. Group earnings are poised to jump 28% and 29% in FY14 and FY15, respectively, driven by strong contribution from its jack-up rigs and FPSO.

Source: HwangDBS Research - 2 Jan 2014