Perisai Petroleum; Buy; RM1.65
Price Target: 2.00; PPT MK

Perisai Petroleum (PPT) proposed to undertake a private placement of up to 10% of the Group’s existing and paid-up share capital (or 108.4m shares). The placement may be implemented in a few tranches. The issue price will be determined and announced at a later date. The exercise is scheduled for completion by 1Q14.  

Assuming the shares are issued at RM1.53/share (based on a discount to the weighted average market price), PPT is set to raise RM165.9m cash proceeds from the proposed private placement, of which the bulk (63% or RM105m) will be utilised for repayment of bank borrowings/capital investment for jack-up rigs and/or mobile offshore production unit. The balance will be used for working capital.  

We expect PPT’s net gearing to improve to 11% (from 32% as at Sep13). There could be additional interest savings of ~RM2.8m p.a. for the Group if the placement proceeds is utilised for partial repayment of bank borrowings. Nevertheless, there will be EPS dilution of up to ~9%.  

We continue to like PPT for its strong growth prospects, supported by timely expansion into the production and drilling business. The Group’s earnings are poised to jump 41% and 32% in FY14 and FY15, respectively, driven by strong contribution from its jack-up rigs and FPSO. We reiterate our BUY rating and RM2.00 TP, based on 15x FY15F EPS. 

Source: HwangDBS Research - 17 Feb 2014