Affin Hwang Capital Research Highlights

Petra Energy - 9M18: Earnings disappointment

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Publish date: Tue, 27 Nov 2018, 04:29 PM
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This blog publishes research highlights from Affin Hwang Capital Research.

Petra Energy’s 9M18 core loss widened to RM55m (9M17: RM10m) and continued to disappoint. Our forecasts were already significantly below consensus estimates, whereby we assumed a full-year loss of RM38m. The earnings miss this quarter was due to a weaker-thanexpected MCM contribution which failed to recognise any profit as well as KBM RSC registering a loss. We cease coverage on Petra Energy due to lack of resources, low institutional interest and poor trading liquidity. Our last recommendation was a SELL with a TP of RM0.37.

Hit by Lower Revenue and KBM RSC Losses

3Q18 revenue fell by 30% yoy to RM120m due to weaker revenue as a result of lower hook-up commissioning and topside maintenance (HuC/TMM) contract activities, though the decline was partly offset by the MCM contract. While revenue fell, operating costs were 29% higher yoy due to unfavourable MCM contract rates which were insufficient to cover the current overheads. This led to core losses widening by 82% yoy to RM27m (from RM15m).

RSC Recognised Its First Loss Since 2Q15

PENB recognised its first Kapal, Banam Meranti (KBM) risk-sharing contract loss since 2Q15 at RM4.3m due to an ongoing dispute with Petronas Carigali in terms of some cost reimbursement.

Ceasing Coverage

We cease coverage on the stock due to better allocation of resources, low institutional interest and poor trading liquidity. Our last recommendation was a SELL with a TP of RM0.37. Key upside risks to our prior rating included: (i) higher work orders, (ii) higher oil prices, (iii) any recognition of variation orders, and (iv) operating margin improvement.

Source: Affin Hwang Research - 27 Nov 2018

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