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Perdana Petroleum - Back In The Game

kiasutrader
Publish date: Wed, 28 Nov 2012, 11:45 AM

Perdana Petroleum's 9MFY12 results came in below our initial forecasts but within consensus',  accounting  for  32.5%  of  our  and  61.7%  of  consensus  full-year estimates.  Its  earnings  turned  positive  compared  to  a  net  loss  last  year  and  thisreinforces  our  view  that  things  are  getting  better  for  the  company.  We  are trimming our FY12 earnings forecast by 27.7%, as 4QFY12 earnings are unlikely to be stronger than this quarter due to the monsoon season, but make no changes toour  FY13  earnings  forecast  in  view  of  better  prospects  next  year.  Maintain  BUY with an unchanged fair value (FV) of RM1.17. 
 
Below  expectations  but  recovery  in  sight.  Perdana Petroleum's 9MFY12 results came  in  below  our  initial  forecasts  but  within  consensus',  accounting  for  32.5%  of  our initial estimates and 61.7% of consensus estimates. Revenue grew 10.9% q-o-q due to increase in vessel utilization, which improved from 75% in the previous quarter to 92% in the  current  quarter,  coupled  with  better  charter  rates.  Its  9MFY12  earnings  turned positive  to  RM12.1m  compared  to  a  net  loss  of  RM17.4m  during  the  same  period  last year. We  believe  that  4QFY12  results  may  not  be  as  strong  as  this  quarter  due  to  the monsoon season. As such, we are trimming our FY12 earnings estimate by 27.7% but make  no  changes  to  our  FY13  earnings  forecast  in  view  of  better  prospects  for  the company next year.

Disposal  of  old  vessel  remains  challenging.  In  a  recent  meeting  with  management, we understand that disposal of its old vessels (seven vessels worth RM38m-RM40m in total)  remains  challenging.  We  understand  that  the  difficulty  lies  in  getting  a  decent valuation for its assets due to the financing issues at the buyers' end ' buyers who are willing to pay cash would prefer to pay less while buyers who are willing to pay more find it difficult to secure financing due to their poorer financial background. Nonetheless, we understand that this issue will not haunt the company's income statement as it has already made the bulk of the provisions or armotized most of these vessels.

The going to get better. We maintain our view that the worst is over for the company and  expect  prospects  to  be  better  next  year  due  to  i)  the  recovery  of  charter  rates,  ii) Dayang's strategic entry into the company, which could benefit Perdana when the latter secures more new jobs later on, especially jobs in the Pan Malaysia cluster, and iii) the delivery of two more work barges, which would enhance its revenue.

Maintain  BUY.  We  are  maintaining  our  BUY  recommendation  on  Perdana  Petroleum, with an unchanged FV of RM1.17, based on the existing PE of 12x FY13 EPS. Note that our fair value is derived from the company's enlarged share capital of  556.4m  shares, assuming full conversion of its existing warrants.
Source: OSK
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