Perisai Petroleum; Buy; RM1.47
Price target:RM2.00; PPT MK

PPT announced that its 51%-owned Intan Offshore (L) Ltd has entered into a Memorandum of Agreement (MOA) with Lewek Robin Shipping Pte Ltd (subsidiary of Ezra Holdings) to acquire the 61 tonne-bollard pull Anchor Handling Tug vessel, Lewek Robin for US$7m, of which US$4.55m will be financed via borrowings already secured by Intan Offshore. The remaining U$2.45m shall be on seller’s credit which is interest free and payable only after the full settlement of the borrowings.

The proposed acquisition is scheduled for completion in 2Q14, upon which the vessel will be charted to Emas Offshore (M) Sdn Bhd (49% shareholder of Intan Offshore) on a bareboat basis for US$2,600/day. Assuming 35% net margin, the proposed acquisition will contribute an additional RM1m earnings p.a. We are positive on the deal given the favorable financing arrangement with the vendor. PPT will also further expand its vessel fleet of 8 vessels at the moment.

We continue to like PPT for its strong growth prospects, supported by timely expansion into the production and drilling business. Group earnings are poised to jump 28% and 71% 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 Mar 2014